New figures showing a sharp decline of foreign investments in Latin America made big headlines in many countries in the region in recent days, but there is other, less noticed data that should trigger even bigger alarm bells. I’m talking about the latest indicators of innovation, which have a much bigger impact on the future.
Granted, the new figures on foreign investments released last week by the United Nations’ Conference on Trade and Development are nothing to be sneered at. Foreign direct investment in the region fell by 14 percent last year after four years of consecutive increases, UNCTAD said.
The reasons for the decline were mainly the drop in commodity prices — which drew fewer investments for ports and other infrastructure projects to ship raw materials — and some governments’ anti-investment policies. Foreign investment in Argentina fell by 42 percent last year, and in Venezuela by 88 percent.
But while these figures should be a cause for concern, the biggest threat for the region’s future will be many countries’ failure to innovate and produce newer and more value-added products. Few if any economists are predicting any recovery of commodity prices anytime soon.
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There are many indicators for innovation, but among the most frequently cited ones are the number of international patents registered by each country. Inventors who come up with a discovery that has a big commercial potential usually register them with the U.S. Patent and Trademark Office, or with the United Nations’ World Intellectual Property Organization.
Both patent registries’ latest figures show that Latin American countries are not catching up to the rest of the world as fast as they should.
According to the U.S. Patent and Trademark Office, which lists patents by the country of origin of inventors, the United States registered 159,000 patents last year, Japan 56,000, South Korea 18,000, Germany 17,000, China (including Honk Kong) about 8,700, Great Britain and France about 7,100 each, Israel 3,600, India 3,000, Singapore 1,000 and Spain 900.
By comparison, all 32 Latin American and Caribbean countries together registered about 836 patents.
Yes, you read well. Latin America and the Caribbean, with a population of 588 million and two countries — Brazil and Mexico — that are respectively the world’s 7th and 15th largest economies, registered less than 5 percent of the patents registered by South Korea, and 23 percent of those registered by tiny Israel. The U.N.’s WIPO figures reflect a similar disparity.
The bulk of Latin America’s number of patents was registered by Brazil (362) and Mexico (222), followed by Argentina (81), Chile (64), Colombia (25), Costa Rica (32), Cuba (19), Venezuela (14), Trinidad and Tobago (8), Peru (5), Ecuador (3) and Bolivia (1.)
Granted, some Latin American countries, such as Brazil, Mexico and Chile, have more than doubled their international patents over the past five years, which is good news. But they are coming from so far behind, and so many of their neighbors are failing to follow their steps, that the region is not catching up fast enough with other emerging economies such as India’s, which more than tripled its international patents over the same period.
And granted, you can innovate without registering a patent. China has done pretty well making small changes or improvements in existing products (not counting the ones they pirate) and then exporting them massively.
But a recent World Bank report on innovation in Latin America, titled “Many firms but little innovation,” shows that, even when it comes to innovation without patenting, the region is lagging behind. The percentage of Latin American firms that introduce new products in the market is 20 percent below that of companies in other emerging regions in Eastern Europe and Asia, the report says.
My opinion: Innovation and quality education, rather than empty ideological speeches, are going to make or break Latin American countries’ future.
South Korea, Singapore and several other countries that were much poorer than some of the poorest Latin American countries only 50 years ago, today have among the world’s highest per-capita incomes thanks largely to their national obsession with quality education and innovation.
It’s crystal clear that’s the way to go for Latin America. But the latest innovation figures show that very few countries in the region are getting it. Most of the region’s leaders seem to be living on a different planet, or in a very distant past.