Saudi Arabia is a racist, misogynistic, and repressive Islamic fundamentalist kingdom that shouldn’t be held as an example for almost anything. But there is one thing that Latin America could learn from it: The country has laid out a concrete plan to end its oil dependence by 2030.
The news went totally unnoticed in Latin America, where most countries depend on just one or two commodities for their livelihood and are now suffering an economic crisis because of the world collapse of prices of oil, minerals, grains, and other commodities. But at a time when most international economists predict that new technologies will doom the prices of oil and other commodities for a long time, the region should take a close look at what the Saudis are doing.
Last month, Saudi Arabia’s Prince Mohammed bin Salman unveiled an economic-modernization plan entitled “Vision 2030” aimed at ending what he called the kingdom’s “addiction” to oil. “We will not allow our country ever to be at the mercy of commodity-price volatility or external markets,” he told reporters.
The plan sets concrete targets to increase non-oil exports, competitiveness standards, and education levels by 2030. To finance its economic diversification, Saudi Arabia plans to sell less than 5 percent of its state-owned Saudi Aramco oil company. The sale would generate enough funds to allow the Saudi regime to invest heavily in non-oil sectors, technology, and education.
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The plan calls for increasing Saudi Arabia’s non-oil income from $44 billion last year to $160 billion by 2020 and to $600 billion by 2030. In addition, it calls for having at least five Saudi universities among the top 200 universities in international rankings as well as to get Saudi students to dramatically increase their performance in standardized international tests by 2030.
By comparison, few Latin American countries are making long-term plans or even discussing their addiction to commodities.
A new report by the Inter-American Development Bank shows that commodities account for 97 percent of total merchandise exports in Bolivia, 96 percent in Venezuela, 94 percent in Ecuador, 88 percent in Chile, 87 percent in Peru, 86 percent in Panama, 83 percent in Colombia, 69 percent in Argentina, 67 percent in Brazil, 41 percent in Costa Rica, and 22 percent in Mexico.
“In Latin America, we don’t have a clear determination to diversify our exports,” IADB’s chief trade economist, Paolo Giordano, told me. “There are no grand plans, such as that of Saudi Arabia, or that of China when it decided a few decades ago to change to a market economy.”
Asked what Latin America should do, Giordano said that countries in the region should make long-term plans to diversify their exports, open new markets — it has been nearly two decades since Brazil and Argentina signed new trade agreements, he noted — and promote exports of knowledge-intensive services.
Right now, Latin America’s services exports account for only 2.3 percent of the region’s economic output. What’s even worse, exports of knowledge-intensive services account for only 0.7 percent of the region’s economy, the IADB says.
My opinion: Granted, Saudi Arabia is hardly a model country, and it’s hard to say anything good about it at a time when much of the U.S. political class is demanding the release of a 28-page secret section from a U.S. Congressional inquiry that might link Saudi government figures to the attackers who carried out the Sept. 11, 2001, terrorist strikes.
But Latin American countries could take an example from the Saudis’ Vision 2030 plan and make it their priority to lay out long-term development strategies. They should put all their energies into promoting non-traditional exports, such as knowledge-intensive services, which will be much more profitable than commodities in the future.
And they should set concrete goals to dramatically improve their education, science, and technology standards, which in the foreseeable future will be the key to producing more sophisticated goods and services.
If Latin American nations continue to depend on commodities for 77 percent of their exports — that’s the region’s average if you exclude Mexico — all of their current political debates are meaningless: No political recipe will be able to produce long-term prosperity in an increasingly technology-centered world.
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