Friday, January 01, 2010

Non-Traditional Exports in the Andes

I'm a regular reader of Peruvian economist and La Republica columnist Humberto Campodónico -- for New Zealand readers, sort of a cross between Brian Easton and Rod Oram. Campodónico writes dense, detailed columns on the world and Peruvian economies, with particular attention to national policies on natural resources such as minerals, petroleum and gas. He is a trenchant critic of what he argues is the Peruvian government's unreformed neoliberalism, its lack of a coherent plan for development and its pandering to the whims of international investors in extractive industries.

Campodónico often resembles a traditional investigative journalist, as he strings together data and timelines to demonstrate how resources have been given away cheaply or tax revenue needlessly wasted. It's hard to imagine a columnist with such a wonkish, fact-based approach, which requires readers to really concentrate, getting such a prominent slot in a New Zealand newspaper.

A particularly interesting recent column compares the progress in developing "non-traditional exports" in Peru, Chile and Colombia. In Latin America, "traditional" exports refer to primary materials such as minerals and petroleum and unprocessed cash crops such as bananas and sugar. These have often been dominated by international coporations operating in economic "enclaves". "Non-traditional" exports are those with a greater value-added content: often, though not always, they are produced at a smaller scale, are more labour-intensive and tend to be locally owned.

A rise in non-traditional exports can be viewed as one measure of the strength of a developing country's economy. Exports are of course important because they provide the foreign currency needed to buy things that aren't produced locally and to pay for borrowing. A higher proportion of "non-traditional" products may indicate greater economic sophistication, resilience and broader participation. For Campodónico, they represent "the insertion of the local entrepreneurial classes in the world market".

In this respect Chile, Colombia and Peru are worth comparing because they are the medium-sized South American countries that have opted to continue with orthodox "market" economies, as opposed to the "Bolivarian" triumvirate of Venezuela, Ecuador and Bolivia, who have built strategies around greater state control and redistribution of the rents from raw materials.

According to the respective central banks, in 2008 Chile exported $65 billion USD, of which 41% was earned by non-traditional exports (mainly food products such as fish, fruit and wine). Colombia exported $37.6 billion, with 47% non-traditional (chemicals, paper, textiles, leather and food). Meanwhile, Peru exported $31.5 billion, with just 25% from non-traditional products (metallurgy, textiles and agroindustrial products).

Campodónico also notes that state-owned companies were responsible for about a third of the "traditional" exports in Chile and Colombia, whereas in Peru most mineral extraction is done by foreign, privately-owned companies.

These statistics show Peru to be significantly weaker than its two Andean neighbours -- a useful counter to triumphalism about its recent recent rate of growth in GDP. This perspective helps raise the questions: how much of this growth is being distributed among ordinary Peruvians? How much is being usefully reinvested? And, can it be expected to last?

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