The Financial Express

Latin liaisons: Here today, gone tomorrow?

| Updated: October 24, 2017 07:48:11

Latin liaisons: Here today, gone tomorrow?
If handled pragmatically, three converging developments open enormous Latin windows for Bangladesh.
The first is the elevation of some of the original post-World War II low-wage countries into G-20 or OECD (Organisation for Economic Cooperation and Development) members and, by consolidating that climb, passing the low-wage baton to other less developed countries across Asia that can bear the global networking responsibilities today. Mexico was one of those original countries that, through the 1965 Border Industrialisation Programme with the United States, sowed the seeds of shedding its fabulously rewarding but increasingly obsolete and costly import-substitution industrialisation culture for relative free trade. That would be consummated through the 1994 North American Free Trade Agreement (NAFTA), prior to which Mexico experienced the excruciatingly painful "lost decade" with other Latin countries, but during which, this low-wage (or "maquiladora") production became so attractive that it invited Germany, Japan, South Korea, among others, to join the United States in building plants across Mexico for sale to the United States primarily (largely automobiles, electronics, and so forth), which has been the largest market in human history then and the most liberal of all industrialised countries, but eventually to the burgeoning Mexican market as it attracted greater attention. 
Yet, this local-market growth also boosted wages across Mexico, pushing a cross-section of the off-shore manufacturers to Central America or China from the late 1990s. History repeated itself: as Chinese wages show the strains of rising wages and Central America's production potential continue to be stifled for one socio-economic reason or another, the fast-growing Asian markets demand new low-wage production sites. Bangladesh is among the new contenders.
The second development is the independent rise of Bangladesh, through its RMG (ready-made garments) exports to not only enter global production networks, but through its continued low wages, climb to the very top low-wage contenders. Just in this specific market, as China's rising wages continuously erode its top-slot credentials, Bangladesh's prospects have been growing, and particularly as possible competitors, like Vietnam, have far higher wages. Against those contenders, Bangladesh has sought, since a couple of years ago, or so, new markets, a search in which Latin America has been prominently present in both diplomatic forays and business curiosity.
The third development is the independent drive across the entire American continent to open up Asian economic platforms and partnerships, not only to diversify from traditional connections in the United States and Western Europe, but also extract the most out of the China-driven three-decade globalising surge connecting Asia with the Americas. Originally (from 1989) evident in the more developed/industrialised rim-land countries within the APEC (Asia-Pacific Economic Cooperation) nomenclature, it has pragmatically disaggregated into small-group arrangements, even individual country-approaches. For example, Canada sought its own Asian network under Stephen Harper, and key Latin countries even built the Pacific Alliance (PA, with Chile, Colombia, Mexico, and Peru as members), almost all of these capitalising on China's remarkable penetration of global markets for both low-wage finished-product exports and raw materials-based imports. In a move to curb Chinese domination, the United States elevated the Trans-Pacific Partnership (TPP), whose roots can be broadly traced to the 1989 Washington Consensus that created the neo-liberal global architecture, but more narrowly to initiatives taken by Brunei, Chile, New Zealand, and Singapore through the 2006 Trans-Pacific Strategic Economic Partnership. If and when TPP ratification is completed (this seems so precarious an outcome amid the U.S. presidential election when almost all candidates have disavowed it or kept a distance from it), Vietnam, as a signatory member, will find the elimination of duties on its RMG exports, thus compensating its higher wages than in Bangladesh, making it a more direct threat to our own RMG exports. More disturbingly for Bangladesh, the rug under potential Latin markets would be pulled away for us to make any gains anywhere.
Whether by choice, coincidence, compulsion, or a mixture of any of the above, the Bangladesh Institute of International and Security Studies (BIISS) and the Bangladesh Ministry of Foreign Affairs staged an intensive day-long seminar on March 06, 2016, involving diplomats from more than half-a-dozen Latin countries, our own governmental officials and one minister, academics interested in what was brewing, a wide range of private-sector groups, including one segment of our RMG sector, and interested public.
It did not take long for the underlying issues to dominate the proceedings. Mexico's Ambassador to India but accredited to Bangladesh, Melba Pria, directly asked: Why have Bangladesh's investors not appeared in her own country (nor even any student candidate for the seven scholarships her country keeps open for Bangladesh), a sentiment her Brazilian counterpart, Wanja Campos Da Nobrega (the first, and at present only fully-accredited Latin plenipotentiary stationed in Dhaka), articulately elaborated another dimension: how Brazilian enterprises have already begun exploring low-wage opportunities in Bangladesh, pacesetting any Latin influx. Given the robust expansion of both Chinese and Indian markets, as well as their presence at the commanding heights of economic growth elevates, as for the United States previously, the efficiency of having low-wage export platforms closer to these giant markets. Given Bangladesh's RMG track record and very cordial relations with both China and India, it is ideally suited to serve the powerhouses of Latin production for Asian markets here in Asia: located between China and India, and with low-wage advantage over the rest of Southeast Asian countries, Bangladesh can complement any off-shore production interest of the only two Latin countries among the world's top-dozen industrialising countries: Brazil and Mexico. As Ambassador Pria indicated, CEMEX (once the world's largest cement producer) leads a lot of Mexican companies having some Bangladeshi interest and/or transaction. If we want to cash in on this opportunity, we must, as dynamic people would, begin to boogey.
Colombia's Ambassador to India/Bangladesh, Monica Lanzetta Mutis, clarified why we may not have too much time to act. Without PA (Pacific Alliance) membership, we might end up facing constraints (similar to Vietnam's TPP membership for our RMG exports), and inconvenience (our businessmen and tourists would not have to go to every Latin country's embassy in New Delhi for a visa when a single PA visa would suffice for the four sizable and keen Latin countries that are its members). This addressed many of the concerns raised by the highly motivated audience, especially the BEXIMCO representative.
At the end of the day, we would still have language barriers (English will not be of any help anywhere in Latin America, either to open a factory or conduct business), as the BEXIMCO representative also pointed out, even more we would have to learn the modus operandi of fitting common law, a leftover of British imperialism, to civil law, the Spanish counterpart: the latter is more documented, far more heavily statutory, and an original NAFTA hurdle for Canada (which practices both legal traditions, given Quebec's French background), the United States (only Louisiana practices civil law, again, for the very same reason as for Canada), and Mexico (which had to undergo the heaviest adaptation given the outburst of several anti-dumping and countervailing disputes with its NAFTA partners). That was only a preview of what we would have to do in Dhaka, that is, begin to align our legal systems to support  wide-ranging trade transactions and investment flows, in turn, enhancing the imperative of learning the key Latin languages.
In the final analysis, though the BKMEA (Bangladesh Knitwear Manufacturers and Exporters Association) representative, a former BKMEA vice-president, Mohammed Hatem,  explicitly mentioned Latin America as Bangladesh's next RMG frontier, a lot of groundwork must be done beforehand for it to be an efficient extension of both our interest in Latin markets and Latin interest in Asian production: the seminar was like reaching first-base, in baseball parlance, but three bases elude us before the home-run's consummation. We certainly await Bangladesh's Pedro Álvarez Cabral (who conquered Brazil for Portugal), Christopher Columbus ("Cristobal Colon," in Spanish, who colonised North America), or Hernán Cortés (who subjugated Mexico) before our own pieces of silver start trickling in. Useful, however, to keep an eye on the rear-view mirror that Latin powerhouses do not abandon us for other low-wage Asian producers: opportunities in international affairs rarely knock twice.
As a step towards narrowing the Bangladesh-Latin gaps intellectually, three other articles follow: the next overviews Asian-Latin historical trends for Bangladesh to learn lessons from; the third appraises Bangladesh's actual Latin American diplomatic breakthroughs thus far; and the final piece chalks out the most appropriate Asian pathway to Latin America for our adoption.
Dr Imtiaz A Hussain is Professor, International Relations, formerly Universidad Iberoamericana,
Mexico City.

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