This is ‘governance outsourcing’ - benchmarking it to global best practices, and giving opportunity to thousands of citizens, and later millions, to improve their lives quickly – instead of leading miserable lives under local political leaders who are criminal and/or incompetent and local institutions that are dysfunctional. An experiment, if succceful, others will want to copy. In India, getting land for SEZs has been a nightmare in many states – but then again taking away prime agricultural land in a non-transparent way from farmers, instead of marginal land, to build industry is a dumb idea.
Politicians and NGOs that make their living from the handout/aid model being perpetuated won’t approve. Fish don’t vote for sushi bars.
In the 1990s, Paul Romer revolutionized economics. Now he’s trying to help the poorest countries grow rich—by convincing them to establish foreign-run “charter cities” within their borders. Romer’s idea is unconventional, even neo-colonial—the best analogy is Britain’s historic lease of Hong Kong.
When Romer explains charter cities, he likes to invoke Hong Kong. For much of the 20th century, Hong Kong’s economy left mainland China’s in the dust, proving that enlightened rules can make a world of difference. By an accident of history, Hong Kong essentially had its own charter—a set of laws and institutions imposed by its British colonial overseers—and the charter served as a magnet for go-getters. At a time when much of East Asia was ruled by nationalist or Communist strongmen, Hong Kong’s colonial authorities put in place low taxes, minimal regulation, and legal protections for property rights and contracts; between 1913 and 1980, the city’s inflation-adjusted output per person jumped more than eightfold, making the average Hong Kong resident 10 times as rich as the average mainland Chinese, and about four-fifths as rich as the average Briton.
Then, beginning around 1980, Hong Kong’s example inspired the mainland’s rulers to create copycat enclaves. Starting in Shenzhen City, adjacent to Hong Kong, and then curling west and north around the Pacific shore, China created a series of special economic zones that followed Hong Kong’s model. Pretty soon, one of history’s greatest export booms was under way, and between 1987 and 1998, an estimated 100 million Chinese rose above the $1-a-day income that defines abject poverty. The success of the special economic zones eventually drove China’s rulers to embrace the export-driven, pro-business model for the whole country. “In a sense, Britain inadvertently, through its actions in Hong Kong, did more to reduce world poverty than all the aid programs that we’ve undertaken in the last century,” Romer observes drily.
As politically freighted as Romer’s ideas are, they also carry a continuing attraction to the people in charge of many poor countries, particularly those with rapidly growing populations. By some estimates, 3 billion people will move to cities in the next few decades, abandoning miserable and environmentally destructive work as subsistence farmers in the hope of better lives in manufacturing and services. In the absence of a Romer-type solution, these migrants will move into urban slums with no running water, high crime rates, few steady jobs, and sewage in the streets; charter cities seem a better option. And Romer’s idea has the great merit of paying for itself. Land in successful cities appreciates in value, creating wealth that can be unlocked to finance new buildings, businesses, and infrastructure.
Politicians, stuck in an industrial era mindset, love to “protect jobs” since that plays well among interest groups like unions, while they completely neglect skill-building, the key to not only citizens being eligible for many jobs in the knowledge era, but also in a position to create jobs as entrepreneurs.
Unlike someone who has been a freight elevator operator on a construction site (inside source: on chicago construction sites, a $70,000+ salary), shielded from reality by a union contract, a person like Ronaldinho whose skills with a soccer ball are superhuman, doesn’t need his “job” to be protected by Lula. With skills like that, he can get a “job” at any top European club. Clubs he’s had a job with include Gremio, PSG, FC Barcelona and now, AC Milan.
I am amazed at how the private insurance markets have not been tapped to provide for “occupational loss insurance” in many countries. It makes more sense for government to subsidize individual contributions to those types of policies than protect particular jobs.
Modeled on long-term disability insurance, the payments can cover 60-70% of salary for upto 2 years worth of job loss and the necessary retraining. Employees can choose to supplement this salary by purchasing additional coverage.
In the example below, it is better to beef up the employee safety net than provide blanket company loan guarantees.
Brazilian President Luiz Inácio Lula da Silva highlighted the formalisation of preferential tariff agreements between Mercosur and India, and Mercosur and the Southern Africa Customs Union (comprising Botswana, Lesotho, Namibia, South Africa and Swaziland), as well as the expansion of the trade agreement with Chile to include services, as is also being pursued with Colombia.
The creation of a fund to guarantee loans taken out by small and medium companies, set up to stimulate this sector especially in Paraguay and Uruguay, is part of Brazil’s commitment to “strengthening the smaller economies,” said Lula, who announced that in 2009 “Brazil will double its contribution to FOCEM” (the Mercosur Structural Convergence Fund), created in 2005 to mitigate the asymmetries within the bloc.
“Protecting jobs and social inclusion”(??) was a concern expressed by several of the presidents, in the context of a crisis which, in Lula’s view, reflects the “perversions of the dominant economic system.”
Microcapital has identified the following six microfinance “pioneers,” individuals who have made long-standing contributions to the evolution and promotion of microfinance practices and/or technology. While not all of these pioneers hail from Latin America, all have been instrumental to the development of microfinance in that region. These pioneers are: Álvaro Dávila of Colombia, Joseph Blatchford of the USA, Theodore C. Ning, Jr. of the USA, Mercedes Canalda de Beras-Goico of the Dominican Republic, Clara Serra de Akerman of Colombia, and José Ignacio Avalos Hernánde of Mexico.
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Starbucks may be struggling, but a Colombian cafe chain built on the fame of the world’s biggest coffee icon is determined to buck the trend.
Even as cash-short consumers cut back on gourmet blends, the Juan Valdez Cafe is selling coffee at 101 stores across Colombia, as well as at outposts in New York, Seattle, Philadelphia, Santiago, and Spain. It plans to add 500 more shops across the U.S., Latin America and Europe by 2010.
The Bogota-based chain has a unique premise: its shops are owned not by investors, but by 22,600 coffee-growing shareholders who opened them to advertise the beans they sell, not to make a profit.
The slick cafes named for a fictional coffee grower invented as an advertising pitchman nearly 50 years ago are meant to draw younger consumers, introducing them to Colombian coffee in hopes they’ll start requesting it at restaurants and grocery stores.
“What we’re doing is financing our promotion through a business” using the stores as tasting shops for customers to sample the product, said Gabriel Silva, CEO of the National Federation of Colombian Coffee Growers. The group created the chain in 2002 and now helps oversee it.
When thrifty shoppers in Boston and Miami pick through secondhand shirts at local Salvation Army outlets or estate sales, they are as likely to meet Haitians as hipsters. Some of the immigrants will simply be collecting clothes to mail back to family in Port-au-Prince, but others are part of a large global network trading in used American goods. Haiti’s enormous, informal, and largely unregulated market in pepe—used items imported from abroad—plays an important role in the least developed country in the Americas.
In 2002 The New York Times reported that of the approximately 2.5 billion pounds of clothes donated to charity in America each year, as much as 80 percent is shipped globally. The Times article inspired filmmakers Hanna Rose Shell and Vanessa Bertozzi to research the history of recycled clothing. From 2003 to 2007 they visited rag yards in Miami, dug through archives in London and Washington, D.C., and traveled to Haiti to see the international secondhand markets for themselves. The result is the recent documentary Secondhand (Pepe), which explores the global trade in used clothing.
In the United States, demand for secondhand goods spiked during the Great Depression, but after World War II peddlers found themselves with excess supply. So the business went global. Third World countries arranged deals with U.S. thrift shops for items that otherwise would end up in the trash.
Haiti started receiving shipments in the early 1960s. With the benefit of cheap items came the cost of serving as a dumping ground. Shell has described the city of Miragoane, which receives new pepe nearly every day, as “blanketed, literally, by a downy coat of secondhand clothing. It grows out of the ground and into the street, onto every surface, a sartorial network—buildings, barrows, man and machine-made structures, everywhere.”
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Traditionally in Latin America, if you were smart and from a respectable family, becoming a lawyer was the ultimate in gaining societal status and wealth. Or maybe a doctor. Then possibly an engineer. Now many countries in the region have an abundance of abogados (lawyers) – many of them with no work.
Only when entrepreneurship is encouraged, respected and rewarded will countries get on the path to wealth creation and prosperity.
EARLIER this year Mario Chady faced a crucial decision. Having built up Spoleto, his chain of casual Italian restaurants, to 150 outlets in Brazil, and opened in Mexico and Spain, the time had come for Mr Chady, based in Rio de Janeiro, to choose between expanding into America or putting the idea on hold for at least 18 months. To help make up his mind, he asked for help from an organisation called Endeavor, which had chosen him as a potential “high-impact entrepreneur” in 2003.
Endeavor is a non-profit group based in New York dedicated to promoting entrepreneurship in emerging economies.
It is routine for entrepreneurs to consult their networks of mentors in
Silicon Valley. But in much of the world, such networks are notable by
their absence—and so, too, are examples of Silicon Valley-style
successful entrepreneurship. Changing this was why Endeavor was created
in 1997. “Why can’t the next Silicon Valley pop up in Cairo or São Paulo or
Johannesburg?” asks Linda Rottenberg, who co-founded Endeavor with
Peter Kellner, a venture capitalist.
Much of the difference between countries such as America, where
entrepreneurship thrives, and those where it does not is cultural
rather than regulatory, she believes. In many emerging economies,
business tends to be dominated by a closed elite hostile to new
entrepreneurs—and failure is stigmatised, rather than being a badge of
honour, as it is in Silicon Valley.
Endeavor’s magic works most powerfully in its selection process.
Entrepreneurs are screened first by a national panel of successful
businessmen, and then, if they are short-listed, by an international
panel. So far over 18,000 entrepreneurs have been screened but fewer
than 400 have been chosen. The aim is to identify those who can succeed
on a scale that will make them into national role models, and then
provide them with every possible support.
One of Endeavor’s earliest successes was Wenceslao Casares, who sold
Patagon, his Argentine internet brokerage, to Banco Santander for $705m
at the peak of the dotcom bubble. He believes Endeavor has started to
change cultural attitudes in the countries where it has been active for
a while, mostly in Latin America. “When I said I was going to start a
business, it was against everyone’s advice, from my family to my
university,” he says. “Now, go to the same university and the same
professors will tell you that one of their goals is to produce good
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