Will Latin America make the same errors and have the same destiny as the Middle East?
BY GABRIEL SANCHEZ ZINNY
AND AFSHIN MOLOVI
More and more, we are hearing people voice their preoccupations in Washington concerning the political relationship between the Middle East and Latin America. Pictures of the Venezuelan president Hugo Chavez and the Iranian president Mahmud Ahmadinejad frequently appear in various means of communication. There have also been and continue to be trips among the leading politicians of both regions.
Nevertheless, the true integration and similarities between the regions are more profound than the photographs and the press. The commerce among both regions has grown in recent years just as the similarities in terms of economic and business development have, representing a total of $11 billion in 2004 and close to $13 billion in 2005 and 2006.
“We consider Latin American a strategic partner who presents solid opportunities to increase our economic integration and to open new markets”, points out Hunaina bint Ahmad al-Mughairi, the Ambassador of Oman to for the United States, Brazil, Mexico, and Argentina.
In the Middle East, we are seeing new and innovative businesses, female and male enterprisers, capital markets that are growing with each passing day, and investors of other latitudes becoming more interested in the region. For example, the Carlyle Group, one of the major investment firms of the world, recently announced the formation of a fund of 1300 million dollars destined to this region. They are not alone; Morgan Stanley, Goldman Sachs and Lehman Brothers are also increasing their presence in the region.
Naturally, the increase in the price of oil helps. The International Institute of Finances reported that the gross product in the Gulf counties, which include Saudi Arabia, Oman, Qatar, Kuwait, the Arab Emirates and Bahrain, has grown 75 percent in the past three years, making the area of GCC (Gulf Cooperation Council) the 16th economic area in the world.
This economic success is resulting in different businesses and corporations of the Middle East aggressively investing outside their own countries, not only in Asia like they have for the past years, but now also in Latin America. A “Silk Route” seems to have been created not only between the Middle East, Asia, and Europe, but also extending to Latin America. The investors are looking at emerging markets that offer the major returns and capital gains. The region seems to be working as one.
Many reasons explain this growing economic integration; first, the enormous liquidity of the countries that export oil who channel their vast profits in investments outside their respective countries. Adding to this is the fact that, for political and security reasons, the United States has turned into a more complicated and regulated market, opening itself up to the Latin American sub-continent as a new area of interest, where there exists not only opportunities, but also a major cultural affinity. Besides the picture painted in the means of communication, the Arab and Latin cultures have many social similarities, in particular with respect to the inclination towards the family and the community and the importance of constructing businesses based on good personal relationships.
Beyond this growing economic integration, in both regions there exists the same paradox. Even though these countries face populist and autocratic leaders and little respect for the law and property rights, we can see an enormous amount of individual talent among enterprisers and companies that demonstrate the impressive capacity of these societies to generate wealth and employment that goes beyond the limitations of their rulers.
However, it would be possible to advance even further if political leaders focused more on promoting the economic development, eliminating poverty, and generating employment. Latin America should also apply these ideas that were recently articulated by the Prime Minister of Malaysia, Abdullah bin Ahmad Badawi: “Only [by] taking responsibility for ourselves and facing internal challenges, will the Muslim world occupy a predominant position in the global economy."
Gabriel Sanchez Zinny is a senior fellow at the Atlas Foundation. Afshin Molovi is the director of the Middle East Initiative at the New America Foundation.