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What's best way to grow?

There are a lot of ways to describe Latin America's challenge today. Some will tell you it's the age-old question of overcoming the staggering gap between rich and poor. Some will tell you it's rooting out corruption and misgovernance. But I come at this issue with my own perspective, and I would describe the big question facing Latin Americans this way: Are they going to emulate India or get addicted to China?

This question was, at least implicitly, a subtext of the recent election here in Peru. But it's true throughout this continent, which has always been better at mining its resources than mining its people.

Let me explain by introducing Gabriel Rozman - a Jewish technologist of Hungarian roots who was raised in Uruguay, educated in America and now heads the Latin American operations of India's biggest software/outsourcing company, Tata Consultancy Services of Mumbai.

Rozman runs Tata's Latin American business out of Montevideo, where 550 Uruguayan programmers, trained and directed by Indians, are writing code and running the computer systems for companies all across this continent. They are backed up by Tata engineers in India, Hungary, China, Brazil, Chile, Mexico and Argentina. India now thinks Latin America is its backyard, too.

And so does China. China, though, is almost exclusively focused here on extracting natural resources - timber, iron, soybeans, minerals, gas, fish meal - to feed its voracious appetite and keep jobs and factories humming in China. There is nothing wrong about that. America and Spain did the same for years. Today, China's appetite is helping to fuel a worldwide boom in commodity prices that is enabling a poor, low-industrialized country like Peru to grow at 5 percent.

But countries that get addicted to selling their natural resources rarely develop their human resources and the educational institutions and innovative companies that go with that. So after the ore has been mined, the trees cut and the oil pumped, their people are actually even more behind.

"Why can't Latin America do what India is doing?" Rozman asked when I spoke with him in Washington last week. It can, he insists, but only if it changes - fast. "Right now I have 500 job openings I can't fill, and the problem is education. The prestige career to follow in India is engineering, and in Latin America it is law or being a notary public."

"We need more computer courses with real standards and starting at an early age," he said. A lot of higher education in Latin America is modeled on the French/European system, which is better at producing philosophers than programmers. Philosophers are important, but not in bulk.

Latin America also has to do a better job of teaching English, he added, and eliminating the red tape that prevents economic integration in Latin America and makes it very cumbersome to start new businesses here.

"To go from Argentina to Montevideo is only a 20-minute flight," Rozman explained, but in terms of the economic integration demanded today by global firms, they are 10,000 miles apart. In addition, most of the legal systems in Latin America are designed to promote agriculture and light industry, not intellectual property or innovation."If we don't get caught up with the next wave, we're in trouble," he said.

Latin Americans may think that their big choice is between two models of Western capitalism - a European welfare state model and a hypercompetitive U.S. model. But before they divide their pie, they need to expand it - and here their most important choice is between an India example that focuses on developing human resources and a China syndrome that focuses on selling natural resources. Since countries tend to do either one or the other, here's hoping that Latin America discovers India before it gets hooked on China.

© 2006, New York Times News Service