Whitman news since 1896

Whitman Wire

Vol. CLIV, Issue 10
Whitman news since 1896

Whitman Wire

Whitman news since 1896

Whitman Wire

Latin America lags behind on self-made billionaires

People often associate Latin America with poverty. Markets all over the world are currently seeing a downward trend due to a number of global economic factors. Not only is the United States suffering, but Chile is also; the country expects to grow no more than two percent in 2014. Similarly, Mexico, which expected to grow 3.5 percent this year, will grow just three percent. With economies shrinking, few expected to see a miracle, especially not one in Latin America. Surprise! The number of billionaires in Latin America grew 38 percent according to the Wealth-X and UBS Billionaire Census of 2014. This number is huge when compared with the growth of the number of billionaires in Asia (18 percent), the United States (10 percent) and Europe (one percent).

When I saw this statistic, I was happy to learn Latin America had something to be proud of this year –– until I read how these billionaires made their money. Argentinean journalist Andres Oppenheimer interviewed David Friedman, the president of Wealth-X, one of the companies responsible for writing the list of billionaires. Friedman unfortunately had some bad news: Most of these new billionaires are the sons of current billionaires. They just inherited fortunes.

In Los Angeles, 92 percent of billionaires are self-made and in Beijing 100 percent of billionaires are self-made, compared to just 57 percent in Mexico City and 61 percent in Sao Paulo. This data tells us something very discouraging. In my opinion, the problem with poverty in Latin America has to do not with the distribution of wealth, but with the creation of it.

I identify two major problems with wealth in Latin America: the accumulation of wealth by very few families and the creation of wealth by Latin Americans. Latin American billionaires tend to be part of families that have been rich since the times when their respective countries were still Spanish colonies. This rich elite controls politics and creates monopolies. I believe that the destruction of monopolies and creation of a true free market will make other companies grow and will bring a flow of new ideas that will create more billionaires. Without monopolies, new companies could start to cover services currently controlled by just one company. In a free market with less government intervention and low taxes, citizens will be able  to start businesses more easily.

Latin Americans usually become billionaires by owning mines or natural resources, entering the food and clothing industries, or pursuing the entertainment industry. The problem with this distribution is that Latin American countries are not inventing new technologies or products that count as intellectual property. Latin America’s performance in the production of patents has been mediocre in comparison with other countries. In 2013 the United States Patent and Trademark Office granted 3,152 patents to Israel, but only 570 to Argentina, Mexico and Brazil combined – yes, a country with 8 million people produces more technology than 3 countries with a combined population of 450 million. Most new billionaires in China, the United States and Japan have become billionaires because they produce technology and high-value patents.

The number of billionaires in a country reflects the opportunities in and productivity of that country. Billionaires often wield more power than governments. There are many examples. The Gates Foundation has paid for thousands of kids’ college educations. Chicago’s major parks and attractions were donated by the Pritzker family. Harvard’s research is funded mainly by alumni that are now billionaires. The only way Latin America can produce more billionaires is by investing in education, giving children more access to technology and breaking down monopolies.

The next software genius might be in a school in Colombia or Mexico or Paraguay without a computer. When a Prep School in Seattle bought an expensive computer in 1968, they expected to improve the quality of education for their students; what they did not know is that the computer would convince a young boy named Bill Gates to go into the software field. Who knows where Bill Gates would be if he had not had access to that computer?

Leave a Comment
More to Discover

Comments (0)

All Whitman Wire Picks Reader Picks Sort: Newest

Your email address will not be published. Required fields are marked *