Latin America's Peculiar New Strength

Brazil makes jets as well as bikinis.

Claudio Edinger for TIME
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Chile, meanwhile, seems to be doing everything right. Though it is small (pop. 16 million), its GDP is $145 billion, one of Latin America's highest per capita, and is expected to grow more than 5% this year with little inflation (though recent labor and student protests indicate Chileans want a larger slice of that wealth). Its size precludes large-scale manufacturing, so it heavily promotes value-added industries for its myriad commodities, like copper and timber. Compañía Sud Americana de Vapores, Latin America's largest maritime-transport concern, reflects how Chile has turned itself from a hemispheric outpost into a bridge to the Pacific Basin.

Chile's FDI measures more than 4% of GDP, also tops in South America, largely because Chile keeps corruption, bureaucracy and undue tax burdens out of investors' paths. Its judicial system is perhaps the most transparent in Latin America. "Investors realize our institutions function," says Osvaldo Rosales, international-trade director at the U.N.'s Economic Commission on Latin America and the Caribbean.

That includes the institution that means the most in the long run. Chile directs more of its public expenditure (almost a fifth) to education and gets more of its kids through primary school (more than 90%) than any other country in the region save Cuba. Investing in people--a concept too long ignored in Latin America--is what makes economies competitive. That's as basic as ABC.

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Developed for the World Economic Forum by Professor Xavier Sala-i-Martin, the Global Competitiveness Index (GCI) measures the competitiveness of nations using economic statistics and extensive polling of international business leaders.

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