S. America can learn from Hu's visit to U.S.

When Chinese President Hu Jintao visited the United States last week, his first stop was not the White House, but Microsoft and Boeing's headquarters in Seattle. Latin American leaders who wonder why Asian countries are winning the race for foreign investments should make a note of this.
It's no wonder that, despite a slight recovery over the past two years, Latin America's share of world foreign investments is shrinking. A new study by the United Nations Economic Commission for Latin America and the Caribbean shows that while Latin America drew 12 percent of the world's foreign direct investment in the 1980s, it attracts 8 percent nowadays.
Referring to Hu's visit to major U.S. corporate headquarters, the economic commission's top foreign investment expert, Michael Mortimore, told me, "In Latin America, we don't see much of this." He added, "Most Latin American presidents go to Europe or China on trade missions with 60 business people, but you don't see presidents going to specific companies."
Dinner with Gates
There are exceptions, of course. But it was interesting that Hu went to dinner at Bill Gates' home and visited Boeing's facilities. While China and its Asian neighbors are actively courting foreign companies -- especially in highly profitable knowledge economy industries -- or pushing their trade agendas by visiting U.S. business leaders at their homes, many Latin American countries are either ignoring foreign corporations, or lashing out against them for political gain with their home constituencies.
Hardly a day goes by when Venezuelan President Hugo Chavez or Bolivian President Evo Morales don't criticize foreign companies, in many cases without solid reasons. And Argentina's President Nestor Kirchner made headlines two years ago when he left former Hewlett-Packard CEO Carly Fiorina waiting for 45 minutes at the presidential palace, until the visiting executive decided to leave.
According to a study by the U.N. Conference on Trade and Development, while Latin America and the Caribbean attracted an average of $83 billion in foreign investments in the late '90s, the figure has gone down to $72 billion today. Meantime, China has seen its foreign investments go up from $43 billion to $60 billion, the rest of Asia from $110 billion to $172 billion and the former Eastern Europe from $10 billion to $50 billion, the study says.
But what is more troubling, and may help explain why many foreign investments in Latin America in the late 1990s failed to generate the economic boom that many expected, is that few of these funds have gone to knowledge economy industries, such as Internet or pharmaceutical research and development, which produce by far the biggest economic impact. Most foreign investment to Latin America goes to extraction of raw materials, or to sell such products as cellphones or cars in the region's local markets.
Between 1994 and 2002, U.S. multinational corporations increased their share of research and development in developing countries from 7.6 percent to 13.5 percent, much of it in India and China. But their research and development investments in Latin America over that same period dropped from 4 percent to 3.2 percent, the U.N. Conference on Trade and Development study shows.
"In other countries, we are seeing a higher-quality foreign investment," the U.N. conference's head, Jose Luis Machinea, told me in a telephone interview from Bangkok, where he was visiting last week. "Investments that go toward extracting raw materials and putting them on a boat don't generate that much income, nor have the same multiplier effect."
Low-quality education
Part of the problem, in addition to Latin America's lower-quality education systems, is that countries in the region are not going aggressively after knowledge-economy foreign investments, experts say.
A recent survey by the U.N. conference showed that, when asked whether they are actively seeking research and development investments, 15 out of 16 Asian government investment promotion agencies responded affirmatively. In Latin America, two out of 18 said they are actively seeking these kinds of investments.
My conclusion: Granted, it's not politically correct for Latin American leaders to be seen courting gringo business tycoons in a region with deep suspicions -- in some cases justified -- about multinational corporations..
Andres Oppenheimer is a Latin America correspondent for the Miami Herald. Distributed by Knight Ridder/Tribune Information Services.