I podcast on Spain and Latin America

With Rasheed Griffith and Diego Sanchez de la Cruz.  Here is one excerpt:

Rasheed: Tyler, if El Salvador were to become a success story, what would it likely be a success at first? Manufacturing, migratory investment, investment tourism, or something more unusual? Because those typical answers feel like maybe they have missed the boat.

Tyler: I think El Salvador has turned itself into a very safe country which is great news. I think you and I both saw that when we were there. I think under all scenarios they have a very hard time becoming much richer. So I don’t think it’s manufacturing through no fault of their own. But most of the world is de-industrializing. So manufacturing is not a source of growing employment due to automation. But there’s other issues for Central America such as scale and the cost of electricity. El Salvador is not the best in Latin America for either of those compared say to Northern Mexico. So I don’t see what its relative advantage is. And it’s just a small place.

I checked with ChatGPT. one estimate places about third of the population, living in the United States on average. That’s probably the more ambitious one third. So there’s considerable brain drain. I do think in terms of levels they can do much more with tourism. They have an entire Pacific Coast which is quite underdeveloped, and could be developed very fruitfully. Sell condominiums, have people do more surfing. Try to have something a bit more like the next Acapulco, but even there you’re competing against Cancun among other locations and it will boost their level but it won’t be a permanently higher rate of growth.

And that’s the case with many touristic developments. They don’t self compound forever and give you many other productivity improvements. So I expect El Salvador to do much better but I know a lot of people who read Bukele on social media and they think it’s about to be the next Singapore or something and I just don’t know how they’re gonna do that under really any scenario. I do think it will improve and they’ll get more foreign investment and more tourism.

Rasheed: How much is “much better”? That’s doing a lot of work there.

Tyler: When you look at the Pacific Coast and you and I sat right next to the water [it could develop much more]. So that could create quite a few jobs. But in the longer term steady state I think they’ll have a hard time averaging more than 2% growth. So they can attach themselves more closely to the US economy. They use the dollar and let’s just assume their governance does not go crazy. That’s another risk right? So Bukele or whoever succeeds them could overreach. The checks and balances the constitutional protections there seem quite weak. Another possible risk there that even despite his best efforts the country becomes dangerous again. You look at Costa Rica which had been quite safe and did all the right things, and is larger and has many more resources and that’s now becoming a more dangerous place because it was targeted by external, in some cases Mexican drug traffickers. And that could happen to El Salvador as well. So even if think the current campaign is gonna work forever it doesn’t mean the country stays safe forever. It’s not really in a very safe region. So that’s a side risk which will also keep down foreign investment. I don’t know, I’m I am definitely seeing the upside but not super duper optimistic there.

Plenty of fresh material, with transcript, recommended.