Ireland an economic role model

by Andres Oppenheimer

A news item buried in The Miami Herald's business pages earlier this week saying that the Irish have become Europe's wealthiest people should become a mandatory history lesson in all Latin American schools and be posted on the walls of government offices throughout the region.

What does that news story have to do with Latin America, you may ask yourself. Well, a lot. Tiny Ireland could be a phenomenal role model -- and morale booster -- for most countries in the region.

Like most Latin American countries, Ireland was until very recently a poverty-ridden, agricultural, soccer-loving, Roman Catholic country best known for having a sizable part of its population living abroad and an economy that was heavily dependent on family remittances from its migrants in the United States.

By some standards, Ireland was even poorer than most Latin American countries. The Great Irish Famine of 1846 left about one million dead. Until as recently as the early 1990s, Ireland was still one of Europe's poorest countries, and the Irish were often stereotyped as the British people's poor cousins. Like in many parts of Latin America, the most common joke in Ireland was, ``Would the last person to leave the country please turn off the lights?''

Ireland was also largely known abroad for producing great writers, performers and sports stars, but very few successes in the business, science or technology worlds. This should sound familiar to many Latin Americans.

Yet in less than 15 years, which amounts to virtually nothing in a country's history, Ireland has become the richest country in the 27-nation European Union in terms of average wealth.

NET WEALTH RISES

According to the report released Monday by the Bank of Ireland, the average individual net wealth of Ireland's 4.2 million population rose by 19 percent to $268,000 last year. Income from Ireland's technology export boom was further boosted by a huge rise in property prices and high savings rates, the bank said.

Ireland's economy has boomed since the country became home to more than 1,100 major multinational companies in the early 1990s. The country has become one of the world's top computer technology and pharmaceutical centers and, not surprisingly, has turned from a net exporter of people to a high immigration country.

How did Ireland turn around so quickly? Contrary to what you may think, the key factor behind its success was not the economic aid it got after its 1973 admission into the European Union.

When I visited Ireland in 2003, virtually everybody told me that while the European support funds helped mitigate some of the hardships that came along with the country's drastic economic opening, they weren't the most important factor.

MANY FACTORS

Rather, Ireland's success is largely due to a combination of a 1987 temporary truce between labor unions and business owners; the elimination of bureaucratic hurdles that discouraged foreign investments; an across-the-board amnesty for tax evaders; a reduction of corporate taxes aimed at encouraging investments; a strong emphasis on science, technology and engineering in its universities; and the successive governments' determination to stay the course despite mounting social tensions at the start of the economic opening.

Granted, skeptics will say that even if European support funds were not the determining factor behind Ireland's takeoff, the estimated $14 billion that Ireland received from the European Union in the 1990s provided a crucial safety net that allowed a smoother than usual transition to a globalized economy.

FOLLOW THE STEPS

But most Latin American countries -- South America especially -- are getting more than that nowadays, thanks to sky-high commodity prices and massive food and mineral purchases from China. They should use their commodity export windfall to follow Ireland's steps and switch to mass production of higher value-added exports.

My opinion: While Latin American countries should not follow Ireland's model, or any other, blindly -- the region has the highest inequality levels in the world, and should do a better job than Ireland in distributing wealth -- they could learn a lot from its successful immersion into the global economy.

It shows that countries can go from the poorest to the richest on the list in a very short time, if they attract investments and focus on exporting more sophisticated goods. So it wouldn't be a bad idea to spread the latest news story throughout Latin America as a reminder that size doesn't matter, and neither does history.