The technological revolution is exacerbating the international character of successful companies. It is part of networks that are replacing traditional global value chains with “global innovation networks”.
The value of all foreign investment that companies have dumped outside their countries has multiplied 6 times over the course of the century (from $7 billion to $45 billion today).
However, in the opposite direction, the evolution of the FDI stock in Argentina was less than one-tenth of the world. And if at the beginning of the century Argentina had 0.9% of the total stock of foreign direct investment in the world, today it does so with only 0.2%.
This is just one facet of Argentina’s international reflection. And there are others. Among them, Argentine companies generated only 0.1% of all foreign investment issued on the planet. And we have just 60 companies that export more than $100 million a year.
This exposes us to less investment, less technological development, lower quality work, fewer exports, less produced goods and services, and fewer dollars.
Several reasons explain this decline: institutional weakness (weak subjective rights); macroeconomic turmoil (more than 100% average annual inflation in a century); on regulation and normative instability; and errors in our international architecture.
Meanwhile, the world is witnessing a new challenging time where five simultaneous changes come together: the technological revolution, the global leadership of disruptive companies, the increasing incidence of geopolitics in business and the consequent greater importance of quality and systemic standards and requirements. Instability.
Well, Argentina has a chance if they correct those four mistakes and if they adapt these five changes. One of them, which is very important, is the increasing influence of geopolitics on economic development. The geopolitics that today influence the processes of foreign investment, international trade, the generation of intellectual capital, and the growth of global financing of innovations.
There are many examples. Recently, the Canadian government decided that 3 Chinese companies will abandon lithium production. About 500 companies have already withdrawn from Russia. Processing of the EU-China investment protection agreement has stalled in the European Parliament.
The Biden government has restricted microchip exports to China (not long ago, the Trump administration raised tariff rates on Chinese products over this intellectual property controversy). The UK has excluded Huawei from its 5G plans. After Britain’s exit from the European Union. And NAFTA has changed. The completion of the agreement between the European Union and Mercosur was delayed. China closed its markets to Australian exports due to a discussion about Covid.
What is actually happening is the result of the logic of disagreement over paradigms. Etymology teaches that competition presupposes convergence (“with”) as well as the search for the same goal (“petere”). Unrestricted world globalization would be impossible if the rules of investment, production, trade and labor were fundamentally different.
But this process does not lead to re-nationalization but to the creation of relevant international spaces. Thus, it tends to new blocks. We can imagine at least five (in categories among which there are also gray areas), namely: large capitalist democracies, large administrative authoritarian regimes, countries with medium influence, local emerging countries, and countries with low events.
Among the first countries are the United States, Canada, the United Kingdom and Australia. Between the second China and Russia. Among the third parties are India, Turkey and possibly, in the near future, Brazil; And between the quarters of Argentina and – today – Mexico.
New spaces are being created and the action of countries to participate in link structures is a symptom of economic outcomes.
Argentina has opportunities ahead: potential energy supplies in the face of the global crisis (shale gas, solar energy or hydrogen); metal production in the face of the technological revolution (from lithium to potassium); the increase in the incidence of agro-food compared to the growth of the world’s population (we reached 8,000 million); Contribution of creators (before the intellectual revolution).
But for this to generate good results, the world requires certainty.
We go from working abroad to supporting friends, Christine Lagarde declares. And from “just in time” to “just in case” (selection of partners to ensure the supply chain). John Freeman shows that – in the struggle for international economic hegemony – the movement moved first from the export of products to the export of technologies, and now towards standards. Ron Adner preached – some time ago – that successful companies really do need to be part of ecosystems.
And Christopher Svensson and Jacob Odessen taught that the legitimacy of economic success, which includes three attributes: pragmatic (the ability to generate productive value), cognitive (which ensures — more than current competence — confidence in future ability) and morale (reputation).
Thus, now there is a lot of new in the game.
We can move from agency to action only if we understand the circumstances. Although it does not seem, at the moment, that this is in the plans. Well, if that’s the case, we’ll always be the country of the future.
Marcelo Elizondo is an international business specialist and president of the International Chamber of Commerce (ICC) in Argentina.