How expensive is good ("Lo caro es bueno")

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    Mauricio Gleiser
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    “The wealth is which has the ability to make us overcome poverty. It seems obvious, but it is not what you have been looking for in recent decades”.

    Miguel Gomez Martinez- Portafolio, Agosto 2018,Colombia

    The writer is not only a highly reputable economist but has also headed several important Colombian government institutions such as Bancoldex (bank of banks 98-02) and trade associations (namely Asocolflores 90-98, Colombia USA Chamber of Commerce 06-09), meaning he must probably have good clues.
    Mr. Gomez´ analysis could well apply to our flower industry, as related to the USA-Colombia trade, where “our model” rules and controls about 80% of exports and 65% of imports.
    As result of such prevailing “low cost” strategies, which the author characterizes (“cheap is synonymous with a fragile productive structure, vulnerable to changes in the economic situation”) the history of this industry (especially since early 90´s) is plagued with continuous episodes of price wars, bankruptcies and acquisitions at all segments from farms to forwarders to airlines to importers to wholesalers and retailers.

    “Invited by the Universidad Sergio Arboleda, in the framework of its academic programming, was in Bogota the Professor Alejandro Ruelas-Gossi, Ph. D. in strategy and theory of complexity, of the University of North Carolina, and master in management of technology, of MIT. The expert made a provocative and interesting presentation on the need to reorient our business model into the production of goods and services of high value.
    The central idea is that the international division of the work wants to separate the ‘think’ of ‘doing’. Poor countries are encouraged to produce goods that are required by advanced economies, in the cheapest way possible. Low cost is a poverty trap, because, to compete, wages must be low, and the emphasis should be focused on maximizing production with the minimum of resources. There will always be a country with a higher level of poverty that is willing to produce at a lower value. Ruelas believes that the best example of this bad model is the multure that proliferated in the North of Mexico, his native country. Competition for the lower value does not generate wealth.

    It is necessary to position itself at the highest level. But the interesting thing about the thesis is that it is not producing technologies that are not available to our countries. What you need to do is carry the highest level of value generation in what we are good producing. The dairy industry in New Zealand or Mexican avocados are clear examples of how it is possible, with a simple product, get the most value and instead of low prices.

    Products as elemental as they are, have the ability to generate excitement, good taste and high quality. “Good and expensive things generate wealth,” says Ruelas with firmness and conviction. Goods and good services are expensive because they are desired and can position itself in the high ranks of consumption. While expensive is profitable, the cheap is synonymous with a fragile productive structure, vulnerable to changes in the economic situation.

    Could we develop a product that is of much value added than the simple grain from our coffee? Can we give our beautiful Emeralds added value to stop exporting them raw? Can we go around so many products in which we have productive capacity, generating a higher value that we position them as reference in those niche markets? Rather than continue to seek areas of competitiveness that we don’t have, because our workforce is neither plentiful nor cheap, we can explore it to be good developing the potential that we have ourselves.

    To reorient our model of development towards high value, also we need good infrastructure and technological capacity and more educated people. But the important thing is to change the idea that poverty will get us out of poverty. The wealth is what has the ability to make us overcome poverty. It seems very obvious, but it is not what you have been looking for in recent decades”.

    Miguel Gómez Martínez
    Economic and business advisor

    Miguel Gómez Martínez

    Economic and business advisor

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