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When I lived in Chile in the 2000s, I used to take a book to the bank because there was always an hour of waiting just to talk to a cashier. Registering a mortgage for a makeshift dwelling in Rocinha (a favela in Rio de Janeiro) was a seemingly impossible task, as there were no formal ways to secure title for illegal settlements on overgrown land. Returning defective products to a department store in Peru remains a Kafkaesque exercise involving paperwork and stamps and an excruciating process that could also have included a body cavity search.
Unsurprisingly, Latin America and the Caribbean have long been left behind economically, eternally dependent on the developed and industrialized north. In 2008’s “Falling Behind,” Francis Fukuyama brought together scholars to explain why the economic gap between Latin America and the United States had grown so wide when they were in such a similar position in the 1700s. The authors determined that poor public policy choices – including state investment and other government interventions – were, in part, to blame.
James Cooper is Associate Dean, Experiential Learning and Professor of Law at the California Western School of Law in San Diego. He has advised the governments of the Americas on disruptive technologies in the justice sector for over two decades.
Economic nationalism, undertaken through import substitution, tight capital controls and suffocating regulation, has made financial institutions lethargic, their balance sheets anemic and their service ethic hostile to customers, the group decided. Latin American banks, insurance companies, consumer credit institutions and cooperative agencies have long suffered from such inefficiencies and faced bank runs during times of economic instability, hyperinflation and massive theft of account holders’ deposits.
No wonder several Latin American countries have resisted joining the World Trade Organization for so long and entering into bilateral or multilateral trade agreements with the United States. It was protectionism, mixed with a hint of fear of foreign competition and a splash of patronage.
In 2001, Peruvian sociologist Hernando de Soto hypothesized that cutting red tape (such as land title registration) and business regularization could free up trillions of dollars of investment across the developing world. By ending decades of state intervention in economies and opening society to the market economy, he said, states could enjoy economies of scale, growth through competition, and other benefits that often come from market liberalization.
Some states – Carlos Menem’s Argentina, Augusto Pinochet’s Chile, and Gonzalo Sanchez de Lozada’s Bolivia to name a few – have implemented these market-friendly reforms and have grown their economies to varying degrees of success. What they all had in common was the privatization of public services, the free floating of their currencies, and the reduction of tariffs and other trade barriers.
Blockchain technology is the natural next step in this process. And the forgotten continent is a perfect test bed. By decentralizing the financial sector and placing trust in distributed ledgers, there will be less need for traditional, inefficient and corrupt intermediaries like the financial services giants that have long mismanaged the economy and hurt depositors’ interests.
Blockchain scholars rightly view Latin America and the Caribbean as a complex mosaic of cultures and financial challenges. Settle Network, which operates in Argentina, Mexico and Brazil – the economic powers of the region – sees the potential to move remittances, register title deeds and facilitate payments for the massive regional unbanked and underbanked communities. Chilean Kibernum provides blockchain solutions for the public and private sectors and is committed to corporate social responsibility, a luxury for many companies that barely make a living there. Marko Knezovic of Kibernum sees an opportunity for blockchain to forge a new constitution in Chile, a process that “should be highly transparent and immutable”.
In the Caribbean, the Bahamas have adopted blockchain technology with its new Sand Dollar, making it the first country in the world to implement a central bank digital currency. The Organization of Eastern Caribbean States is following suit in its digital transformation project, sponsored by the World Bank. The regional group’s Eastern Caribbean central bank seeks to increase access to digital finance through a blockchain-enabled digital common currency.
Haiti, the poorest country in the Western Hemisphere, is also taking action. Karl Seelig of Digital Davos and ChainBLX is providing the blockchain technology and investment platform for the Andre Berto Fund and its gold mining operations “by investing in building multidimensional economies, fighting labor exploitation”. This means tracking the supply chain to ensure child labor and a micro-payment system are not used to support fairer economic growth.
Latin America and the Caribbean remain the most unequal continent in the world. But with blockchain solutions, some of the region’s historical dependencies and underdevelopment can be undone. At the very least, some of the long waits in line for banking services, to pay an energy bill, or to obtain a government license can be avoided.
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