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Latin America’s Stymied Innovators

SANTIAGO – First, there was one disappointed foreign entrepreneur. In December, Israeli venture capitalist Arnon Kohavi, whose firm had been lured to Chile by a government program to promote startups, announced that he was leaving. “A handful of monopolistic families control the country,” Kohavi declared to an online magazine. “Worse, these families don’t care about anything except their money. They don’t have to: the country’s natural resources are a disadvantage here, because the rich don’t need to work hard.”

Though the interview generated a buzz in the startup business community, establishment papers were quick to dismiss Kohavi’s criticism as sour grapes. But Kohavi was not alone. One month later, Argentine entrepreneur Martin Varsavski, a bit of a guru in the tech world, had this to say about Chile: “The tendency is to copy old models rather than create new ones. Entrepreneurship has to do with non-conformity, and Chileans lack that. It is a small society of embarrassed people who are uncomfortable being different.”

Are Kohavi and Varsavski on to something? I certainly think so. And what they are on to applies not just to Chile, but to much of Latin America.

The region’s challenge is to transform its huge natural-resource wealth into the kind of wealth that does not run out, because it is constantly enlarged by human creativity. In recent years, a natural-resource boom fueled growth. Resource-rich countries in South America did well (even when, like Argentina, they had misguided policies). Resource-poor countries in Central America and the Caribbean stagnated.