"It is wealth that has the capacity to help us overcome misery. It seems very obvious, but it is not what we have been striving for in recent decades." It is the subtitle of Miguel Gomez Martinez's column "What’s expensive is good" (Lo caro is bien) published in Portafolio. He reviews the thesis of Professor Alejandro Ruelas-Gossi, Ph. D. which shows the need for Colombia to reorient their business model towards the production of high value goods and services. According to him, the competition for the lowest costs does not make it possible to generate wealth. "What we need to do is to bring whatever we are good at producing to the highest level of value generation."
Even though no flowers or the flower industry is highlighted in this study, links can be made. "The 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", says Mauricio Gleiser of Vacuum Cooling Colombia.
"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."
See below the entire column of Miguel Gomez Martinez:
Invited by the Sergio Arboleda University as part of its academic program, Professor Alejandro Ruelas-Gossi, Ph.D. in Strategy and Complexity Theory from the University of North Carolina, and a Master's Degree in Management Technology from MIT, visited Bogotá. The expert made a provocative and interesting presentation on the need to reorient Colombia's business model towards the production of high value goods and services.
The central idea is that the current international labor distribution wants to separate 'thinking' from 'doing'. Poor countries are encouraged to produce as cheaply as possible the goods required by advanced economies. Low cost is a poverty trap, because, in order to compete, wages must be low and the emphasis must be on maximizing production with minimum resources. There will always be a country with a higher level of poverty that is willing to produce at a lower price. Ruelas believes that the best example of this bad model is the “maquila” that proliferated in northern Mexico, his native country. The competition for the lowest costs does not make it possible to generate wealth.
It is necessary to position yourself at the highest value level. But the interesting thing about the thesis is that it is not about producing cutting-edge technologies that are not available to our countries. What we need to do is to bring whatever we are good at producing to the highest level of value generation. The dairy industry in New Zealand or the Mexican avocado sector are clear examples of how it is possible to obtain the maximum value from a simple product without resorting to low prices.
No matter how basic they are, products have the potential to raise emotions and stimulate our tastes. "Good and expensive things generate wealth," says Ruelas. Good products and services are expensive because they are desirable and can be highly rated by consumers. What’s expensive is profitable, while the cheap is synonymous with a fragile productive structure, vulnerable to changes in the economic situation.
Could we develop from our coffee a product with a much higher added value than the simple grain? Could we give our beautiful emeralds more value, so that we may stop exporting them in the rough? Could we add value to many of the products we are able to produce, allowing us to become leaders in those market niches? Instead of continuing to look for competitive gaps we are unable to fill, given that our workforce is neither abundant nor cheap, we could try being very good at developing the potential that we already have.
In order to reorient our development model towards high value, we also need good infrastructure, a technological capacity and better educated people. But the important thing is to forget the idea that poverty will get us out of poverty. It is wealth that has the capacity to help us overcome misery. It seems very obvious, but it is not what we have been striving for in recent decades.
Addendum: With the current belief that the State must pay for everything, even for things it is not responsible for, it is impossible to overcome the fiscal crisis.