"The Hundred-Year Divergence" Paper I of III
Latin America did not fail to get rich. It built the machinery that kept it poor.
In 1913, a young man standing on a dock in Genoa with a ticket in his hand faced a choice:
Two ships, two destinations: New York or Buenos Aires.
It was not an obvious call. Argentina that year was the tenth-richest country on Earth per person — wealthier than Germany, wealthier than France, wealthier than the empire of Austria-Hungary.
It's so easy to forget a past you never lived. This was not so long ago — and things change fast. During this World Cup I have been reflecting on the nations of the world, and on why Latin America can perform so well on the field, on the world stage, and so poorly when it comes to its economies, governments, and societies.
What is it that we just dont get right?
Buenos Aires was building a subway before Madrid had one.
The phrase riche comme un argentin — rich as an Argentine — was current in Paris, and it was not a joke. The Maddison Project’s 2023 revision puts the average Argentine at about 60 percent of American income that year — estimates vary by revision, some run higher — but every version places Argentina squarely in Western Europe’s league.
Millions of Italians and Spaniards looked at the two ships and chose the southern one, and by the standards of 1913 they chose well. Their great-grandchildren are now standing in visa lines.
That reversal is the single most important economic fact about our hemisphere, and we almost never look at it directly. We talk around it. We talk about poverty as if it were weather — something that happens to a region, an atmospheric condition of the tropics.
We talk about “developing countries” as if development were a slow train that Latin America boarded late but will eventually ride to the same station. The data says something much harder.
Latin America is not converging slowly. It stopped converging forty-five years ago, and in most of the region it has been moving backward relative to the rich world ever since.
This series exists to look at the fact directly. Not to lament it — to diagnose it, the way an operator diagnoses a failing system: find the mechanism, name it, and fix it. If we can figure out how to get the region back to where Argentina started — and Mexico to where South Korea and Canada are today — we might just unleash one of the greatest regions on the globe.
So I will try my best to deliver clarity, value and direction.
Paper I will establish what happened, with numbers that could survive a fact-check by any central bank on the continent.
Paper II will names the machine that did it.
Paper III will be about the one country that has been offered a way out — Mexico — and what it would actually take to walk through that door.
The North American- 77 is a platform that advocates for smarter North American integration— and we believe that a modern Mexico is a key piece of the continent's future and continued success.
The gap, measured honestly
Start with today, World Bank figures, 2024.
The United States produces about $86,000 USD per person per year.
Canada, $55,000.
Germany, $56,000.
Australia, $65,000.
South Korea, $36,000.
Japan, $34,000.
Now the other column.
Uruguay — the wealthiest economy in Latin America per person — produces about $24,000 USD per year.
Chile, $17,000.
Mexico, $14,000.
Argentina, $14,000.
Brazil, $10,000.
Colombia, $8,000.
Bolivia, $4,400.
Venezuela, by the best available estimate, $4,200.
Adjust for purchasing power and the picture softens but does not change: the best-performing economy in Latin America sits below the worst-performing economy of the rich world.
Uruguay at purchasing-power parity reaches about $37,000;
Japan, the least wealthy of the rich comparators, stands at $54,000.
There is no overlap. Between the two columns runs a gap that no Latin American country — not one, in two centuries of independence — has fully crossed.
Defenders of the slow-train theory will say: patience, the region is catching up.
It is not, and this is the number that should end the argument.
In 1980, Latin America’s income per person stood at 19.8 percent of the US level.
In 2000, 13.9 percent.
Today, 13.3 percent.
(Those figures are computed from World Bank data in constant dollars at market exchange rates. Measure the same gap in purchasing-power terms and the levels roughly double — but the shape of the line does not change: the peak is around 1980, and it points down. Whichever ruler you use, convergence stopped two generations ago.)
The region’s relative position peaked when Jimmy Carter was president and has eroded for two generations since.
Meanwhile South Korea — which in 1950 earned less than a third of what Mexico earned per person — went from 6.5 percent of US income to over 70 percent.
The train exists. Korea boarded it. Latin America stood on the platform holding a first-class ticket it never used.
Four collapses, one pattern
The regional average hides the drama. Go country by country and the divergence stops being a statistic and becomes a series of decisions.
Argentina did not decline; Argentina was dismantled.
Nine sovereign defaults since independence.
Six military coups between 1930 and 1976 — the armed forces governed twenty-five of the fifty-three years in that span.
In 1947, a compliant Congress removed nearly the entire Supreme Court, and every government since has understood the lesson: the referee can be fired.
The inflationary consequences arrived on schedule — roughly 5,000 percent in 1989, 211 percent as recently as 2023 — because a state that answers to no court eventually answers to no budget either.
The country that was tenth in the world in 1913 had fallen to 31 percent of US income by 2022.
Whether the current stabilization holds is a live question; the historical pattern it must break is a hundred years old.
Venezuela is what the endgame looks like. In the late 1990s it pumped 3.2 million barrels of oil a day and sat atop the largest proven reserves on the planet.
Then, in three moves visible to anyone watching, the machinery of extraction was seized:
eighteen thousand employees of the state oil company purged in 2003 and replaced with loyalists;
the Supreme Court expanded from twenty justices to thirty-two in 2004 and filled in a single legislative session — after which, across some forty-five thousand rulings, it never once decided against the government;
and finally the electoral authority itself.
What followed was the largest peacetime economic collapse in modern history — GDP down more than 75 percent between 2013 and 2021, per the IMF — and
the largest displacement in the hemisphere’s history: 7.9 million people, a quarter of the country, gone.
Venezuela in 1950 earned 56 percent of US income per person. By 2022, 9 percent.
Cuba ran the same experiment with different branding and needed permanent outside financing to survive it —
Soviet subsidies worth roughly a fifth of national income through the late 1980s
Venezuelan oil on concessionary terms.
Both patrons are now gone, and the result is visible from space: recurring nationwide blackouts, a rationing system in collapse, and an exodus without precedent —
by official count a tenth of the island’s population left between 2021 and 2023 alone; independent demographers say the true figure is closer to a quarter.
Bolivia is the quiet case, and in some ways the most instructive, because it fell without a dictatorship and without a US embargo to blame.
It rode the commodity boom
banked fifteen billion dollars in reserves by 2014
spent the next decade consuming them while gas production
starved of investment under state control
fell by three-quarters.
When the constitutional court was asked in 2017 whether term limits applied to the president, it overruled a referendum the government had just lost.
The reserves are now effectively gone, the country imports the fuel it once exported, and inflation is running at its worst level in four decades.
Four countries, four ideological wardrobes — Peronist, Bolivarian, Communist, plurinational —
and underneath, one identical sequence: capture the court, capture the referee, capture the cash flow, and ride the machine until it stops.
The exceptions that prove the rule
Now hold the counterexamples up to the light, because they are the most hopeful data we have.
Uruguay — país chico, ejemplo grande — is today the only full democracy in South America by the Economist’s measure and ranks thirteenth in the world on perceived integrity of government: ahead of Canada, well ahead of the United States.
It also happens to have the highest income per person in Latin America. This is not Scandinavian genetics; Uruguayans are the same gallegos and tanos who populated Buenos Aires across the river.
The scholarship on Uruguay points to something almost boringly structural: genuinely competitive political parties, over a century old, that found they could no longer win elections through clientelism and were forced — by competition, not by virtue — to deliver universal goods instead.
Chile built the region’s most serious economic institutions —
an independent central bank in 1989
a fiscal rule in 2001 that saved the copper windfall instead of spending it
and became the only country in Latin America to gain productivity ground on the United States since 1960.
Its social explosion in 2019 and two failed constitutional rewrites since are a warning of a different kind, one this series will return to: institutions can deliver growth and still fail to deliver belonging.
Costa Rica abolished its army in 1948, spent the money on teachers and clinics, and today has a life expectancy above the OECD average and a medical-device export sector worth nine billion dollars a year.
Three societies, same colonial inheritance, same language, same church, same supposed cultural handicaps — and materially different outcomes, achieved through nothing more exotic than institutions that survived their founders.
Killing the comfortable explanations
Every Latin American has heard the alternative theories, usually over dinner, usually delivered with a shrug. They deserve a direct answer, because the shrug is part of the problem.
“It’s geography — the tropics, the distance, the terrain., just the way we are, just the way it is”
Stand on International Street in Ambos Nogales — the split city where my family has worked the border for four generations. North side: Nogales, Arizona. South side: Nogales, Sonora.
Same desert, same aquifer, same heat, same families — the same last names on both sides of the fence, cousins waving at cousins.
When Daron Acemoglu and James Robinson needed one image to open the book that won them the 2024 Nobel Prize in economics, they chose these two towns, because household income on the north side is roughly three times the south side and geography explains none of it.
The desert did not change at the boundary line. The rules did.
“It’s culture — we are simply like this.” Then explain the diaspora. The Mexican who crosses to Houston, the Venezuelan engineer in Toronto, the Argentine in Madrid — the same person, with the same culture, the same work ethic, the same abuela — becomes dramatically more productive within a few years of stepping across a border.
Culture does not evaporate at customs. What changes is the system the person plugs into: enforceable contracts, functioning courts, credit at survivable rates, a state that shows up.
Latin Americans are among the hardest-working people in the OECD’s statistics wherever the rules allow work to compound. The culture argument is not just wrong; it is the most corrosive idea in the hemisphere, because it teaches two hundred million talented people that the problem is them.
No somos el problema. El sistema que toleramos, sí.
“It’s the resources — the curse of commodities.” Venezuela has more oil than Saudi Arabia and cannot keep the lights on in Maracaibo.
Meanwhile Australia — a commodity exporter of iron ore, coal, and gas, as dependent on dirt and rock as any Andean republic — produces $65,000 per person and has not had a recession-driven collapse in a generation.
Norway drowns in oil and leads half the world’s quality-of-life tables. Commodities are not a curse.
Commodities are a stress test. Institutions that pass the test turn windfalls into sovereign funds; institutions that fail turn them into PDVSA.
What survives, after geography, culture, and resources are eliminated, is the thing the 2024 Nobel committee spent its citation on: institutions.
The rules that decide whether effort compounds or evaporates.
Whether a court can be packed.
Whether a referendum can be overruled.
Whether a state oil company is a national asset or a political checkbook.
Economists call the two varieties inclusive and extractive. An operator would put it more plainly: systems built so that everyone’s work adds up, versus systems built so that a few can skim what everyone else builds.
Latin America inherited the second kind — that is what the encomienda and the mita were, extraction franchises with a royal seal, and modern research can still measure their footprint: districts of Peru subjected to colonial forced mining labor have measurably lower household consumption today, five hundred years later.
But inheritance is not destiny, and this is where the comfortable and the honest explanations part ways forever.
Uruguay inherited the same system and rebuilt it.
Costa Rica inherited it and disarmed it.
Korea inherited something arguably worse — colonization, war, partition — and left the entire region behind in a single lifetime.
The inheritance explains where the region started. It does not explain why, one hundred years after that dock in Genoa, so much of the region keeps choosing to maintain the machinery it inherited.
Someone maintains it. Someone staffs it, defends it, modernizes it, repaints it each generation in whatever ideological color sells — revolutionary red, sustainability green, young orange…you name it.
The machinery of extraction did not survive five centuries by accident. It survived because it works — for the people operating it.
That machine — how it is built, the five parts it always captures, and the documented cases where societies have actually beaten it — is Paper II.
The North American stakes
A reader in Chicago or Vancouver may ask why this belongs in a publication about North America. Here is why:
The most consequential question on this continent’s agenda is whether Mexico — 130 million people, the United States’ largest trading partner in history, the demographic engine of North America — completes its integration as a full institutional & modern partner or remains half-in, half-out: first-world factories bolted onto machinery Paper II will make uncomfortably familiar.
Canada is the standing proof of what is possible: a middle power with a modern western system sharing a border and a market with the American colossus that converged instead of diverging — $55,000 per person, courts nobody can pack, elections nobody disputes.
Mexico is the test of whether that outcome can be chosen rather than merely inherited. The Latin American record laid out above is not someone else’s story. It is the control group for the biggest decision North America will make in our lifetime.
One future, three nations — but only if the third one exits the pattern this paper has just described.
The dock in Genoa is gone, but the choice it represented never went away; it just moved. It sits today in Guadalajara, Monterrey, Leon, Medellín and Córdoba, in front of every engineer deciding whether to build at home or leave, every family weighing the visa line.
For a century, the region has answered that question with its feet, and the feet all point north. The work of our generation is to make staying the rational choice — and that will not be done with speeches about potential.
Latin America’s shortfall was not fated. It was built — law by law, purge by purge, packed court by packed court. And what was built by human hands can be unbuilt by them.
Next: Paper II — The Capture Machine / La Máquina de Captura.—