Why This Coming American Summit May Blow Up for Biden

the march of democracy. This is more than words. This is a commitment to deeds. Hello, and welcome to Stephaniel. It's the podcast that brings the global economy to you. And that was President Bill Clinton at the closing ceremony of the First Summit of the America's which he convened in Miami. As you heard there, it was supposed to mark the beginning of a new era of cooperation across

the America's. In fact, all it started was a tradition of holding these summits every few years, which generally didn't achieve much. That free trade area of the America's that went nowhere, and the US hasn't hosted another one until now. With President Biden holding his own summ into the America's in just a few days time in Los Angeles. The guest list, though, is still in doubt to be honest. So are those shared values President Clinton talked about back

in ninety four. I'm going to talk about all that later with Juan Bablo Spinetto, who runs all of Bloomberg's economic and government coverage in Latin America. After that, we also have a chat with one of the authors of a major new report about where we get our human capital from. It's not where you might think, it turns out. But first, here's our Mexico City based reports, admire Ather buch To explain why plans for this summit are in such a mess. Episode is in momento. The it's in momento.

The initial in lais the America. You are said only him Blomundo. That was Andress Manuel Lopez Brador, also known as Amlo, the popular and populous President of Mexico, expressing his support for a new era of cooperation throughout the America's. In fact, improving relations across the region is a key objective for President Joe Biden too. He needs the support of Mexico and its Latin American neighbors to prevent the persistent of rival of migrants at the US's southern border

from becoming a political problem. However, a meeting of the region's leaders next week in Los Angeles is looking less like an opportunity to men defences and more like a political fiasco. The US is hosting the Summit of the America's for the first time since the summits founding in and on the eve of the event, not all of the would be participants have accepted their invitations. At the top of the list of holdouts is am Loo, who has threatened to boycott the event unless the US also

invites Venezuela, Nicaragua, and Cuba. For now, inviting the heads of those three nations is a non starter for the Biden and illustration. The standoff is exposing the fault lines across the America's, including a desire by leaders in the region for the US to stop imposing its political vision.

Here's Andres Rosenthal, a Mexican career diplomat. The history goes back to four when the US decided to convene the first Summit of the America's basically with the clear intention of trying to gauge interest in the region for an integration, a economic integration of the America's somewhat similar to the European Union. UH. It was not successful. There were too many differing views regarding the possibility of integration, as I'm

sure they still there still are today. It's the first time that the United States hosts the Summit of the America since it was clear to my mind at least that this was an attempt by President Biden to reaffirm US interest in the region, uh, notwithstanding all of the other distractions going on, and to be able to bring the leadership of the region to Los Angeles in order to discuss issues such as migration, economic competitiveness, climate change.

But we haven't even gotten to the part where leaders can discuss crucial issues. First, Latin America's leaders need to show up. Almost says if Biden does not treat all countries equally, he will send his foreign affairs men as or to the summit, but the Mexican president himself will stay home. Meanwhile, other countries have said they refused to go. Qubas president said he would not go even if he

did get an invite. Guatemala has made a fuss over US criticism of its justice system, and Honduras as president said she would not go if other leaders were left out. The question for Biden is whether a lackluster turnout is enough or if the boycott by some nations is one snub too many. Guala Lupea Cabrera, a political scientist and migration scholar at George Mason University, says the hubbub is a sign of the loss of US influence in the region and it comes at a tricky time for the

Biden administration. The u s midterm elections are in November, and they will determine whether Biden's Democratic Party retains its majority in Congress. The US is concerned in Latin America's whether Mexico and its neighbors will help block migration and boost trade. But almost he's standing up to Biden as a winning political strategy that could help his own party

in the upcoming Mexican regional elections and later on. The current administration is thinking about a midterm elections and also UH stability in terms of diplomacy and a hemispheric stability. It's important for for the Democrats in a very complicated electoral process that will probably not result in big in

a big victory for them. On the contrary, so at this point also migration, it's it's at the center probably of the discussion, considering that a number of people from different parts of the world start a journey in different parts of South America, and we have the problems in Central America that have been magnified because of COVID nineteen pandemic.

The pandemic has been a time of big change in Latin America and many of the leaders who have been invited to the summit I have never met one another

in these two years. Chile elected at three five year old leftist Colombians voted in a first round election for a Garia fighter turned mayor, and Brazil lost its love for the conservative and brash Yeah Tonto Honduras, his former president, got extradited to the US on drug trafficking charges, a huge fall from Grace, and Mexicans cemented their support for Amlo, who has frequently criticized the US for its intervention in Mexico security and energy affairs, while calling for more US

investment at a time when economic recovery has been too slow. Rosenthal, the diplomat says the embarrassing debate over whether or not

to attend the summit could have been avoided. The US government, the White House has mismanaged this issue because they should have foreseen this from the very beginning, and they should have made whatever efforts needed to be made, either not to hold the summit if they weren't going to invite some of the countries of the region, or to find some solution before they it became a political heart patago. The Biden administration's objection to hosting Venezuela, Nicaragua, and Cuba

centers on its characterization of those countries as undemocratic. To be sure, though the US has negotiated with the countries on its no fly list in the past. Vanessa Rubio Marquez, who once worked in Mexico's Foreign Affairs ministry, remembers what it looked like when the United States was just another participant. I was in that very historic moment in which a

President Castro shook hands with back then President Obama. I was in twenty in Panama at another summit of the America's So I guess what what a president man had in mind was the possibility of having once again all of the countries of the Amisphere invited to the stummits. But of course, in the context of this very divided Latin America, what has been happening is that countries have cited one way or the other. So we can get

a bit more context now. From Juan Pablo spinetto Bloomberg Managing editor for Economics and Government, Maya's boss JP, thanks for coming on, Stephanomics. We've had some of the history in that piece. But the plasmo the guest list for these summits has always been a problem, hasn't it always?

And thanks for the invitation, Stephanie. Um. You know, the issue of Cuba has been for decades, very sensitive, obviously, and you have guessed that the White House thought about it before, but it didn't and uh show up and exploded when I'm law decided to play politics and say, okay, if you don't invite these guys Cuba, Venezuela and Nicaraga, I'm basically not going to go to this meeting, which

put the White House in a very tough position. When I was looking back at some of the sort of colorful history of some of these meetings that even before the Summit of the America's There was a There was a North South summit in Cancoon in Mexico in nineteen one, which which famously also caused all the same issues around whether or not Castro could come. So remind me what happened there exactly. It happened the same as you know now. That was forty years ago. Ronald Reagan was going to Cancun.

That put Mexico in a tight spot because they needed to decide what to do with Cuba. Mexico has always been very friendly to to Cuba during the p r I years, and so the solution they came up was, Okay, we're not gonna invite Fidel Castro, but we're gonna in white team. A few days before to a meeting in Costmel, So the president at the time, Lopes Potio, called Fidel to make the invitation and he traveled by ship by a navy yacht from the island to Costomel, which is

also an island in the Caribbean. Cost of Mexico held a meeting. Cosmo is actually rather nice than Cancoon. Fantastic, fantastic place. And I actually I think they met a few times there in Costumel and um and they had a meeting there. So Mexico has always been doing that balance right, knowing that they can get on a fight with the US, but at the same time, you know, making their point, their stands and showing that they are

allies with the Cuban regime. And coming back to today, when you think of sort of more broadly among Latin American leaders, do they think this summit by President Biden is entirely politically motivated and to do with the u s midterms or do you think they give him some benefit of the doubt that he wants to support integration across the region. I think it's a bit confusing the message that the US is sending, because obviously it's nice to be invited, but we haven't seen a strong agenda

so far. There were we reported, you know, the interests of the White House to focus on trade, but you need deliverables, right. One of the reasons why the the Brazilian presidents didn't want to go to la had nothing to do with Cuba, obviously, but because of his internal reasons, and he is fighting a very tough re election campaign and his point was what it is for me to go to l A, which is twelve hours away from Brazilia to meet with Biden who never pick up the

phone and talk to me until now. And we're not gonna get anything, but you know, a photoshop. Um. So the Origion expects, uh, you know, more concrete steps and not just to be you know, lecture about migration. Basically, you and I were in I mean I was in Mexico with you a couple of weeks ago and we talked about this. You know, if when you don't spend time there, you don't realize quite how strange in some

ways the President Amlo is. You know, he's not a sort of tradition he's a populist, but he's not traditionally left wing. He had a very tight fiscal policy, didn't spend a lot during COVID. He's very dedicated to these kind of big projects, quite old fashioned projects, like building

a big new petrol refinery. Do you think the Americans even sort of know what to make of Amlo or do they understand what makes his government tick or does anyone understand what makes his government take I think you know, they do in a way, um, in the sense of they have been very respectful, to be honest of of Mexico's autonomy and that's something that even Amlow recognized and

he's very um grateful for. Uh. He always talked about this, and this is very important to any Mexican president right the the the appearance of negotiating as a as as spears and not a not as being imposed by the US right now, it's a very difficult negotiation because in a way for the US, the only thing that matters right now is migration, and especially not having a migration

crisis during the midterm. So uh that you know, on one side, um prevents the development of other projects, but at the same time gives some a lot more leeway to play his own cards, right knowing that by containing migration, uh, the Americans will be happy. I mean, if we step back, the other thing that we probably talked about even more when we were in Mexico, it was not anything to do with the summit. Anything that's going to happen in in Los Angeles is but what's happening in Washington and

precisely what's happening inside the Federal Reserve. I mean this Historically, a period of rising US interest rates has been bad news for many countries. In Latin America, and certainly we saw in the eighties and in the mid nineties when the US was increasing interest rates making money more expensive, it was a lot of countries in Latin America that ended up paying a heavy price for that. So is that How worried are people in Mexico and around the

region about that possibility? Now? Of course? Uh, you know here something very interesting happening, which is the Latin Riican central banks were the first ones to move. Brasil started to increase the interest rates um in March last year, so and the tightening cycle has been very aggressive so far. So by the time they these years started to move, Latin America already created a cushion that you know, you

can see it basically in stronger exchange rates. Uh, that you know, at the same time prevented the capital outflows that tend to generate those crises UM as we saw in the past. Now, to me, the answer here, the main point is how far the fat is ready to go.

I think if we if the titaning cycle in the US is something reasonable and we start to see inflation coming down, even even if it's not getting to two percent anytime soon, Latin America will be uh in as safe as safer place than you have imagined, um, considering the scope of this cycle now, and that's interesting to be may not of course people's radar that actually that the many of the major central banks in Latin America, certainly in Mexico, had raised interest rates long before the FATS,

And we're ahead of the game when we spend time criticizing the FED for having got behind the curb. So finally, JP, I mean, you've you know, you've been around the block a few times, if I may say that, you've seen some of these summits come and go. Do you think it's salable, salvageable? Do you think that the Mexican president in the end will go to l A? What do you think he may not go? I mean, it's funny he said, you know, he may design next week on the spot, and he's not very far from l A,

so he it's a flexible ticket. He even joke up stuff. He even joke about flying to Tijuana and taking a car. But you know, I think it's salvageable in the sense of it's going to happen. The president who will be there if I'm not doesn't go, it will be mostly his mistake or he's you know, he will be losing out. I think in the end if everybody else go, I don't think we're gonna see a lot of the little

bubbles um that's the main thing. But we're gonna have a meeting, We're going to have a photo and you know, somebody laterals and that's always interesting and well. It certainly goes along with the long tradition of photo ops that these of these summits, but not a lot of deliverable as well for those people who are waiting in tenter hooks to see how this summit of the America's goes down. We will potentially be talking to Maya from l A next week. But Juan Pablo Spinda, thank you very much.

Thank you. I'm not a person I caught up with in devils. The other day was Spen Smid, the director and chair of the McKinsey Global Institute. And the institute puts out reports which usually draw on enormous amounts of data and experience to say something interesting about the world. And they've just published a big one about human capital and the value of experience. It's based on the careers

of four million workers in several countries. Human capital is one of those phrases that politicians talk about a lot. I started by asking Spen what was so special about this report. They looked at how much of that skill is also built inside the job called through the accumulation

of experience. And what we find is that about half of the human capital, which is two thirds of the humans wealth creation is actually coming from experience, which is basically what you get after you're born and your endowment of birth. But so it's lifetime earnings as well. So we significate as an approximation. So basically you look at how much does subbody to make in its total life and if you take you come in and that would

be your starting salary. Let's they continued, with no additional experience, no additional job gains or something like that, you would be at half of what you would make as what you gain through experience. And that we're not the earnings is a proxy for that capital. It's it's not the fundamental metric. This is the one that we found it best to measure it. And just to go back a little bit, so what what were you what were you using to draw these conclusions? What data did you use.

We lose twenty years of profiles big data, four million people's profiles from different countries US India, and we basically knew what people had at formal education, what they got as their starting salaries, and how they then progress for twenty years through their jobs where they then ended up. And we followed their job moves inside the companies that they worked at and also rotating to other companies and

potentially coming back if you want. And so we learned not only that experience was to have, but there were a few other surprising results. One thing that surprised me probably the most, is that the increase in human capital due to experience is the most for the people who have the least incoming. So the progression through experience is

the highest for counter workers stone Mason's crafts people. So if you don't have a lot of formal education, you've got you can have a much You actually keep relations of skills and and so somehow they make more steps, whereas if you come in as a dentist, you stay

a dentist. And then with the second surprise for us, where there is a group of people about a third in the US a quarter in India, if you take that spectrum that just moves more so they accumulate their experience faster by going from job to job inside the company, sometimes rotating through other companies, and as a result, they have a much faster experience game, which I think is also draws an implication for what companies need to do in terms of how they develop their people. Yeah, I

mean it's interesting. So McKenzie. They're obviously your clients are usually businesses, and a lot of your reports tend to focus on lessons for businesses and to some extent and governments because you also work for governments. But this was one that I read thinking, actually, it has a lot of takeaways for individuals. You know, what are the sort of broader lessons. It sounds like you should move around

a lot. I actually think these learnings are vestiprocal for individual and the companies because the company doesn't that doesn't allow their people to make steps and as a result, basically going to deep end again and then learn again, it doesn't help to further the human capital of their people, and as a result, they're not helping furthering their company.

But if you are an individual and you say I'm kind of comfortable at what I'm doing, and you don't try yourself in the deep end, or at least try to persuade your company that you work for to be thrown to be deep end again and pick up an next set of learnings. Um, then you're basically also not

making that development. So it's both responsibility the companies to say we should be thinking about that, because you know, it's easy for a company to say, let's keep the person in the role they have because they do it well. But if you want to step up your own human capital, if you know it would be on the balance sheet of a company, then the best way to manage the balance sheet is to keep moving the people to the next step where they again accumulate the next step of capital.

Who is talking about what you can do as an individual or certainly as an employer to invest in yourself in a given company. But I guess one of the slightly hard even harder conclusions from this report is that you should be letting people go and work for other companies and other places. I mean, I'm someone who has moved around a lot, but I'm conscious now that I have people, you know, as part of a big team at Bloomberg. You know, I don't part of me wants to tell them go and get new jobs, but as

a business, we've not always been very comfortable with that. Yes, so I'm not sure you should sort of proactively send you the way. But if the best thing for a person is to go, that doesn't mean they can't come back. And in a way you should expect if you can celebrate an experience game that is relevant to the return,

why would you not have that return? And I do think there is a group of people that just feel more comfortable to go into an experienced curve inside a single company, and people that like that rotation and maybe even develop skills faster. But why would you then say you don't come back? Although one of the awkward conclusions I think I'm reading right that if you want to actually, if you want to maximize your income, and not everybody wants to do that, then you are better off moving around.

Balder moves inside the company and balder moves across are for the individual probably the best maximizing, at least for that ball that we looked at. It's not so, it's not it's a small group that actually doing that. We think a lot these days about social mobility, And this in a way is about micro social mobility. How do people move up through jobs? And you say, you know it's actually you're going to really struggle if you start off as a cashier. There's a lip, probably a limit.

Will be very few people who will be able to rise right to the top of an industry. But if but you can do better by by moving and by taking risks. I mean obviously a lot of people less advantage, people, people with less education, will feel financially constrained from moving jobs, from from taking risks, taking a job that they don't

necessarily have the skills for. So just from that social mobility perspective, were there are there any conclusions here about how should we address training, how should we make it easier for people to move around? Well, the first point I would make is when we say the experience gained for the cashier is bigger than for the dentist, what is that actually? So just if you look at it, the cashier becomes departmental leader in the store, and if

they're really good, they might even be store leader. That's how far they might not become the CEO of the company. But that is two very big steps that the cashier can make if you're starting point as a cashier, and I think we should think about how do we celebrate that. You can't only celebrate the person who came in from university and became the CEO. Why don't we also have narrative that this is significant progress and people make as as you say, they gain more than their incoming earnings,

and that's not because they stay cashier. And you can take that from the counter to chef, from sus chef, as you come in as a sus chef and you become chef. It's these paths that have quite some brange that we should celebrate. And it's not all high school, university, n b A. And so you know, that's of course

where the elites will spend their time thinking. But I think for a large group of people, these steps are very important and we should find ways to celebrate them, create narratives around them, and we should celebrate them equally. Then you know some of you who came and CEO story, and then I think that will provide a little bit more context to people, because otherwise people say, I've become a sou chef and that's what I am, But the su chef many actually move up. Many move up, and

that's what this data suggest spend. Thank you very much. Well, that's it for this episode of Stephanomics. Will be back next week, but in the meantime to please rate the show if you like it, and check out the Bloomberg Terminal and News website for more economic news and views on the global economy. You can also follow at economics on Twitter. This episode was produced by Magnus Hendrickson, with special thanks to Maya Ava Book, Juan Pablo Spinetto, and

Sven Smith. Mike Sasso is executive producer of Stephanomics and the head of Bloomberg Podcasts is Francesco Levi.