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China's role in realizing 'Latin America decade'

Brazilian President Dilma Rousseff arrived in China today accompanied by 300 business leaders on a visit aimed at boosting a growing economic partnership.

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But Mr. Guerria is more optimistic. With the help of Chinese investment in infrastructure projects throughout the region, “Latin America is tapping into global markets,” says Guerria, who formerly headed Mexico's Finance Ministry and Foreign Affairs Ministry. Integration with the global economy "is absolutely integral," he says, and it will be key toward realizing a “Latin America decade."

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The first transcontinental highway is to open later this year. It will connect Brazil to Peru's Pacific ports for the first time and bring it closer to the economies of China, South Korea, and Japan. Only about 25 percent of the region's roads are currently paved, compared to the 80 percent average among OECD nations, says Guerria.

Region must boost education, equality

But Chinese investment won't alone guarantee success. "I'd like to inject some caution into our discussions,” Guerria said in an April 2 speech at a business conference on Latin America at the Massachusetts Institute of Technology (MIT) in Cambridge, Mass. “This will not be Latin America's decade if Latin American countries continue to top global rankings of inequality.”

The region must boost educational standards and social programs while tackling income inequality, lax tax collection, and weak rule of law, he said.

Guerria called it unacceptable that the region's richest 10 percent earn 40 percent of all income, while the bottom 10 percent earn 1 percent of all income. This inequality is exacerbated by problems with taxation and social programs, he said. “Before taxes and transfers for social security, inequality is not much different between United States, Europe, and Latin America.”

Public services, especially education, need improvement, he added. The OECD's benchmark Program for International Student Assessment (PISA) measures Latin America in the bottom third of performers worldwide.

“A poor family will produce children that perform poorly in school. The breakup of that relationship is absolutely critical,” he said. Students in Shanghai test one to two years ahead of their 15-year-old peers in Latin America, according to PISA.

Are security risks overhyped?

In addition to educational gaps, significant security risks remain throughout the region, said officials attending the MIT business conference. Sergio Cabral Filho, governor of the State of Rio de Janeiro, told attendees that “fighting crime is important to economic development" and said Rio police are attempting to reclaim the state's favelas (slums) from drug gangs. Meanwhile in Mexico, the government is facing off against drug traffickers that control large swaths of the country.

Diego Serebrisky, managing director in Mexico for the private equity fund Advent International said that investment opportunities still outweigh the security risks. Last year the company raised $1.65 billion for a Latin American fund.

"The publicity that the crime levels and the drug war have, it's higher than the real impact on the country and it's localized in a number of regions,” he says.

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