WHO IS THE KING?

For weeks if not months, people have been talking about the European crisis. They talk about Greece where at every moment it was assumed that it will declare “default”, prior to this, people spoke about the dollar, that another currency has to be invented, etc., etc. But what is incredible is that every time the world gets nervous, people take refuge in the U.S. treasury bonds in DOLLARS.

People do not understand that it's not like in the year 1930 when there was no television, no intercontinental radio; that only in 1936, the King of England for the first time made an intercontinental network to announce that England entered the war. Today with technology, bank transfers are made in seconds, banks are interconnected by buying and selling papers, many have not observed that although it is truth, the worst men in doing the task were the Greeks, greed let German and French banks among others, buy Greek sovereign bonds assuming that Greece would rebound or that the market was so innocent that the Greek bonds would be privileged before the inconsistent support of an European Central Bank (ECB) or governments of Europe. This did not happen and on the contrary, those who were creditors (guarantors) became debtors because the bonds of Greece became junk bonds and countries like Germany and France, with more stable and serious economies, have banks in need of 15,000 and 7,000 million Euros.

And not to mention Spain, that boasted not to be that bad, upon uncovering the coffer by the European banking authority is the one leading the banking problems with a need of 26,000 million Euros to correct lags of their banks in particular Santander Bank that needs 15,000 million Euros for balance.

As you can see in the IMF (International Monetary Fund) chart of this magazine, the data are self-explanatory.

It's time to know the truth; the world should meditate on overspending and public debt which definitely end in crisis. The party's bill has to be paid some day. Then the forced adjustments will come with much more suffering.

The costs of a country cannot exceed 25% of the GDP (Gross Domestic Product). Progress comes from investment, production, innovation and productivity, not from spending and waste.

Who then is the King?

The 2011 which is near completion, has shown again the benefits of high oil prices, probably because the year average is near US$ 95 a barrel. Setting a price of US$ 73.00 a barrel on the fiscal budget pro forma of this year, ends up being absolutely referential, because the government has used all the surplus in the expenditure commitments incurred. The debt from China has been the main source of financing the public budget and tax contribution has also been involved in a meaningful way in these revenues. Despite this favorable situation, the 2011 budget which estimated an initial deficit of US$ 3,000 million, probably will be reduced to about US$ 1.000 million, not by applying austere policies but by the government inability to get all the necessary financing. This phenomenon occurred in 2010. However, an issue of great concern is the size that has come to represent the total public expenditure to GDP (Gross domestic product, same that until 2006 was 23%, compared to what is recorded from 2008 and specifically 2011 which is 43%. This casts doubt on the sustainability of public finances in the future. The situation of the external sector has also suffered a significant decline, however because of high oil prices and prices of Ecuador’s export products, the non-oil trade balance will be close to the US$ 8,000 million deficit while the oil one will be positive in about US$ 6,900 million, recording a total trade deficit of approximately US$ 1,100 million. Foreign investment would not exceed US$ 500 million and the private investment ratio to GDP would be close to 13% versus 21%, for example, in Peru.

Accumulated Trade Balance (Millions of FOB dollars)

Source: Central Bank of Ecuador A reflection of the abundance of liquidity is the behavior of deposits and bank credit, because in both cases the annual growth is close to 35%, which clearly shows an expansion rate, proof of abundance of funds in the economy.

-342.3

-1,377.9-919.7

3,218.83,947.2

5,205.0

-3,561.0

-5,325.1-6,124.8

Ene-sep 09 Ene-sep 10 Ene-sep 11

Balanza Comercial Petrolera No Petrolera

The Ecuadorian Economy in 2011 and 2012

Ec. Maricio Pozo Crespo Economic Analyst

Annual changes in credits and deposits of the Private Banking (Percentages)

Source: Central Bank of Ecuador With these indicators, the 2011 Ecuadorian economy would grow over 5%, however, it would be an increase in production tied to the excess of public expenditure and liquidity resulting from high oil prices. This has led to a significant expansion of consumption, housing finance and commercial sector and importer. However, it is not a solid foundation growth in the absence of private investment in the necessary quantities to ensure permanent production increases in the future. The inflation rate would close 2011 in percentages close to 6% annually; this indicator that during 2011 has suffered a significant acceleration, driven in part by the importation of foreign goods that have risen in price. The unemployment rate until the third quarter of 2011, was 5.5% of the economically active population (EAP) and underemployment would be closer to 50% of the EAP. It would have been a decline in unemployment, however, it was tempered because of the more than 2 points of the EAP by the increase of bureaucracy in the country. However, inconsistencies still occur in formation as the one that reflects a reduction of the EAP in Ecuador or the sudden and large falls in unemployment in certain cities of the country and in very short periods of time as a quarter. Thus the reduction of human poverty in the last year does not reflect compatibility with the amount of subsidies that annually accounts for about US$ 5,000 million. According to these results, 2012 is anticipated with similar characteristics to the previous year. If certain predictions are fulfilled such as keeping oil prices around the current values, i.e., between US$ 90 to US$ 100 a barrel, if the government continues to receive external financing even if it this if this is in financial conditions unsuitable for the country, if there is a collapse in prices of export products and whether remittances behave similarly, to that recorded in 2011, 2012 could show an economic growth rate somewhat lower than the 2011, i.e., between 4 and 5% annually. This is because there are still no sign of a solution to big helm changes in the management of economic policy, but a postponement of certain private investment projects by the presence of an electoral process. Regarding inflation, it is estimated that it will be at rates similar to those of 2011, i.e., between 5 and 6% annually.

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Variación de los depósitos de bancos privados

Variación de los créditos de la banca privada

Ecuadorian Oil Prices (Dollars per barrel, monthly average)

*As of November 10, 2011 Source: Boomerang According to the structure of the 2012 state budget pro forma under discussion in the National Assembly, the trend of previous years to maintain an expansionary fiscal policy, follows the same behavior. The pro forma fiscal expenditure grows by 17% compared to 2011, wages and salaries would do it in similar percentages, which means that they would increase the expenses by more than double what it would grow the economy and prices. The government anticipates a fiscal expenditure deficit of more than US$ 4.200 million, an imbalance that most likely repeat what happened in previous years, i.e., ending in a lower value due to lack of the necessary funding. This will rebound in investment expenditures, which will never be executed in the amount of the budget that has been set at US$ 7,900 million.

2012 Budget Pro forma (Million dollars)

2012

Total Revenu 15,919

Permanent revenu 12,001

Non-permanent revenu 3,918

Total expenses 20,153

Permanent expenses 12,212

Personnel expenses 7,547

Consumption goods and services

1,510

Financial expenses 708

Other current expenses

96

Transfers and current grants

2,352

Provisions for reallocations

0

Non-permanent expenses

7,940

Primary outcome -3,526

Total outcome -4,234

Source: Ministry of Finance

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The external account would not also show large variations compared to 2011. The balance of the trade balance is projected to be in a deficit of approximately US$ 1,600 million. Foreign investment does not anticipate major changes nor the international financing. The international situation deserves a especial attention, both in Europe and the United States, for its eventual impact on the Ecuadorian economy. In that sense, all will depend on the duration of the crisis and depth of same. The transmision channels to the country would be register through oil or non oil exports, international finance, remittances sent by Ecuadorians from abroad and the behavior of the dollar exchange rate compared to other currencies, especially against the Euro. 2012 is an election year, therefore it is anticipated to be of greater policital hostility that what happened in 2011, which in practical terms means that the greater impact would be on investment and, therefore, in employment and economig growth.

Confidence is the key to release our nations from underdevelopment and poverty. Only by having investment we could create JOBS that minimizes poverty, dignifies men, since it generates goods and services, namely wealth. In Latin America we do not get out of poverty as there is no trust and it is not generated because popular leaders emerge cyclically who do not respect the Rule of Law, i.e. law. Populism is now the most paralyzing factor for the development and growth of our countries since this is the primary means to build mistrust. But we wonder what populism is and we can define it as: POPULISM: Are practices to exacerbate expectations of welfare in exchange for political loyalty, achieved by welfare benefits, which are in general unproductive, resulting in the substitution of personal freedom, by the will and interests of those who hold the redistributive key power. Populism can arise by right or left messianic leaders, since is the action to implement public policies to buy loyalties and stay in POWER with high popularity and acceptance. It is thus, a BLACKMAIL for the poorest. This way of doing politics is called populism, which consists in the misconception of tackling poverty by redistributing income and wealth, without taking into account that the variable key is economic growth. Populism is a phenomenon purely political, not economic, which is always bound to fail because it generates social instability, economic destruction, undermines the rule of law since it divides society by strengthening the class struggle. We can say that Populism has as main features the following:

It is a mass social and political movement that seeks for economic, social and political solutions, based in the charisma of a man or woman who is the leader.

It is a movement supported in democracy with authoritarian forms of government.

It arrives by democratic vote.

In the populism there is a combination between the State…..the Government Party…… and the unions and social organizations.

It has a Messiah who pretends to end the socioeconomic problems of the country.

Populism can arise between right and left leaders since their practice is blackmail to buy political wills.

It tackles poverty redistributing income and wealth without taking into account that the key variable is economic growth.

It strengthens and revives class struggle.

The government or the leader acts beyond institutions.

It splits and distributes between the people and makes every effort to ensure that the legislature and judiciary are subordinated to the executive.

POPULISM PARALYZES, WE NEED CONFIDENCE

TO INVEST AND CREATE JOBS

Dr. Armando Calderón Sol Former President of El Salvador

Their existence is based on a personalized and “charismatic” leadership.

Between the ruler and the ruled, communication, speech and rhetoric, the bombast and the continuing conflict abounds.

Projects and programs, whether they do not exist nor they are met. The last mentioned is what happens to such abundance of promises.

From the power, clientelism and paternalism are practiced, it violates the constitution and law.

And, in the event that there is any ideology or doctrine in a government or popular movement, they would be at the service of a personalized power.

Populism is thus the antithesis of a government and a responsible political proactive, analytical and realistic; that seeks consensus and social stability for the benefit of the majority, in line with what it can be given, without promising the impossible in an atmosphere of freedom, where free expression of thought settles and roots. If we are not clear that Populism is harmful and leads to poverty, we will never be developed countries where we can have high standards of living for our citizens.

Part of the government's economic policy in recent times can be summarized in the following measures (or attempts to measure): increase in international transaction costs through customs duties, taxes (such as the outflow of currency) and other measures (such as the obligation for banks to bring part of its external liquidity to be placed in the Central Bank). In more colloquial terms, that means putting higher walls around the economy. Why is that? Because the government looks to the non-oil trade deficit of the Ecuadorian economy and frighten…rightly so! In recent eyars there has been an average of about 600-700 million a month, about 7,000/8,000 million annually, or the equivalent of more than 12 points of GDP. No huge doubt! But after the shock comes the interpretation. The government looks at the graph of this deficit (at the bottom of the chart below) and says, “as it has begin to grow strongly shortly after 2000, it means that it is a result of dollarization and the loss of competitiveness that the country has had since then”. It sounds logical…but it looks wrong to me. First, it is difficult to believe that the country has lost so much competitiveness in these 10 years so that the deficit has grown by 1’ years from 1,000 to 8,000 million dollars. It would be necessary an elasticity of imports, which is not understood or can be technically justified. Second, because the loss of competitiveness that we have had, is limited. The main indicator in this regard, is the real exchange rate that measures the evolution of inflations and exchange rates between countries. It turns out that we are in approximately the same level that 10 or 12 years ago. In part it is due to the dollar devaluation in the international market, which gives us more competitiveness, but for that reason or another, the truth is that we have not lost too much. No doubt the real exchange rate is not a sufficient measure of price competitiveness, because at least you have to take into account other factors in particular wages and taxes which have had excessive increase in this government, but even so the dimensions are not enough to explain a multiplication by 8 times. Thirdly, because the government’s explanation requires taking into account something more clear in the graph, since the early 2000, while the non-oil deficit increased, almost at the same rate increases the oil surplus (upper curve in the graph). That is, both curves are a mirror one another. How do you understand that mirror in that analytical frame? The only thing is as follows: “the loss of competitiveness has increased the non-oil deficit, and luckily there was a surplus oil to finance this deficit.” This is strange and it makes little sense: why the excess oil will have been (almost) exactly the necessary amount to finance de non-oil deficit, when the two balances depend on factors completely different? Luck and coincidence are an explanation, but obviously not enough. As we see, there are at least three reasons to show that the government explanation is weak. Is there a better explanation? Yes, of course, the following happens. As there is a higher oil price in the world, it generates a higher oil surplus in Ecuador (difference between exports and imports of petroleum products). That money goes into the economy (through the public expenditure), the non-oil expense level increases, and since the non-oil income do not increase in the same proportion, it automatically generates a non-oil deficit similar to the initial non-oil surplus. In this way it is explained simultaneously the two observations of the graph: a very large non-oil surplus (large because the surplus oil which it originates is great) and the two curves are (almost) a mirror one another.

MORE WALLS SURROUND US

Pablo Lucio Paredes, Ph.D Director of the Institute of Economics

Universidad San Francisco de Quito

The important is that this alternative explanation leads to different economic policies. Instead of putting up walls around the Ecuadorian economy, what we must do are two things: to set up an oil stabilization fund to cushion the ups and downs of oil (so that not all the oil stream blow to the economy), and secondly, to support the development of more productivity and competitiveness of the export sector (and economy in general). Nothing more. And obviously, not just the policies are different for each, but what the government does goes (almost) against what the country needs. Different interpretations lead to different policies. Which one is correct?

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Petrolera

No petrolera

During the last ten years that I have dedicated myself to find and assess the human talent, I have been invited a couple of times to give orientation lectures about the subject. The invitations have been from universities where the audience was young people who were in the last years of careers related with the business and executive world. This eventuality invited me to think about what these young people were thinking or what they wanted to hear from me. This reflection let me think on what did I think when I was at the same age and what I would have liked to hear from a person like me in that moment. As a result of these reflections, I consider interesting to note that when you are that age, let's say 24 or 30 years old, there are no well-defined interests and which abilities do we have. The problem is that at these ages is when you have to make very important decisions for our professional future being unable to be prepared for such a decision. I'll try, briefly and accurate as possible, to convey in these few lines what the market is or demand or who make this demand, which are mainly private companies, organizations, state institutions and all kind of organizations, that require human resources. From the professionals' point of view, it is important to understand or to know what their real skills are; this is not easy to distinguish especially when you're young. I have always thought that for this exercise we have an enemy in between which is the self-esteem that pushes us to overvalue things that may not be. At this point I have to mention that when it comes to evaluating a professional, there is an obligation to annul the self-esteem to avoid mistakes. For this case the recipe is to measure the achievements of individuals; what an executive has accomplished in his professional career, is his fingerprint. But, back to the skills, I invite readers to do the exercises, whether they are young professionals or not, try to give up your self-esteem and question yourself what your real skills are. Human beings are all different and you will probably have some of it and lack others; the proportions of each competence are going to be different for every human being. For example, from 1 to 100 maybe you have 80 as a good negotiator and 20 as leadership; it is a good negotiator but is not a good leader. And again I make notice one thing that you think you are a good negotiator and another is that it must be proven what you have achieve to demonstrate it; that's what counts. But, once this exercise of skills is done, in the most complete and precisely way that you can, you will be able to distinguish your preferences concerning what you want to do with your life and what activities fit you the best. The demand for human resources is also diverse as well as we human beings are. But, I have the kindly readers to see that these companies, organizations or institutions that make up the demand, will always want to assess or know what are the real human resources skills they require. And the skills will be related to the specific needs of the petitioner. For example, it is very logical to think that if a company or organization wants to hire a purchasing manager, it will require that the candidate have great negotiating skills.

SOME GUIDANCE ON HUMAN RESOURCES

Eng. Santiago Samper Q. Executive President

Semanarium/Samper Head Hunting

From the point of view of a head hunters enterprise that we act as a bridge between the labor supply, as I described above, and a labor demand made by our clients, we are focused on giving our customers human resource excellence for which we have to consider two important steps:

1. What is really what the customer needs so that the human resource requested will add value to the organization. At this stage we have to understand the type of organization it is, what are the behaviors that govern them (is it a transnational company or is it a family organization, etc.) It is also necessary to break in details the profile of the position being sought, because according to our experience, the petitioner (client) always put on the table that he wants something perfect at a maximum normally low price. He is thinking that if I'm going to pay to get a professional that I need, I will give them a stage as difficult as possible to make it worthwhile.

The reality is that human resources are diverse and that people have certain skills and are not as strong as in others. The important thing is to identify what the client requires for certain position and find the perfect candidate for that environment.

2. Once the previous point is determined, we must find the human resource that meet the required profile for the organization that is requesting it. The search strategy is diverse and depends on the scenarios presented to us, but by the time of the evaluation we have to be very assertive in measuring the skills that will contribute significantly to the organization that is requesting us.

Finally, I want to note once again, that it is important to be able to warn what the skills are in which we cannot excel in our professional activities and which are the ones that are not too good for us to be able to work on them. Time and dedication that we put on those skills, in which we have been favored, will be much more productive than in those who do not and will also be more comfortable and productive to stay focus on those that we are strong. When you have good knowledge of your strengths and weaknesses, you must handle your product skillfully to see your strengths, don't let that your self-esteem plays a trick on you.

MILITANT ARROGANCE

Alberto Medina Mendez Argentina

Some leaders are convinced of its own success, to the point of believing that they have found the magic formula, the perfect prescription, the so desired secret, to lead their Nations destinations.

Such is the lost of humility of these characters, that they not only praise themselves every day, but they feel so smart, so superior, that they do not accept any point of view when someone tries to say a discrepancy about their beliefs. They consider their views as the only possible ones and they do not understand the possibility of a divergent thinking.

Obviously, they are surrounded as usual by professional sycophants, fans without proper criteria, bold opportunists and people who not only applaud their daily actions, but discovering in the leader attributes that even he would have recognized.

But his arrogance goes still much further, because not only boasts of its alleged successes, but it also believes fiercely in the originality of his recipes, he understands that he has discovered something that has no history and that its government action is foundational , unpublished, singular, and thus it will remain in history, in bronze, for their achievements.

He does not support under any kind of view the possibility of error, much less will accept criticism and will seek permanently any mechanism to keep out their opponents out of the field, but will never recognized in public, his evident level of democratic intolerance, despite reciting the opposite, declaring himself outspoken advocate of freedom of expression and plurality.

The paradox is that the citizens of your country deny any alien which anime or has the audacity of giving one’s view about their country, their political events or economic decisions. Any outsider who dares to say about their country, even much more about its implemented policies, is rejected by the mere fact of not being born or, at least, lived in the local soil.

This particular kind of xenophobia that is part of the home folklore, quickly turns into anger, in hate and resentment, and reach different levels of vehemence according to the nationality of the possible partner. The brothers of the continent and mainly from neighboring countries will be less questioned, but those of other regions, with different languages and different culture and idiosyncrasies, will not even consent the opportunity of pointing their own perspective and it will be outright rejected.

Not to mention the case in which these views come from political institutions of other countries, governments or supranational organizations. Those comments or suggestions will be taken as an alleged imperial order, or as the impertinent interference in affairs of state, or owned by local sovereignty that no country should violate.

Now, the strangeness of this so-called pseudo nationalist theory is that when the local leader of the moment has the opportunity to have a public stage, of a field of media, or an international audience, or institutional abroad, it seems in this case that he's magically enabled to deal with other nations and their leaders.

He not only does, but is encouraged to make recommendations with an arrogance slightly comparable with the heads of state often criticized by him for what he describes as identical actions.

The explanation is simple. He believes that its figure is not comparable with any other, he sees himself as a special, intelligent and original person, so he does feel morally duly authorized to do and say what he pleases, without the risk of being judged in the same way by those who receive their speech.

When a foreign speaks, he interferes in affairs of other nations, but when the leader of cabotage does it, there is no problem, it’s like you have grounds to “meddle” with no self-confidence.

And, an additional component is its own circumstances and others. Giving advice from the comfortable position that the downwind gives, is at least slightly objective, but hypocritical. Giving recommendations to those who have a headwind from the opposite sidewalk is nonsense, and someone should at least have the decency, moderation, prudence to call for silence.

When the situation sets a positive scenario, on which we have no influence but which allows us a more comfortable deployment, common sense, but above all, spiritual and human greatness, he should provide the share of modesty that the situation deserve.

And it is quite clear that we are not talking about someone, but many. This is not about a particular character, but of several and about a repeated attitude in history. Every nation, every community, every citizen and thus their leaders, should deal with their own problems.

The arsenal of ideas, tools and even beliefs, that they will apply to try it, depends on many factors, and we must learn to respect that uniqueness, having the wisdom and maturity to give oneself the proper place and not another.

What makes great men, famous leaders, statesmen and not mediocre leaders, are their qualities and personal attributes, and not their defects and human baseness. Just to clarify, it's not on the list of virtues this ongoing militant arrogance.

Today, Latin America is, in what it could be considered, a privileged position compared to the rest of the world. As a region, we are not only enjoying a period of political stability, but also a sustained economic growth. This is due, mainly, that in recent decades, most countries of our region have shown discipline in public financial management, as well as prudence in fiscal and macroeconomic policies. Thanks to this, Latin American could not only face and endure in the right way the last world economic crisis, but today it is established as one of the most solid regions, even facing a global picture of general slowdown.

In a year in which the effects of crisis are still present, even in the most developed economies, the economic outlook predicts to Latin America a growth of over a 4 percent. No doubt, our region is going through a good time against the other world economies. In view of this encouraging situation, our responsibility is to make the best decisions to ensure that this economic growth does not become an isolated episode, but that it serves us as an impulse to continue building the prosperous and forceful Latin America that we have always wanted. We remain committed to the development of the region. It’s in our hands to make this decade be the decade of Latin American prosperity and leadership. However, to achieve it, it will not only depend on our economic performance, but what we can do to reduce poverty and inequality that for a long time have been present in our region. Thus the truth is that a true sustained economic growth necessarily has to be

accompanied by policies designed to end once and for all with the backwardness and social gaps. And it is fair that at this time of growth, we shall deal with these historical grievances, since is just in this way that we could build a better future. It is precisely in times of economic growth when we must socialize profits. The solution to social backwardness is in a greater investment in human capital. The most valuable resource for any country is found in its people, so its growth mainly depends in what the country invests (or not invest), in them. But, what matters is not about investing more, but to do it efficiently and effectively. This is because the best investment is to provide to new generations the tools that they need to break once and for all with the vicious circle of poverty and inequality. Our goal should be to encourage equal opportunities from birth to do more long-term social mobility. Consequently,

ALAS FOUNDATION

Alicia Marin and Juan Antonio Pungiluppi Directors of ALAS Foundation

only following in this way we shall succeed in extracting these problems from the root. So today, what Latin America needs most is a greater investment in quality programs for Early Childhood Development. Several studies have demonstrated the importance, as well as the many benefits, associated with investing in quality program focused on the Early Childhood Development, both for children and for the society in general. Experts in the field argue that motor, sensory, cognitive, social, emotional abilities and people skills are acquired in the first years of life. It is during these years that interventions have greater potential to achieve a positive impact in their abilities and aptitudes which increase its chances of being successful not only at the school but in all scope of their lives. Therefore, a child who has access to an adequate diet, health and quality education during this critical stage of brain and social development, is more likely to contribute to the growth and development of his family and his country in the future. This means that investing in quality Early Childhood Development not only means to invest in our children, but also in the future of our nations. Among other benefits, we should note that investment in ECD:

1. Promotes economic development because it increases the quality of life in general, promoting higher income not only in adults, but also a better school performance and better health.

2. Promotes peace within communities and nations because it fosters the reduction of marginalization, violence and long-term insecurity.

3. Promotes social equality because it encourages intergenerational mobility, helping children born in relative poverty, to have the opportunity to reach their highest physical, social and economic potential.

4. Reduces political instability because they promote social inclusion of individuals and it provides appropriate education to participate actively in civic life, contributing in this way to reduce political instability and strengthening democratic stability.

Due to the above mentioned, ALAS Foundation is convinced of the need to invest today in the overall development of early childhood. Our goal, since our creation in 2006, has been to mobilize and raise awareness among the different sectors of society about the importance, as well as the urgency to invest more in Early Childhood Development. From the beginning, our work has been to advocate with prominent leaders of the private and public sectors for a greater number of initiatives focused on the overall development of children (boys and girls) from 0 to 6 years old in Latin America. In addition, we recently decided to take a more active role. With the support and collaboration of our various strategic partners, we are also now participating in the design and implementation of initiatives and programs for early childhood. Our goal is to lead innovative projects that represent solutions adapted to each context.

Today we are working on different projects with the governments of Brazil, Colombia and Argentina, state government of Quintana Roo in Mexico, Xuxa Meneghel, Mario Santo Domingo and Pies Descalzos Foundations, as well as the social enterprise aeioTU, in order to increase coverage and facilitate the access of more and more children to ECD quality programs. In the ALAS Foundation we are convinced that the future of our region is drawn by the decisions we make today and the investments we make in the present. And we are sure that the best investment is in early child development programs. This is a work that not only corresponds to the public sector, but also to the private sector and to the general public. This is a work of such importance that we are committed to each and every one of us to act decisively. Let's take this opportunity to invest in our future and the future of our children and of our nation. Working together, shoulder to shoulder, we can inherit to tomorrow's generations, the prosperous, secure and strong Latin America free of poverty and inequality.

It is known that a majority of urban employment in Latin American is generated by SME companies ranging from micro scales of production of goods and services to medium scales, with greater or lesser degree according to formality. They represent the majority of the establishments of the countries and they often show a significant portion of the value added of the sectors, according to their level of productivity. Therefore, we can say that they represent the majority of enterprises, employment and a significant portion of wealth. Studies made by ECLAC (Economic Commission for Latin America and the Caribbean), give us as a result that the 99.5% of the enterprises of the region are SME and provide 70% of employment. However, only 10.7% export. These figures give us the measure of the importance of the SMEs in the economy of our region. However, the SMEs enterprises are in “everyone’s lips” and in no one hands, since in general there is no legislation that considers the characteristics of the SME enterprise. The SME entrepreneur cannot afford mistakes, unlike other activities in which success seems to be governed by principles such as knowledge, dedication, adequate conduct, etc. Regarding the company it would seem that there are no patterns to follow to ensure business success, nor objective and real standards to compare with. These circumstances add to the frequent concerns generated by his business, the uncertainty about their own future, which does not always depend on his entrepreneurial skill. There are external constraints generated by regulatory frameworks, inappropriate bureaucratic regulations to promote a favorable environment for the SME business development. It may be added those arising from the difficulties of accessing markets, financial services, information, etc. It is true that when we talk about the SME companies, it's involve to refer to a sector of the economy deeply heterogeneous and complex, that I can integrate the self-employed persons, those who work as autonomous or self-employed, up to the middle enterprise of modern structure. It is therefore necessary, to deal with the problem, to make a segmentation of the sector. In the formal and modern sector, we find small and medium enterprises that have leaders with higher education or professionals that run companies with good productivity level, have a relative division of labor and responsibilities, some independence of the family structure, as most of them are family businesses. This level of business has a greater market share, access to financial and non financial services and a significant linkage with larger scale enterprises. Employees tend to be more qualified, to have higher income and access to social protection systems and formal training.

WE ARE SME (SMALL AND MEDIUM ENTERPRISES), AND WHAT?

Julita Maristany FIE (Business Interamerican Federation)

General Secretary Argentina

In the lower segment of the modern sector we can certainly find small companies with capital accumulation problems, deficiencies in the management of resources and poor access to markets of goods and services. We can find small enterprises of high productivity, significant level of billing and accumulation of capital, generally in the technology category, but it is a well known segment. In the low productivity sector, called informal sector, we can distinguish:

a) Micro-enterprises and freelancers, of extended accumulation with less sophisticated technology, with revenues that allow them accumulate capital and grow, a specialization and division of basic labor, with mainly family structure, with a minimum division of work and responsibilities and a budding relationship with larger companies.

b) The subsistence micro-enterprises, which have outdated technology, income that does not allow capital accumulation, with family staff, without specialization, and access to local low-income markets.

c) Self-employed or workers by their own account with eventual one-person business, with no possibility of capitalization, very low productivity, with random access in the markets.

However, they all have in common some problems. The vast majority of SME businesses are family businesses, this by itself implies a problem. The growth and stabilization of it depend in a 99% of the options that he or her chooses or the founder of the company. In order that continuity be successful, the shareholder, director and worker must play roles simultaneously and possess the ability to integrate these three roles in harmony. As the company suffers the strain of growth, he or she, the founder, must take decisions to develop the existence of appropriated structures to the business functions. The needs of the enterprise shall be put before the family requirements which; this means having succeeded in establishing a family protocol to avoid confrontations between family members serving in the company versus those who do not. This issue about the succession is very important because the survival data of SMEs speak for themselves. In a thousand companies that start at two years, 200 work; after five years working, 95 and after 15 years working, only 52 are running. There are few companies that survive the third generation. This is an internal problem created by the lack of foresight in the succession of the founder. Having said this, we list some of the successes that make the SMEs profitable:

DIRECTIVE POWER

FUNCTIONAL BALANCE

TARGETING BUSINESS

PROFITABILITY GROWTH

ORGANIZATIONAL EFFECTIVENESS Similarly, we will enumerate some of the most common management problems:

CORPORATE DIFFERENCES

LACK OF INNOVATION

NO BUSINESS ENGINEERING

IMBALANCE BETWEEN CAPITAL AND INVESTMENT

EXCESSIVE DIVERSIFICATION

OVERHEAD INFLEXIBILITY

LACK OF EXTERNAL ADVICE It is essential to differentiate the needs of micro-enterprises from those with economic potential that create sustainable jobs. It is important for public policies since for the second group, the trend should be aimed to simplify bureaucracy both administrative and fiscal, for example, the creation of a unique tax account for each company that enables to credit surplus in certain tax as payment of another tax obligation; the tax credit orientation that allows the company the access to services aimed at business growth. These should aim to develop SMEs competitiveness with potential. For the first group the level of subsidies by the state must be very significant, since they will be directed to the alleviation or reduction of poverty through strategies of income generation and employment. This segment of micro enterprises with growth potential has increased requirements and needs of technical and management training. They can benefit from access to financial services as those offered by microfinance companies. Nevertheless, we insist that State Policies are needed to allow the following:

1. It is necessary to have a regulatory, labor and tax framework according to the characteristics of the SMEs.

2. Simplify the existing bureaucratic processes and mechanisms for the creation of new enterprises and for its development.

3. Develop inclusion and reintegration policies into the formal system. 4. Encourage reinvestment through active policies. 5. Strengthen agencies and support tools for the internationalization of SMEs. 6. Have the means to promote technical and management training. 7. Facilitate access to financing.

These measures should not be considered in any way as a benefit to one sector, as SMEs are, as we said 99.5%, thus they benefit the economy in general, being on the other hand, the largest employer and generator of democratization of the economy of a region.

The struggle for human rights has become one of the most significant events in the world. This whole process that society has lived to limit the state power and place the individual as subject of rights and powers, have been marked by painful traumas, heroic struggles, triumphs and failures. Humanity received with optimistic the establishment of human rights as widespread reality after experiences of pain, repression and death. In recent history, the defeat of Nazism and the shameful unmasking of the Stalinist regime, responsible for more than thirty million victims, seemed to be the latest signs of the triumph of rationality against the brutal and inhumane use of power. Nevertheless, there are other experiences that have raised and still raise responses of freedom, in a tireless and hard work that seem not to end, bloody dictatorships and cavemen of different ideological references, but of similar criminal proceedings. Just to remember the long and hard transit of Latin America in the 70s and 80s of the last century in which regimes of terror and persecution were established that acted in a systematic and combined manner, to exchange prisoners and execute developed strategies of extermination, and the indescribable trail of blood that was left by the madness of the self-described communist government of Pol Pot in Cambodia and his rabid army of the Khmer Rouge, to ratify this painful assertion. In recent years, the avatar of human rights in our continent faces new details and passages. With the heritage of the Cuban reality that began in 1959 as a triumph of their society against corruption and the discrediting of the Batista regime, which resulted in one of the biggest lies and tragedies for freedom, the neo-populism led by Hugo Chavez and seconded by Evo Morales, Daniel Ortega and Rafael Correa, imposes a government style based in the abuse of state power, the arbitrary use of public resources, and the restriction of the main freedoms. The people of these countries suffer from the chaos of showy and overbearing leaders, the real narrowing of the tacks of democratic participation, and the disappearance o their core activity and representation. The story of dignity and sacrifice on which the Nation State of Latin America was built, waits for the energy of its community to enforce citizens’ rights and freedoms.

THE TOUGH TASK OF DEFENDING HUMAN RIGHTS

Jose Luis Ortíz, Lawyer Master in Political Science

A few months ago appeared an interesting article in the Harvard Business Review (July-August 2011) called “The New Psychology of Strategic Leadership” by Giovanni Gavetti, associate professor at Harvard Business School. It seems important to me to discuss some elements described in this article not only for the business scope, but because of its relevance in the organizational field of governance and the definition of strategies (public policies) that lead in fact Ecuador through a path of real progress and welfare for the population.

The article begins by referring to the way Michael Porter opens his classic work on the five forces, saying: “In essence, the role of the strategist must be to understand how to face the competition. However, they often make a mistake defining competition narrowly”. The problem is that the strategic leader, according to the way it has been educating business strategy, has focused on analyzing and managing market forces and has not sufficiently understood the psychology of its own organization and also of their own mental processes. In many cases, the company is mistakenly guided in competing not only with their opponents in the market, but with their own customers.

The leader should seek the positions of the market where your company can best fit. What are the unemployed or under-served areas in which your company can launch an attack business (offering products and services to better meet these spaces..)? This often requires that strategists find these places thinking outside the status quo. But, how do we get out of these ways of thinking that are part of our mental DNA?

The process seems simple: A.- Identify opportunities. B.- Act on them, engaging and leading members of the company through the same path. C.- Legitimize these efforts involving external actors, shareholders and other “stakeholders”. D.- Evaluate and adjust. Managers are good at detecting primary opportunities. For example, the strategies adjustment that Walmart did to change from its initial strategy to settle in rural areas in order to enter the outskirts of large cities. However, in real life, business leaders are not as agile as it seems to find these areas of opportunity and therefore there are open positions left that offer opportunities to new visionaries. These abandoned spaces are called by the article I refer to, as “cognitively distant” because recognizing them requires a mental leap. Besides, these leaps sometimes require cultural changes in companies often resisted by employees. Even the other “stakeholder” such as shareholders, may also resist to see these changes as too challenging or bold.

An example of this, the article explains, is presented by the case of the late 1930s, in which Charlie Merrill began offering banking services to the U.S. middle class that surprised the traditional banking and was the origin of Merrill Lynch Company. According to Porter, the opportunity existed because the customers where in a vulnerable position and at a disadvantage in facing the power of a dominant traditional banking. Costumers were in weak positions facing the offer and Charlie Merrill capitalized on this opportunity. Are there opportunities in today’s world in the relation customer-banking? It seems that the situation has returned even in the United States and Europe, to this disadvantage. The public policies of bank bailout in the United States and the measures being taken in Europe are really considering this problem? The legal reforms in Ecuador in establishing a popular economy scheme and finance of solidarity, will be good for this? It seems to me that the whole world favor the creation of bureaucratic and regulatory schemes so complex, that they diminish the creative power of individuals able to create new opportunities for the population in

The New Leadership: Psychological reasons for a better corporate governance

Eng. Giovanny Ginatta FIE Executive Director

general. Sometimes, new laws that claim to fight for social and economic justice, hide the interests of large corporate powers that grow in more controlled markets and where the state has a discretionary power of decision. The mental process of the entrepreneur Merrill allowed him to see the opportunity of creating that kind of financial supermarket for the American middle class. Today, are there other industries where customers have lost power face to the offer? Could it be the case of the airlines? Today customers have the advantage of better prices and a schedule of flights more accessible to the middle class, but where is the quality of service and the basic human treatment?

What is associative thinking? Why is it important to see these abandoned spaces? Our minds are accustomed to associate new events with events that we know and we learn by comparing/contrasting. Our minds do it intuitively, without a conscious effort. Managers that best manage these mental processes will have a better chance of seeing the invisible. But, is it possible to train the mind for it? In part yes, making exercises of associative thinking such as studying and reasoning of cases in which the individual is proposed to combine elements of rational analysis with intuitive associations. The ideal case is to combine analytical methods, such as Porter, with intuitive processes of association. This is the best of both worlds and the confluence, the best recipe.

We cannot accuse Ecuador's current political leaders not to think differently. It is playing a strategy to change everything and to rebuild the country as the former president Palacios said. But, what is the true country vision that is projected? There are many papers written especially by SENPLADES, such as National Plan for Good Living; it is describe a very different Ecuador. Innovative features are projected, inclusive in laws, such as the incorporation of the concept of natural rights. But, where does all this lead us? We want an economy based on bio-knowledge, but which are the practical steps to achieve this and how soon? What happen to the existing sectors in this process? I think that Ecuador has plenty of theoretical processes of numerical and rational analysis, but it lacks the associative view of where we want to go. What space do we want to occupy as a country in the regional and global economic environment? Perhaps the President needs to better communicate us what does he see in the future? Maybe if he did it, without confrontation, we could be able to understand his vision and create a unified country force so that we all work in the same direction.

LOGISTICS, CLEARLY MANAGEMENT PROCESS

Eng. Roberto Calderon Viteri Director of CALDERON Group From a management point of view, it is a necessary strategy to completely manage the supplies chain, in such a manner that it achieves the optimal balance between the customer needs and the available resources of the company. The business logistics function has become stronger because the markets have become more demanding, integration and globalization are a fact, firms have to compete with companies in the whole world, besides the new information technologies have resulted in lower times and transaction costs. This is obliging to take more seriously the logistics management. At strategic level, logistics involves all areas of the company, to design from the state of identification of need and design of products or services a process that includes all necessary means to achieve the best results, in economic terms and at consumer’s satisfaction. Logistics, so understood, has a multifunctional character. To reach the final goal in the most efficient way, does not only depend on a function or responsibility of the company, but it is the result of joint efforts of all. The marketing and distribution strategy, are closely linked to the management strategies of the production and it should be considered within the same reflection. There are many business models, taking into consideration the number of intermediaries and legal categories, I will consider three circuits: No. 1 The manufacturer has his own distribution network The manufacturing firm has control of a distribution network and sells through that network their products directly to customers. For example vehicle manufacturers who have their own distribution network. No. 2 The manufacturer sells its products through a logistic operator The manufacturer sells to a wholesaler who is responsible for selling their product to the final customer. There is the case of computer equipment manufacturers that are only dedicated to the manufacture of the equipments and sell through specialist distributors. No. 3 The manufacturer sells its products to a distributors that has its own distribution network. The firm sells its products to a wholesaler who has under his control a distribution network. For example the hypermarkets that have created purchasing center to receive merchandises from the manufacturers and supply their outlets. The manufacturer in this case, does not control neither the distribution nor the commercialization of their products. Transportation services door to door. To absorb the demand for international transport, there must be a continuous development of integrated services door to door that can provide uninterrupted movements across countries and continents. Some of these services will be performed by operators who base their operation not

only in the availability of own resources, but in international versions of domestic companies of the intermodal market that link specialized carriers through information systems and intermodal transportation. However, they could also have a stronger tendency towards integrated transportation, that base their operations in the possession of own resources, which offer to buy at once, by linking multimodal capacity in all regions of the world. Countries like ours have access to full services provided by national logistics enterprises, including multimodal transport operations. To face competition, the international transportation suppliers are developing along with the manufacturers, strategic alliances based on value-added services, such as tracking ability in cargo real time, customs facilities, warehousing, distribution through local services. Communication systems based on electronic data interchange (EDI) which allow the management and tracking of the consignment, allow to control and monitoring of the cargo flow through transport networks and provide reliable information along of different modes and interfaces. The choice of the mode of transport is extremely important in terms of delivery time, location, costs, quantities, etc. Sometimes the mode of transport is imposed because of practical reasons. For example: Most importers transport their goods only under one Bill of Lading, ignoring the advantages of chartering space within a charging unit (container) through the figure of consolidation of merchandise. The mode of transportation is of great importance in the location of logistics platforms, in the case of maritime transportation, it is likely that the platform is located in port areas. Scope of the International Physical Distribution – IFD It is the set of operations required to achieve the load shifting, from the production site in the country of origin to the place required by the importer, in the destination country, for the fulfillment of the order Just in time. This allows to determine if the product arrives in good condition, promptly and at a reasonable price to their destination. It is necessary to involve the management to achieve and maintain the competitiveness of the goods throughout its travel, with adequate control of the movement performed by third parties, strictly complying with the cost of operations to meet delivery times. This is a simple exercise to be performed by a manager if he wants to enter an open market where suppliers with quality standards and compliance with all its states, attend there. It is dangerous to focus solely in the product quality; it should be conceived as a full service, where the product as such, is only part of the acceptance of something. It is not convenient either to associate high quality levels with high cost levels; this short-sighted attitude prevents to climb the ladder of excellence. What is required is to eliminate all the costs, delays and inefficiencies above the minimum required, so it manages to be more competitive. The above mentioned demands from the businessman a rethinking of the traditional way of work, strategic planning must be incorporated within its management, which applied to the field of motion, is nothing else but to do logistics. The purposes of logistics according to the World Customs Organization are:

1. Security of the International Physical Distribution Chain 2. Facilitate global trade 3. Promote smooth flow of merchandise 4. Integrated management of the Logistic Chain at all levels of International Trade.