Skipping the factory: from the farm to services

Skipping the factory: from the farm to services

SurEconomics staff, August 2026

The “magic formula” that enriched Europe and Asia is now a textbook classic: move from tilling the land to manufacturing automobiles in industrial plants, then offer high-value services (particularly financial ones).

This formula has not worked in Latin America.

The region has suffered a historic short circuit. We moved directly from farming a plot of land to a “street vendor’s stall” without adding much value to what we produced. Then we abandoned the land to drive an Uber or answer calls at a call center. Little industrial development, little value added to primary products and services. Unfortunately, that is the economic history of Latin America.

The problem is not working in services, but which kinds of services we have specialized in, and labor productivity. While in Singapore a services employee who programs algorithms or manages investment funds generates 90 dollars per hour, the average service worker in Latin America generates less than 8 dollars per hour.

Moreover, in 1980 manufacturing in Latin America accounted for 26% of regional GDP, while today it barely reaches 12%. In fact, the region’s premature deindustrialization has been due to the relocation of major manufacturers to Asia, driven by lower production costs.

Without a strong industrial sector that turns local iron, meat and coffee into high-value processed products, the region is condemned to be a spectator, buying manufactured goods from abroad and paying for them with its cheap raw materials.

Sources

·       Rodrik, Dani. Premature Deindustrialization in the Developing World, NBER Working Paper, 2025.

·       IDB. Desafíos de la productividad industrial en América Latina [Challenges of Industrial Productivity in Latin America], 2025.

·       La Jornada. “La caída del peso manufacturero en la economía latinoamericana” [The decline of manufacturing’s weight in the Latin American economy], June 18, 2026.