Digital Republics; Forget bananas. Though there is much left to do in building more-stable societies, Latin America is rising as an information age threat.

Byline: Oscar Arias (Arias, a Nobel laureate and former president of Costa Rica, is running for a second presidential term.)

What's the third most competitive outsourcing destination in the world, after China and India? It's Costa Rica, according to The 2005 Global Outsourcing Report by Ziff Davis Media. The software industry accounts for about 12 percent of our GDP, and microchips have overtaken coffee and bananas among our leading exports. Maybe the world should start calling us a "Digital Republic."

Nor is Costa Rica the only Latin American nation vying for a piece of the global IT outsourcing market, which is expected to total $50 billion by 2007. Chile is at No. 9 on the Ziff Davis list, Brazil is 15 and Mexico is 19. Confidence is growing, as foreign direct investment in Latin America and the Caribbean rose 44 percent in 2004 to $68 billion. And investors were not merely chasing commodities: cross-border mergers and acquisitions in the electronics sector rose 400 percent, by nearly half-a-billion dollars, with mobile-telephone firms leading the way.

Although the Pacific Rim economies present a huge challenge, Latin America is still in the game for three reasons: comparatively low wages, proximity to the United States and falling trade barriers. The Central American Free Trade Agreement, which five nations have ratified so far, will boost our high-tech sector by creating investment incentives, protecting intellectual property and opening the telecommunications industry to competition.

But free trade is not enough. Access to the U.S. market is not enough. And our competitive edge cannot and should not depend on low wages. What will attract business is a stable society, with transparency, democracy, the rule of law and developed human resources. And in this regard, the nations south of the Rio Grande are struggling.

Our governments need to attack the virus of corruption. The watchdog group Transparency International just released its 2005 Corruption Perceptions Index, a survey of business and political analysts. Latin American nations scored an average of 3.6 points on a scale where 10 is the most transparent. The four East Asian tigers averaged 7.2. This disparity is costing us dearly.

...