Thread by @svembu

1/ Very interesting thread on Colombia (pop. 52 million) wanting to restore basic industries and jobs and restore balance in their external trade.

Is it possible? Yes. There are some trade-offs (!) they would have to make but their goal is doable. Let's look at the trade-offs.

https://twitter.com/michaelxpettis/status/1657116393924624384

2/ The most critical trade off is this. Consider the iPhone, which I will use as code to represent "goods with the most sophisticated tech available". If Colombians want to buy a lot of iPhones, they may not have enough exports to pay for them and achieve trade balance.

3/ The trouble is no combination of basic industries (food, fertilizers, textiles etc) whose technology is easily and cheaply available will allow Colombia to export enough to achieve trade balance *while freely importing technologically advanced goods*. That is the problem.

4/ Solutions? a) Colombia can settle for somewhat older lower cost "iPhones" while rationing the most expensive "iPhones".

b) Colombia can focus and master an area of very high value addition (like Taiwan with TSMC) and use those exports to pay for high value imports.

5/ Of course, Colombia can do (a) short term while pursuing (b) long term. It requires national will but can be done.

Colombians will "suffer" slightly from having to use slightly older but much cheaper technology but in return they live debt free and retain their sovereignty.

6/ This is fundamentally a political economy choice for a nation to choose to live debt-free. Macro economists pretend that their theories don't have any political dimension but not wanting external debt is a valid political economy choice. I wish Colom­bia well in this effort!