Colombia is learning how socialism effects its economy

Money flees, talent flees and economic outlook darkens

The election of socialist leader Gustavo Petro by Colombians follows a pattern of politics shifting to the left as income inequality worsens across the region. Voters hope socialist governments will ease the inequality with progressive policies not materially unlike those of Joe Biden in America or Justin Trudeau in Canada. The result - money flees.

Wealthier people across Latin America are rapidly moving their money out of their home countries to buy real estate in United States, foreign stocks, gold, and anything they believe will be out of the reach of the socialist regimes. Bloomberg reports billions have fled Latin American regimes every year since 2005 when the “pink” slie began.

Source: Bloomberg

It is not just capital heading for the exit door as socialism gains in popularity. The exodus of talent is taking place just as fast. It may comes as a surprise to socialists but wealth must be created before it can be redistributed and if you enact efforts to redistribute wealth quickly without thinking through the impact of your policies on entrepreneurs, business owners, investors and in short the people who create the jobs and build the economy, you can stake out the airports and border crossings to watch them leave. Even the poor are abandoning Latin America as evidenced by the millions of people lining up at the United States southern border to get into America and build a future for their family, giving up on any hope of a similar outcome in their native lands.

Canada is on a quick march towards authoritarian socialism under Justin Trudeau, and the flight of capital from Canada is well underway. During the Trudeau years to date, business investment in Canada has fallen away while Canadians’ investment abroad has risen over 70%. To bribe Volswagen to put a battery plant in St. Thomas at a capital cost of about $7 billion, Trudeau gave VW $13 billion in federal government support and Doug Ford, eager to bask in the headlines, threw in undisclosed millions as well. It is not enough to pay the entire cost of building a battery plant in Canada, Trudeau finds it necessary to pay the operator an amount that is so profitable for them they don’t have to produce anything to make out just fine. Great headline for the Liberals- “we are building a stronger Canada”. Lousy outcome for Canadians - your money is being poured down the drain.

The VW plant will become a white elephant if VW can’t sell enough electric vehicles (EV’s) to fill its capacity since the likelihood of VW’s competitors sourcing batteries from a direct competitor is near zero. Tesla will build its own batteries, Ford and GM have made plans for their EV battery needs, and Stellantis is a bit player in North America. The idea that Toyota, Hyundai, Honda, Subaru or Mercedes will fall all over themselves to buy EV batteries from VW is too remote for sensible consideration. Once the fanfare is over, the plant built, Liberal voters seduced into voting for Trudeau once again, and the brutal competition in the automotive industry takes its toll, the fabled VW battery plant will be on life support and another Liberal government (if Canadians are stupid enough to keep this up) will be shelling out millions in support to avoid having the workforce in St. Thomas lose their jobs.

Canada should learn from Latin America. If you want to build a strong economy, stop attacking the people capable of building it.