When I was still having fun and enjoying the sun, sea and sand in Cancún, I had an insight that may be good to explain the concept of added value.
Whereas the ingredients for a plate of guacamole would cost you around 15 pesos (1 EUR) if bought at the supermarket, when I ordered it at my hotel it costed more than 80 pesos (5 EUR). If we take into consideration that the different farmers got probably a few peso cents for selling the individual avocados, onions and other individual ingredients this begs the question: Why the increase?
For starters, I didn’t have to grow the crops myself. I didn’t have to go to the supermarket and buy the ingredients and I didn’t have to prepare it either. Furthermore, I was at the beach and had a very nice view.
All these extras are called added value. This is why higher profits are not in the production of raw materials, and why I think that the strategies being followed by many Latin American countries in focusing on extraction of raw materials are not right for the medium/long term.