The commodities boom has deflated, and Latin American economies must now develop ways to stimulate growth in a tepid environment. The challenges are many and tough, and a number of promising approaches are clearly in view, senior government officials and experts agreed on the final day of the World Economic Forum on Latin America.
Policy-makers and private businesses should focus less on a model of growth and direct their attention to a strategy, said Andrés Velasco, Professor of International Practice in International Development, Columbia Global Centers Latin America. “We need to diversify economies and diversify exports”, he said, and this requires dialogue and collaboration between the public and private sectors. Except for Mexico, where a large export sector has developed, all countries in the region export the same goods they produced during the last 30 years, Velasco noted.
Coordination between the public and private sector is widely recommended in order to make Latin American economies more competitive. Long-term strategies and policy execution are necessary to meet the challenges of upgrading technology and establishing education that prepares workers with 21st century skills. “I believe in public-private work and in permanent contact with academia,” said Rosario Cordova, President, Consejo Privado de Competitividad, pointing out that private business participates in Colombia’s governmental system of promoting competitiveness in science and technology. Governments and private sector actors have long partnered in joint ventures to support the construction of infrastructure across the region.
A new effort in public-private collaboration was launched earlier this year in Honduras, where the government and the private sector jointly funded a McKinsey consulting firm study that designed a plan for development through to the year 2020. The programme identifies key growth sectors for the economy, including tourism, the textile and intermediate manufacturing industries, and agriculture, explained Arnaldo Castillo, Minister of Economic Development of Honduras. “It doesn’t matter what government comes to power, the private sector will supervise compliance with the programme”, he said, adding that the private sector has bet on the programme “and is practically a partner”. The goal of this national plan is to raise growth to 5% per year.
When participants were asked whether they agreed that institutions need to be strengthened, a vast majority of them raised their hands in agreement. Institutions are needed that have a long-term vision, coordinate among themselves, and have better trained staff, panellists argued.
Low productivity is a widespread problem that hampers growth in the region. An ecosystem that promotes productivity in small businesses that account for 60% of employment and 30% of output in the region is required, said Ricardo Haneine Haua, Partner and Managing Director of the Hispano-American region with A.T. Kearney.
Weaknesses in Latin American economies will be best addressed by taking a focused approach, experts suggested. Rather than considering education in general as a problem, policy should centre on training that will develop specific 21st century skills. Competitiveness should be developed locally by working to create cities or clusters as centres of innovation or production. “Creating sustainable advantage will permit integration into the value chain,” said Haneine Haua.
Combating corruption is a priority for improving competitiveness, gaining the confidence of foreign investors and helping boost growth, panellists emphasized. Transparency, the rule of law and developing talent are the most important tasks on the economic agenda for the next decade, said Hugh Welsh, President, DSM, North America.