Argentina’s challenges to increase productivity

This is one of the conclusions of the 2018 Economy and Development Report (EDR) by CAF-development bank of Latin America- presented in Córdoba, which examines the region’s challenges for major progress in productivity.

Latin America needs to devise and implement an institutional reform agenda with a focus on productivity in order to improve the environment where companies operate and promote efficiency in the allocation of funds, innovation and greater productive integration. This is one of the suggestions of the 2018 Economy and Development Report (EDR) entitled “Institutions for Productivity: Towards a Better Business Environment” developed by CAF-development bank of Latin America- and presented today at the Sheraton Hotel in the city of Córdoba.

The event was officially opened by the Chairperson of the Mediterranean Foundation, María Pía Astori, together with the CAF representative in Argentina, Abelardo Daza. Subsequently, CAF Vice President of Knowledge, Pablo Sanguinetti, explained the main contents of EDR 2018, which focuses on factors with an impact across companies, such as the degree of competition, access to inputs and cooperation between companies, labor relations, and financing.

During his presentation in Cordoba, Pablo Sanguinetti explained: “The problem of productivity is a crosscutting issue: there is a considerable lag in all sectors of the economy compared to leading countries. This is partly owed to a significant degree of informal production in most sectors. It is also due to problems of productivity within the formal sector, associated with inefficient allocation of resources across companies, and in particular to their relatively low productivity. For example, in 9 of the 10 sectors considered, production per average worker in the region was below 50% when compared with workers in the United States.”

The presentation of EDR 2018 in Argentina continued with an analysis of the report by Marcelo Capello, an economist at the Mediterranean Foundation and Chairperson of the Institute for Studies on Argentinian and Latin American Affairs (IERAL). Finally, newspaper reporter Walter Giannoni, from La Voz del Interior, moderated a panel featuring the Minister of Industry, Commerce and Mining of the Cordoba Province, Roberto Avalle, the CEO of Porta Hermanos, Jorge Porta and IERAL researcher Gerardo García Oro, together with Pablo Sanguinetti.

In the specific case of Argentina, the report identifies challenges associated with a low level of local competitiveness, based on the business perception as measured in the World Economic Forum Global Competitiveness Index. With respect to labor relations, Argentina made significant headway by reducing its rate of informal salary workers by 16%, to reach 33% in the 2001-2015 period. Argentina–just as in Colombia–still has important gaps in wages between formal and informal workers. In terms of financing, EDR 2018 shows that domestic loans granted to the private sector as a percentage of the GDP reached a mere 14% in Argentina, while the regional average stands at 50%, with Chile at 112%.

Major progress in productivity requires an adaptation of the institutional framework that leads to a better productive environment to encourage more innovation, more efficient allocation of funds and greater productive integration. This institutional change is complex and requires political consensus, which is not always easy to reach. Through the EDR 2018 presented today in Argentina, CAF aims to disseminate knowledge on the most useful initiatives for building bridges and advancing on the path towards further development in the region.