Colombia, leader in Latin America based on its experiences in local development

(Bogotá June 16, 2010).- The sixth edition of the CAF Report on Economy and Development (RED) 2010, with the theme "Local development: toward a leading role for cities and regions," focuses on the local economic development strategies implemented in Bogotá, Medellin, Quindío and Norte de Santander, which have been successful in attracting investment, productive transformation and strengthening regional competitiveness.

"Colombia is an example for Latin America because of its successful experiences in local development. To show how it has been done, a crucial factor has been the active role played by local and regional governments in the design and implementation of development policies, in a context of intense interaction and cooperation with the private productive sector, the community and other representatives of society," said Leonardo Villar, CAF vice president of public policies and development strategies.

Throughout the Report, diagnoses and recommendations are offered, taking as reference the analysis of local experiences from various Latin American countries, whose objective has been to improve the quality of the workforce, attract investment from firms and industries by developing clusters and/or productive chains, strengthening institutions and defining public policies, as well as promoting citizen participation and transparency in collective decision-making.

Colombia, example for the region in investment promotion agencies

According to RED 2010, Colombia is the Latin American country with the most advanced development of local investment promotion agencies. The Report showcases the role that Invest in Bogotá is playing in attracting foreign investment to Bogotá. Invest in Bogotá is a local agency which came out of cooperation between the public and the private sector (Bogotá Chamber of Commerce and Bogotá City Government),

One of its most important achievements, according to RED, was that, based on a series of studies, the agency found that the city had important educational and technological strengths for positioning itself in Latin America as host to investments in the area of value added and export-related services, particularly attracting BPO (Business Processing Outsourcing). This model consists of outsourcing services to providers outside the company for administrative, financial, operational or technological activities. Using this information, the agency began to work systematically on improving the investment climate, defining a sectoral strategy, generating and facilitating investment, supporting installation of businesses, promotion of reinvestment, and implementation of specific recommendations for investors and for the city.

The CAF study finds that Bogotá began to position itself in the markets of Spain and the United States as an attractive location.

Based on this success, the agency scaled up its strategy and began attracting software firms which were willing to set up as potential customers around these BPO. The Report sees as an interesting experiment, the idea of integrating the value chain between both industries through an active investment promotion strategy.

With the capacity to promote synergies between the public and private sectors, the creation of local investment promotion agencies has been a widespread practice in Europe, particularly in countries such as England, Spain and Denmark. In Asia, countries like China have used this type of agency as an important tool for creating regional zones of highly differentiated investment.

New forms of governance, key to the productive transformation of Medellin

For this edition of Report on Economy and Development, CAF conducted a survey in 23 cities in South America to measure citizens’ levels of confidence in the private sector as a source of solving local problems. The six cities with the highest levels were Rafaela (Argentina), Salto (Uruguay), Caracas (Venezuela), Medellin (Colombia), Guayaquil (Ecuador), and Montevideo (Uruguay)

Specifically, Medellin (Colombia) and Rafaela (Argentina) were the two Latin American cities that RED 2010 took as an example of how the increased dynamism of local governments and the building of new governances with the private sector, conceived with a comprehensive and participatory sense, lead to implementation of local development strategies which stimulate the socioeconomic transformation of regions and cities in relatively short periods of time.

According to the Report, the decentralization process in Colombia has encouraged democratization of regional and local governments, which has led to the emergence of innovative forms of governance in several cities in the country, and Medellin is regarded as one of the most interesting cases.

According to the study, the management model for transformation of the city, which has led to participative planning and building of networks of confidence and respect between local interest groups, consists of long-term planning tools such as the Medellin Strategic Plans which are reviewed every four years at the end of the mayor’s term, along with the studies that private local entities regularly carry out in certain areas of the economy, the initiatives which measure the progress of the city such as the program Medellín, cómo vamos?, and the mechanisms for citizen participation such as the Participative Planning and Budget process under way since 2004.

Medellin has also adopted the clusters methodology as a working tool to increase productivity and stimulate increased value added in industries such as textiles, automotive, footwear and services in the construction area.

The CAF Report says that it is still too early to say if this development strategy implemented will lead to a sustained transformation of the city of Medellin. However, it is clear that the strategy will have played an important role in the changes that are beginning to be felt in the city.

Quindío and Norte de Santander develop local resources to be competitive

Likewise, RED 2010 shows how nine regions of Latin America – including Quindío (Colombia), Norte de Santander (Colombia), Bíobío (Chile), Buenos Aires province (Argentina), Córdoba (Argentina), Paraiba (Brazil), Ica (Peru), Guanajuato (Mexico) and Nayarit (Mexico) – are notable for their efforts to become more attractive and achieve a real competitive performance (better than expected based on their GDP) by means of coordinated and sustained work by public and private sectors.

Five of the regions mentioned (Quindío, Buenos Aires, Paraiba, Ica and Nayarit) have reinvented themselves through tourism. In this respect, the Report suggests that tourism facilitates increased public/private coordination, precisely because it is the only way to enhance the attractiveness of the locality.

According to RED, Quindío department succeeded in exploiting the natural beauty and historical value of the coffee industry to create an ecotourism industry. Various coffee growers adapted their infrastructure to tourism and diversified their sources of income. The active participation of the public sector was critical in adapting services and investing in promotion of the coffee route as a tourism attraction.

In contrast, Norte de Santander, Córdoba (Argentina), and Bíobío have focused on strengthening and developing new industries. The Report states that the experience of Norte de Santander is an interesting case since it is a department which traditionally focused on its commercial strengths rooted in the city of Cúcuta, which continues to mobilize a significant volume of international trade with Venezuela. Even so, the region has built up, with solid support from the government, various clusters such as poultry, chocolate and leather. The exports from these sectors have grown strongly following improvements in production processes.