Dialogue between government, academia, entrepreneurs and trade unions about productivity challenges facing Uruguay

CAF-development bank of Latin America- presented the 2018 Economy and Development Report (EDR) “Institutions for Productivity: Towards a better business environment,” a report focusing on productivity challenges in Latin America. The results of the report kicked off a panel featuring Álvaro García, director of the Planning and Budget Office; Sebastián Pérez, economic advisor of the Chamber of Industries of Uruguay; Alejandra Picco, economic advisor of the Cuesta Duarte Institute of the PIT-CNT; and Néstor Gandelman, PhD in economics and professor at ORT University.

“The Pact that we have to establish now is for productivity, through dialogue, to reach a consensus on identifying policies to be implemented in order to improve long-term growth in our countries,” said Germán Ríos, CAF representative in Uruguay, quoting Luis Carranza, CAF executive president, who explained that several pacts have been made in Latin America in recent years, some of them implicit, related to macroeconomic improvement and stability, and others that are more visible, such as social pacts, which have helped reduce poverty.

“The regional lag in production is common across all sectors and is partly due to misallocation of funds. Therefore, we must focus on economic institutions that affect the entire business environment,” said Guillermo Alves, Chief Economist of the Department of Socio-economic Research at CAF.

In this connection, he said that research is conclusive on the importance of designing an institutional reform agenda that improves this environment, with actions related to competition, such as the reduction of barriers to markets and strengthening entities for the defense of competition; employment, ensuring that the design of taxation and associated benefits does not encourage informality; access to inputs and cooperation, promoting trade and integration, and financing, creating well targeted and rigorously evaluated productive financing programs.

“In Uruguay, we are lagging behind in productivity measurement processes,” warned Gandelman, and said that this resource should be used to design policies and for companies to know their status compared to the competition. He also spoke against considering productivity measurements by sector in Wage Councils, since this does not reflect the heterogeneity of companies. As he explained, this initiative was introduced in the second administration of Frente Amplio, following the impact of wage recovery measures of the first administration, which resulted in some firms implementing remuneration levels that relied on the evolution of productivity.

“The collective bargaining system is not helping to improve productivity. We need to have a sectoral perspective when setting wages,” added Picco, as she explained that the generation of more sophisticated indicators and the standardization of measurement methodologies is incidental. In her view, these proposals are undermined by the lack of available information in companies.

In addition, Perez highlighted the contributions of the CIU in terms of measurements and reporting. “The problem is not the measurements, but the results,” he said. He said that while the Chamber is aware of the productivity problems of some private companies, they identify a greater need to promote changes in state-owned companies, which can lead to improved conditions of competition.

Meanwhile, García welcome the inclusion of this issue in the CAF report. “It is critical to include the issue of productivity in the agenda,” he said. He spoke about the growth experienced by the nation after the 2002 crisis and the challenges yet to be overcome to improve productivity in the long term, such as narrowing the gender gap in employment and continuing work on education. García also highlighted the work of state projects such as Transforma Uruguay, which seeks to promote an agenda on issues related to competitiveness and national transformation capacity through synergy with workers, entrepreneurs, social economy projects, researchers and educational institutions.