Increased productivity and fiscal stability, the major unresolved issues in Latin America

Increasing productivity and achieving fiscal stability have become two of the most pressing challenges in Latin America to resume sustained growth in the medium and long term, enabling expansion of the social gains achieved in recent decades and the closing of the socioeconomic gaps that separate the region from more advanced economies.

These are some of the conclusions reached by the experts during the second day of the CAF Conference that took place in Washington DC on September 5-6, organized by the CAF-development bank of Latin America-, the Inter-American Dialogue and the Organization of American States.

“The low productivity in Latin America is more related to how we produce rather than what is being produced. That is, to the way in which resources are allocated in economic sectors, and not so much to the fact that all sectors produce little,” said Pablo Sanguinetti, CAF’s Vice President of Knowledge. 

In this sense, Jorge Familiar, World Bank’s Vice President for Latin America, said that “we are not in a position to preserve growth, but we must continue working towards improving it. Our countries have to work on generating a record of good macroeconomic practices that help us generate more confidence from the markets”.

Santiago Levy, Vice President for Sectors and Knowledge of the IDB, considers that the less productive companies absorb large amounts of capital and labor. “If we don’t fix public policies leading a large number of individuals to behave privately profitable but in a socially inefficient way, we will not solve the productivity issue,” he said. 

The panelists agreed that one of the determining factors to increase productivity is innovation, entrepreneurship and promotion of dynamic business ecosystems. In this sense, José Juan Haro, Director of Public Policies for Latin America at Telefonica, said that both formal and informal companies face a new paradigm as a result of the digital revolution, but that the former face a greater challenge, since they must “unlearn” processes that have been installed for years to continue innovating and being productive.

According to Mariana Costa, Founder and President of Laboratoria, it is essential for companies to generate a much more agile and open culture, less risk-adverse and more tolerant of failure, to compete in the current business context. "We are undergoing times of major changes, and they are not going backwards. This has important implications at all educational levels, since soft skills will be the most important ones. In a world where information is already in the open, it is necessary to use sound judgment to differentiate between useful and useless information,” she said.

Other topics covered on today’s session included the strengthening of institutions, the mechanisms to eradicate corruption, the quality of infrastructure investments, the strengthening of judicial systems, the emergence of new technologies or the role of the private sector in the countries’ development.

The afternoon session covered issues related to the implementation of public policies in the long term that will achieve sustainable development, and was also focused on the lessons and political developments in Latin America, specifically in Brazil, Colombia, Mexico, Paraguay and Venezuela.

See the best of the 22^nd Annual CAF Conference here.