Latin America and the Caribbean are still far behind other regions around the world in terms of research and development. While the United States, Japan and the Republic of Korea invest from 2.5 to 3 points of their Gross Domestic Product (GDP) in this area, and the European Union almost 2 points, our continent as a whole invests barely 0.5 points of GDP.
The investment gap translates into an important difference in economic productivity. This calls for public policies to create and develop innovative skills capable of making the most of rapid technological change and economic integration, states the Economic Commission for Latin America and the Caribbean (ECLAC) in its report Productive Development in Open Economies, presented at its Thirtieth Session, currently taking place in San Juan, Puerto Rico.
The document points out that introducing new knowledge and new technologies into production, generally referred to as "innovation", are among the main pillars in company competitiveness and sustained economic growth in the long term. In fact, scientific and technological progress has significantly changed the face of the economic world in recent decades and become much more rapid.
However, the process of acquiring, adapting and developing technology has been uneven in every region and in many cases has been hampered by the lack of a market or serious flaws in market functioning.
In the countries of Latin America and the Caribbean, research and development is mainly financed by governments. This contrasts with other regions, where one-third of spending is by higher education institutions and private non-profit organizations, one-third by government, and one-third by companies.
Moreover, the absolute differences are very large. In developed countries, companies spend from US$200 to US$700 per capita on this area. The Latin American countries spending the most are Argentina, Brazil, and Chile, with almost US$50 per capita, while Mexico spends US$33, and Costa Rica, Uruguay and Venezuela slightly over US$20. At the same time, governments spend the most on research and development, ranging from US$20 to US$36 in Argentina, Brazil, Chile and Mexico. This figure remains a long way from the US$150-250 per capita that the governments of developed countries spend.
This enormous gap demands that the region's countries focus their resources on a few activities with the greatest potential, instead of spreading them among multiple initiatives.
Formulating and Coordinating Policies for Innovation and Technology
According to ECLAC, the region's countries today face the challenge of approaching technological policy more pragmatically, taking into consideration the interaction between supply and demand in the innovation process and resorting to more effective instruments in each case.
To do so, it proposes using several instruments, such as government incentives, direct public credit, subsidies, improved incentives from the official science and technology apparatus, risk capital, observation missions, technological distribution services for small and medium-sized firms (PYMEs), and transferable research and development laboratories. It also underlines the need to increase economic resources going to intensify innovation-oriented activities.
Finally, it notes that developing a national strategy for promoting innovation requires considerable coordination, at the policy design, formulation and implementation stages. Companies, their suppliers and customers, universities, public and private research institutes and financial institutions must increase their interrelations, to achieve positive synergies.