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ECLAC Recommends Changing Productive Structure to Take Advantage of Opportunities Provided by World Economy

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10 June 2008|Press Release

Latin American and Caribbean nations should add knowledge and value to their export products.

This year, Latin American and Caribbean economies are completing an expansive cycle of six consecutive years, with an average annual per capita growth rate of 3.5%. This is the biggest economic bonanza in the past 30 years. Many new opportunities are arising. It is time to explore new avenues.

Basically, countries in the region should make the most of the global expansion to promote a process of productive transformation and capacity-building to enable them to broaden and modify their traditional modes of international insertion, adding value and knowledge to their products.

This is the central message of the document Structural Change and Productivity Growth, 20 Years Later. Old problems, new opportunities that the Economic Commission for Latin America and the Caribbean (ECLAC) submitted today to delegates at its Thirty-second Session, being held in Santo Domingo, Dominican Republic.

The report asserts that the region is undergoing a good moment, with favorable external conditions have meant greater demand, abundant liquidity in financial markets, higher prices for raw materials and a significant increase in remittances.

However, several "old problems" of structural nature continue to persist in the region, the same problems that led ECLAC to adopt the concept of productive transformation with equity 20 years ago.

The report also acknowledges that the region is facing short-term difficulties due to the economic deceleration in the United States and the rising food and fuel prices.

For this reason, today the United Nations regional commission is re-examining its approach to address the new opportunities that are arising, focusing on the diversification and development of instances where technological learning, innovation and competitiveness converge, as the basis of future development strategies.

ECLAC suggests two basic approaches: generating a culture of innovation in order to create and benefit from opportunities arising from new proposals; and detecting and making the most of the opportunities provided by the world, as well as learning from the experiences and progress in other regions.

The report presents a study of six sectorial learning patterns to identify the elements required to strengthen dynamic comparative advantages and explore new avenues for learning, in sectors and companies. These areas are: the traditional manufacturing and the manufacturing export (maquilas in their different modes) industries, the agrofood complex, metal mining, and tourism and business services.

In each of these areas there are opportunities from which to benefit, but the process is not spontaneous. It requires creating capabilities and public policies to make the most of them, in cooperation with the private sector.

Reasons for certain optimism

In the document, ECLAC points out that the region has not advanced much in terms of the quality of its exports, as reflected by their price, which is lower than the price of the same products exported by developed countries.

However, precisely here there is an opportunity, and there are three reasons for certain optimism.

  • There is a context of greater and more diversified demand, increasingly fragmented production, and technology that can be adapted locally.
  • Countries in the region have developed certain capabilities that must be strengthened in international markets.
  • The experience of Asian countries suggests that it is possible to escalate in value chains and move towards more knowledge-intensive segments, and develop a surrounding network of small and medium-sized companies, as long as the technological capabilities to achieve this are developed.

Similarly, short-term regional integration problems must be overcome; greater economic cooperation would facilitate the process enormously. If this is not possible, the speed of changes in the world may convert opportunities in mere illusions.

Search for consensus and financing

According to ECLAC, to succeed in the process of productive transformation, medium and long-range strategies reflecting the national interest must be implemented. That is, they should be part of a search for a broader consensus, given that societies with greater levels of social cohesion are capable of forging better strategies and institutions, and generating the levels of trust required to implement reforms.

In terms of financing these strategies, there are two challenges: how to maintain the balance between traditional sectors and those with the most potential, reallocating resources from the former to the latter without eliminating incentives; and second, how to invest these resources effectively and in pursuit of a clear objective.

In sum, advancing towards productive transformation is possible only by combining economic and social policies based in three basic areas: technical progress, productive employment and accumulation of human capital. If this goal is met, the region will be closer to filling the "empty box" of growth with equity that ECLAC set forth 20 years ago.