ECLAC calls for scaling up and improving productive development policies to escape the low capacity-to-grow trap in which Latin America and the Caribbean are mired

In order to overcome the low growth capacity trap in which the region is mired and avoid a third lost decade, the Economic Commission for Latin America and the Caribbean (ECLAC) calls on countries to scale up and improve productive development policies (PDP) that promote productive transformation and productivity growth in their economies.

This is stated in the new flagship document of ECLAC Overview of Productive Development Policies in Latin America and the Caribbean, 2024: How to promote the great productive transformation that the region requires?whose first edition was presented today in the framework of a webinar that brought together some of the most prominent figures who, from practice in their respective countries and from some of the most renowned multilateral entities and study centers worldwide, guide the international debate on these issues.

The publication, released by the organization’s Executive Secretary, José Manuel Salazar-Xirinachs, and the Director of the Productive and Business Development Division – in charge of the report – Marco Llinás, presents ECLAC’s renewed vision of productive development policies, provides an analysis of the efforts that countries in the region have been making in terms of productive development policies, and presents concrete proposals to scale up and improve these policies in Latin America and the Caribbean. To this end, it puts forward more than 80 practical recommendations, summarized in seven lines of action, which seek to guide the countries of the region and their territories on the “what” and the “how” to advance their productive transformation.

Among its main findings, the document indicates that the efforts that the region is making in terms of productive development policies are marginal compared to the productivity challenge that exists and compared to what other countries are doing in this area. The countries analyzed in the Panorama allocate public resources in PDP equivalent to between 0.2% and 1.2% of GDP. These are very low values ​​when compared to the 3.5% that some countries of the Organization for Economic Cooperation and Development (OECD) are estimated to invest.

Likewise, tax instruments predominate, accounting for 61.5% in Argentina and 87% in Brazil. The exception is Chile, where subsidy instruments prevail, accounting for over 70% of the total. There is also a dispersion of resources among multiple instruments of limited scope, which atomizes the efforts made, thus reducing their capacity to have an impact.

The modern vision of PDPs promoted by ECLAC emphasizes governance and collaboration mechanisms between institutions and key actors. In this regard, a great dispersion of institutions dedicated to PDPs was found: most of the 33 countries in Latin America and the Caribbean have between five and six entities dedicated to these policies. However, the institutions that promote them are poorly articulated among themselves. In addition, the data show that subnational governments contribute their own resources to the financing of PDPs in their territories. However, there is great heterogeneity in these efforts between territories within countries.

According to the diagnosis carried out by ECLAC, there are great opportunities for improvement in PDP efforts in the region. Thus, to guide national and subnational governments in scaling up and improving their PDPs, the Panorama presents a broad set of proposals grouped into seven axes of action:

1.- Increase efforts in line with the new vision for greater impact.
2.- Strengthen multi-stakeholder and multi-level governance.
3.- Strengthen the technical, operational, political and prospective (TOPP) capacities of institutions.
4.- Create and strengthen cluster initiatives in line with productive priorities.
5.- Strengthen the commitment of all stakeholders, particularly the private sector.
6.- Deepen territorialization.
7.- Adopt a strategic line of internationalization.

The webinar where the report was presented grouped the discussion into three panels on the challenges of current productive development policies in the region; governance and institutions for productive development policies in the region; and subnational efforts in productive development policies in the region.

The event was attended by leading experts, including Annalisa Primi, Head of the Development and Economic Transformation Division of the OECD Development Centre; Fuad Hasanov, Senior Economist at the International Monetary Fund (IMF); José Antonio Ocampo, former Minister of Finance of Colombia and former Executive Secretary of ECLAC; Nicolás Grau, Minister of Economy, Development and Tourism of Chile; Uallace Moreira, Secretary of Industry of the Ministry of Development, Industry, Trade and Services of Brazil; Paola Pabón, Prefect of the province of Pichincha, Ecuador; Professors Nathan Lane (University of Oxford), Charles Sabel (Columbia University), Amir Lebdioui (University of Oxford) and Christian Ketels (Harvard University); Gonzalo Rivas, Head of the Competitiveness, Technology and Innovation Division of the Inter-American Development Bank (IDB); Piero Ghezzi, former Minister of Peru; Camilo Rivera, Vice Minister of Business Development of Colombia; Rebeca Vidal, Senior Executive for Technical and Sectoral Evaluation at CAF; and Vidal Llerenas, an expert on Mexican productive policy.