10 ways to boost Latin America’s productivity

While Latin America experienced robust economic growth and made great strides in enhancing its prosperity in recent years, the consensus is clear: to sustain growth and competitiveness, the region must improve its productivity.

A new World Economic Report, Bridging the Skills and Innovation Gap to Boost Productivity in Latin America, presents 10 recommendations for the region’s leaders to collaboratively address the region’s gaps in skills and innovation.

1. Build a strong foundation: The building blocks of a strong foundation are called “framework conditions”, which provide the right environment to motivate and enable Latin Americans to acquire the right skills, use those skills to find gainful employment, and bring innovative ideas to market. Having adequate infrastructure, supportive regulations and laws, and a healthy level of competition are examples of framework conditions. Without a strong foundation, even the best designed policies will falter.
2. Follow through – evaluate, manage, and monitor: When designing and implementing policies, it is important to evaluate existing ones so that we can make sure new policies fill a gap and do not duplicate the efforts of an existing policy. Providing adequate implementation support and ongoing management (including strong watchdog capabilities) is also crucial.
3. Align investments to critical priorities: A discussion of investment efficiency must ask not only “is the investment yielding returns greater than its cost?” but also “is the investment allocated to meet the most critical needs of society?” Frequent and structured calibration of existing policies and programmes by all involved stakeholders – not just policy-makers – must occur so that investments are going to meet the most critical needs of society.
4. Boost private investment: Effective design and administration of policies will help in sustaining strong public sector investments. But what about increasing the overall level of investment, particularly from the private sector? Private investment is a particularly weak point in Latin America, and a newly emerged class of wealthy individuals and firms presents an untapped opportunity to change this. Social impact bonds are a great example of the public sector engaging private investors, in which government agrees to pay for improved social outcomes. The first social impact bonds began in the United Kingdom, where results show a positive outcome for reducing the instance of first-time offenders returning to prison. There are now several social impact bonds under way tied to education and skills outcomes, including an early childhood education programme in Utah, USA and a migrant education programme in Belgium.
5. Create a standardized regional catalogue of research competencies: Study after study point to the weak linkage between academia and industry as a key challenge in Latin America’s innovation development. Building awareness is key to strengthening this linkage. Building a regional catalogue of research institutions and their competencies has two desired outcomes: one, such a catalogue serves as a gap analysis of sorts, enabling structured feedback and dialogue between academia and industry on what competencies are important for increased productivity and innovation. Two, a regionally standardized catalogue will help address the skills mismatch by allowing industry to identify institutions and competencies beyond its national boundaries.
6. Design public-private research and skills development funding schemes: Based on enhanced awareness, academia-industry stakeholders should collaboratively design research and skills development funding schemes, providing the private sector with an opportunity to directly invest in high potential areas and develop the competencies they will need in their next generation of researchers and knowledge workers.
7. Define and implement cross-sectoral vocational education and training programmes: The skills mismatch does not only exist in the upper echelons of academic research. In fact, the most critical skills mismatches are found in industries such as automobile and machinery, where both the right technical skills and socio-emotional managerial skills are in short supply. Integrating the needs of industry directly into vocational training programmes, therefore, would help narrow the skills mismatch even further. An example of such a collaborative engagement can be seen in the reform of Switzerland’s vocational education and training programme.
8. Establish a regional multi-annual research and innovation fund: A regional fund creates a greater pool of resources for participating countries, while increasing the chance for success as local players will bring specialized knowledge. Existing regional funds have successfully addressed critical needs in the region, such as the FRIDA fund which seeks to improve the region’s ICT infrastructure. Such efforts could be expanded to strengthen framework conditions or target a specific and common weakness in the region.
9. Enable a greater regional mobility of students and researchers: Regional student and researcher mobility programmes facilitate a better alignment between skills and need by letting the region’s employers access a larger pool of talent. Existing programmes, such as the Pacific Alliance Scholarship Programme and Brazil’s Science without Borders, have already made great progress in this area.
10. Employ a flexible implementation approach: This is more of a principle rather than a specific action, but one that is crucial for success. The key is to focus simultaneously on building a strong foundation while focusing on needs in skills and innovation development. This can be achieved using small-scale pilots involving select industries or localities, and creating a structure for these smaller entities to participate on an opt-in basis when readiness criteria have been met.

Author: Sharon Chae Haver, Senior Manager, World Economic Forum.

Image: A view of an almost empty Munoz Rivera avenue in the Hato Rey Financial District in San Juan, February 27, 2014. REUTERS/Ana Martinez