DAVOS, Switzerland, CMC – The Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), José Manuel Salazar-Xirinachs, has outlined new policies to help the Latin America and Caribbean (LAC) countries emerge from a prolonged development crisis.
Addressing the 2023 World Economic Forum Annual Meeting (WEF), which ends later on Friday, the ECLAC official is proposing cluster-based policies as a powerful instrument to promote growth and product diversification to help pull the region out of the prolonged development crisis that has impeded high, sustained and sustainable growth in the last decades, except in cases of price bonanzas in primary products.
The meeting here brings together the most significant number of world political and economic leaders in its history, including more than 50 heads of State or government, 56 finance ministers, 19 central bank presidents, 30 ministers of trade, and 35 ministers of foreign affairs, under the slogan “Cooperation in a Fragmented World.”
In his presentation, the ECLAC’s Executive Secretary stressed that productivity has not grown in 30 years in Latin America and the Caribbean, the region with the worst productivity performance in the last 40 years.
He added that the average rate of growth in the last ten years from 2014 through 2023, considering the projection of 1.3 percent growth for this year, is just 0.9 percent, or less than half the growth the region had in the infamous lost decade of the 1980s.
“Therefore, this decade will be even more lost than the last lost decade. This is the real developmental crisis of Latin America and the Caribbean: the region has failed miserably in promoting technological sophistication, economic complexity, and production and export diversification. The result is that all countries are in the medium-income trap,” he noted. As a result, none have even reached the threshold of 20,000 dollars per capita income.
Salazar-Xirinachs warned that without productivity growth, prosperity is not sustainable, the creation of jobs and social policies are not sustainable, social mobility is not possible, and without all this, the reduction in inequality and social pacts are at risk.
“We know there are no easy recipes for achieving high, sustained, and sustainable growth. There are no silver bullets. A checklist of things must be correct, such as investment climate, infrastructure, education, macroeconomic balances, good governance, etc.
“But a solution could be cluster initiative policies or cluster-based policies that could be built from the bottom up, even if some of the factors on the competitiveness checklist are not 100% right,” Salazar-Xirinachs explained.
He said that clusters are a specific form of public-private partnership that creates a space of governance where all relevant players collaborate to promote competitiveness, job creation, innovation, skills, and financing and remove obstacles to the growth of the cluster, sector, or aggregation. The private sector leads the most successful clusters, with close cooperation of government agencies and educational and training institutions.
“The countries of Latin America and the Caribbean should embrace cluster-based approaches and scale them up in their effective development policies. In this sense, we want to turn ECLAC into a Center of Excellence in Knowledge on cluster policies, among other themes,” Salazar-Xirinachs said.
He emphasized the need to speed up the pace of economic transformations in the region, saying that economic changes, whether induced by trade and globalization, the technology revolution, or by green growth and the significant environmental push, are a process of “creative destruction” or structural change where there are sectors, workers and territories that win, and others that lose.
He also referred to the big public policy challenge to promote a fair and equitable transition is in making the creative aspects of the change come before the destructive elements in terms of unemployment and the obsolescence of existing production capacities.
He said that one of the fundamental aspects of a fair and equitable transition is having significant investment in education and training. “
“One of the greatest restrictions for making the transition toward what’s new is not having the talent and competencies that the new sectors of the future demand,” he said. In addition, he recommended bolstering the active labor market policies to help displaced workers find new employment opportunities through training, re-training, and labor reinsertion policies.
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