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.