Next month, several hundred leaders from every different sector of society will arrive in Panama City for the ninth World Economic Forum on Latin America. It is an appropriate setting for a meeting focused on Latin America’s opportunity to leap forward in terms of growth, productivity and infrastructure development.
Panama City has a traditional Latin American flavour, with its historic and colourful colonial centre. It also embodies the dynamic economic growth of the region with a skyline to rival that of any major trading hub. Located at the heart of the Americas, it is well connected and will, this year, celebrate the centenary of the Panama Canal.
The country as a whole has strived tremendously in the area of competitiveness. With extensive investment in infrastructure, it has created innovative business models to attract international companies. As a result, Panama has developed a thriving economy based mainly on services, with very high, sustained rates of growth for the past 10 years.
It is from this perspective that we will focus on Latin America’s efforts to drive economic dynamism, innovate for social inclusion and environmental sustainability, and modernize its economic and institutional infrastructure.
Latin America has vast natural resources and important human capital. It has shown its financial resilience with sustained economic growth for the past decade, and despite complex economic perspectives, it is now open for greater investment in a host of different industries.
In Brazil, for example, the Logistics Investment Programme, a US$ 121 billion government-led infrastructure investment portfolio, is based on strategic partnerships with the private sector, and in Mexico, a wide-ranging package of reforms to labour laws, education and strategic economic sectors, has opened up great opportunities in the energy, communications and manufacturing industries. This is an inspiring model that could be used in other countries, both in and outside the region.
But it is important to tackle remaining structural challenges. Latin American countries must diversify their drivers of growth. Commodities exports represented 60% of the region’s exports compared with 40%, ten years ago. More than the expansion of its volume, many have benefited from high commodities prices, but this is a volatile base for an economy, as demand has faltered, particularly from China, because of the global economic slowdown. It has also implied the substitution of locally manufactured goods by imports, affecting the region’s manufacturing capacity and competitiveness, in some cases. This opens a timely opportunity for the adoption of new regional industrial policies to promote enhanced specialization based on knowledge, increased value added and improved value chains that also incorporate SMEs. To this end, economic integration initiatives like the Pacific Alliance are positive examples of political will towards the achievement of more efficient flows of goods and services, simplified customs procedures and reduced red tape, in general.
From a competitiveness perspective, the region must modernise its infrastructure and logistics, and reduce the transportation costs, or risk impeding further productivity and development. This aspect is crucial and requires focused attention. Physical infrastructure is, of course, key and its modernization requires sufficient financial resources, that could, in some cases, require innovative public and private investment models or fresh resources and increased revenue from fiscal reform, together with strong institutions to monitor public spending.
But we are also referring to technological and institutional infrastructure, which enables businesses to commit to a region and gives investors the certainty they require for the long term. Latin America must bring in new technologies and develop enhanced public policy and innovative business models, if it is to transcend the status quo and develop a more advanced economy.
Another serious concern is the degree of inequality in the region. It is true there have been impressive positive outcomes from poverty alleviation programmes, which have allowed for the emergence of a larger middle class and has created models for worldwide practice. But much progress still needs to be made in terms of equal opportunities, gender parity and inclusive growth. The meeting next month will include sessions to address the need to invest in human capital and improve the quality of education and skills for the long-term development of the region, as well as the need to respond to the demands of its growing middle class, including efficient and better public services and more high-quality employments.
The issue of public insecurity and drug trafficking is another important defy. We will have a session looking at innovative and collaborative solutions, not just in terms of law enforcement but also in areas of crime prevention, rehabilitation and social reinsertion.
Among the more than 600 participants at the meeting, there will be eight heads of state, more than 60 government ministers and public officials from almost every country in Latin America, and some from outside the region. All the heads of the regional and hemispheric organisations will attend, as will business and thought leaders from Latin America and around the world.
At the same time, Panama City will host the first gathering of Global Shapers – young leaders – between the ages of 20 and 30 years old – from every country in Latin America and the Caribbean. It is particularly exciting to have young, energetic voices providing their views on how they would like to see the region develop.
Our aim is that these leaders will emerge from the meeting inspired and willing to use what they have learned from the multi-stakeholder dialogues in their realm of impact and influence. That is how we will open pathways for continued shared progress in Latin America.
The World Economic Forum on Latin America 2014, Panama City, Panama, runs from April 1st-3rd.
Author: Marisol Argueta de Barillas is Senior Director, Head of Latin America, at the World Economic Forum.
Image: Skyline Panama City, near Balboa Avenue and Punta Paitilla; Mario Roberto Duran Ortiz