2. Policies for productive development
- Growth and productivity in Latin America: an aggregate analysis
- The labor market: challenges and policies
- Financial markets and productive development
- Competition as a driver of innovation and productivity
- Business-to-business relations: access to inputs and cooperation
- Productive capacities, complexity and diversification
- References chapter 2
Key messages
- Despite the progress the region has made in terms of per capita income over the last three decades, this has been insufficient to close the gap with the most advanced countries.
- The lag in per capita income is a reflection of low labor productivity, which, in turn, is largely explained by the region’s low productive efficiency. Total factor productivity, an indicator that measures efficiency in production, has been stagnant since 1990.
- Economies in the region, such as Chile, Costa Rica, the Dominican Republic, Panama, Peru, Trinidad and Tobago, and Uruguay, which have managed to increase their productivity, have been able to grow substantially and close the income gap with respect to the most advanced countries.
- Reducing informality is imperative to increase productivity in the region. Policies that reduce the costs of formality and increase its benefits are steps in the right direction. Increased taxation that seeks to formalize businesses can also have positive effects on formal employment and productivity. Likewise, education and training policies are essential to this end.
- Improving access to financing for companies is crucial. Reforms that foster competition in the financial sector are fundamental. This includes the entry of new financial institutions such as fintechs and credit cooperatives, and the promotion of development banking. It is also necessary to promote the development of capital markets as a financing alternative.
- Greater trade openness is key not only to foster competition in goods and services markets, but also to boost the participation of the region’s companies in global value chains. Greater regional integration is a fundamental step in this direction. To this end, it is necessary to reduce tariff and non-tariff barriers, improve logistics systems and transportation infrastructure, and simplify customs procedures.
- Industrial policy can serve as an articulating mechanism for the set of reforms needed to address the various problems afflicting LAC. It is a key tool for promoting economic growth and productive diversification in the region.