Productive capacities, complexity and diversification

The productive landscape of Latin America and the Caribbean has its counterpart in terms of the complexity and diversification of the region’s economies, that is, in the degree of sophistication and diversity of their productive capacities (Hidalgo y Hausmann, 2009). These capabilities, which include technological knowledge, the skills of the labor force, cooperation networks between companies and the quality of institutions, are what enable a country to innovate, adapt to changes in the global environment, move up the value chain and, in short, grow in a sustained manner.

South America should have a development orientation very strongly marked by an effort to diversify its structure and a good use of natural resources to expand prosperity in other sectors. The great challenge for South America, therefore, is to develop economic activities that are internationally competitive, beyond commodities, and that requires improving the value added in the commodities sector itself, but also diversifying.

Based on an interview with Augusto de la Torre

The region’s productive development requires the accumulation of these capabilities, which will translate into economies that are not only more diversified but also less vulnerable to external shocks. The countries of the region will also be able to take better advantage of the opportunities offered by international markets and ongoing and future technological changes.

To make progress in this regard, there are no magic recipes. The countries of the region need to undertake far-reaching reforms that will enable them to resolve the serious problems described in this chapter and thus promote a dynamic, competitive and innovative productive environment.

As a final message, it is important to emphasize that the design and implementation of these reforms and policies should be articulated within a broad development strategy and be the product of rigorous, evidence-based analysis to ensure their effectiveness and sustainability over time.

The participation of all relevant stakeholders, including the private sector, Government, academy and civil society, is crucial to build consensus and ensure that policies respond to the real needs of the productive environment. In addition, it is essential that these policies integrate the principles of environmental sustainability and social equity, recognizing that economic development should not compromise the well-being of future generations or perpetuate existing inequalities.