World Economic Forum on Latin America
New Partnerships for a Sustainable Recovery
Cartagena, Colombia 6-8 April 2010
The views expressed in this publication do
not necessarily reflect those of the World
Economic Forum.
World Economic Forum
91-93 route de la Capite
CH-1223 Cologny/Geneva
Switzerland
Tel.: +41 (0)22 869 1212
Fax: +41 (0)22 786 2744
E-mail: [email protected]
www.weforum.org
© 2010 World Economic Forum
All rights reserved.
No part of this publication can be reproduced or transmitted in
any form or by any means, including photocopying and recording, or by any information retrieval or storage system.
REF: 210410
Contents
> Preface
Page 3
> Executive Summary
Page 4
> Demography, Democracy and Governance
Page 6
> Leading the Green Economy
Page 10
> New Opportunities for Cooperation
Page 12
> Paths towards Economic Recovery
Page 16
> Reducing Inequality in Latin America
Page 20
> Summaries of Private Meetings
Page 22
> Acknowledgements
Page 24
> Contributors
Page 26
2 | World Economic Forum on Latin America
Preface
With the resolute support of the
Government of Colombia, the 2010
World Economic Forum on Latin America
in Cartagena welcomed 550 global
and regional leaders to construct “New
Partnerships for a Sustainable Recovery”.
Participants from more than 40 countries
representing business, government,
academia and civil society addressed
pressing issues such as the promotion
of economic growth, strengthening
of democracy, reduction of poverty
and inequalities, and environmental
sustainability. They shared renewed
views on regional governance and
international cooperation towards trade
integration, enhanced security and
environmental performance. Regional
leaders from different sectors also focused
on specific problems affecting Latin
America, which include the international
community’s initiatives to rebuild Haiti
and reconstruction efforts in Chile after
earthquakes in both countries.
The World Economic Forum on Latin
America in Cartagena was an exceptional
opportunity to address regional issues of
global importance and to highlight new
solutions rooted in the Latin American
context and culture. While regional
challenges are influenced by global
trends, proposed solutions were based
on successful local initiatives. There is
clear evidence that the region has made
progress in addressing major social
challenges and promoting democracy over
the past 10 years. Nevertheless, to build
on those remarkable achievements and
secure prosperity into the next decade
will require innovative changemakers to
take the lead. The concrete proposals that
emerged from this regional meeting are
therefore presented in this report to the
benefit of current and future generations.
Emilio Lozoya Austin
Director, Head of Latin America
Latin America can lead the world in many
value chains – in renewable energies,
clean transportation, sustainable food
production, ecotourism and creative
industries, among others. While a
demographic bonus and macroeconomic
stability are foreseen in most countries,
the pace of recovery in 2010 and 2011
might vary considerably from one country
to another. With regard to monetary policy,
inflation in the region as a whole will be low
by historical standards, which will continue
to help poverty reduction. Assuming that
macroeconomic stability can be preserved,
the region now needs to enhance its
productivity by reducing its transaction
costs and considerably improving its
economic and social infrastructures.
World Economic Forum on Latin America | 3
Executive Summary
As the poster democracy for Latin
America’s remarkable turnaround,
Colombia was the perfect vantage point
for participants to take stock of how the
region had weathered the global economic
crisis and to focus not just on the broad
strokes of a strategy for sustaining
economic recovery but on exactly how to
do it. The crisis, as well as other recent
stresses from high food and energy
prices and the devastating earthquakes
in Haiti and Chile, has brought home
to Latin American leaders and citizens
the lesson that closer collaboration and
deeper integration are the best ways to
ensure stability in today’s volatile and
unpredictable global economy.
At this critical juncture, the majority of
Latin American countries are taking the
transformational path and forging “new
partnerships for sustainable recovery”,
the theme of this year’s World Economic
Forum on Latin America. Over three days
of interactive discussions in sessions,
lunches and dinners and a rousing concert
of Latin music to promote social change,
participants came away with a sense that,
despite Latin America’s good fortune to
have managed well through the crisis, this
is not a time for complacency but a time
to look forward and implement solutions to
the pressing challenges the region faces.
The 2010 World Economic Forum on Latin
America was organized under five subthemes: Demography, Democracy and
Governance; Leading the Green Economy;
New Opportunities for Cooperation;
Paths towards Economic Recovery; and
Reducing Inequality in Latin America.
Following is a summary of some of the
proposals that emerged from the sessions.
Demography, Democracy and
Governance
•
•
•
Law and order – Security should
be regarded as a fundamental
democratic value, without which
investment and economic growth are
impossible. Crime and terrorism are
not solely rooted in poverty, but must
be addressed through social and
economic programmes and not just
brute force.
Democratic governance – Pragmatic
policies that deliver tangible results will
bolster democratic institutions and the
faith of citizens in their leaders.
Regional governance – The region
may be better off pursuing limited
or focused mechanisms for regional
cooperation, such as an emergency
fund for humanitarian relief instead of
ambitious programmes that are likely to
fail or difficult to achieve.
Leading the Green Economy
•
•
•
•
Deforestation – Innovative approaches
to protect biodiversity and valuable
natural resources, such as government
subsidies to low-income families
in exchange for commitments
to preserve forests, need to be
considerably enlarged and supported
by governments, private enterprise and
international institutions.
Private sector – Private-sectorsupported programmes to develop the
green economy, such as sustainable
logging or Amazon protection, should
be expanded beyond limited corporate
social responsibility initiatives to
achieve the scale necessary to protect
the region’s environment.
Market opportunities – Latin America
should avail of its tremendous
competitive advantages by developing
carbon trade, ecotourism and biofuel
production.
Metrics – Clearer standards for
measuring and reporting on carbon
emissions are necessary for Latin
America to lead the transition to lowcarbon growth.
“Ten years ago, we couldn’t have
held a meeting like this, mainly
because of the security situation.”
Jorge Londoño Saldarriaga
President and Chief Executive Officer,
Bancolombia, Colombia; Co-Chair of the 2010
World Economic Forum on Latin America
4 | World Economic Forum on Latin America
New Opportunities for Cooperation
•
•
•
Trade – Latin America should pursue
pragmatic strategies for deepening
regional integration such as the new
initiative to link countries along the
Pacific Ocean.
Infrastructure – Countries should
pursue more bilateral or plurilateral
cooperative projects such as the Itaipú
Dam.
Industry – To fully engage new
partners in Asia and other emerging
markets, Latin American economies
need to diversify their products and
services and make it easier for small
and medium-sized companies to
participate by investing in human
capital, skills training and innovation
development.
•
Reducing Inequality in Latin America
•
•
Paths towards Economic Recovery
•
•
•
Infrastructure – Investment in
infrastructure should focus not only
on classic utilities such as water
and electrical grids but also on
telecommunication systems and
education.
Foreign capital – To attract the capital
needed to fund the upgrading of
infrastructure and other investments
will require strengthening regulatory
frameworks and increasing
government transparency.
Regional and Asian markets – In
the face of decreased consumer
spending in the US and Europe, Latin
American businesses should focus
on regional markets and on Asia.
Governments can support this shift by
pursuing bilateral trade agreements
and increasing intraregional regulatory
collaboration.
Commodities – Improving education
can reduce the region’s dependence
on the commodities sector by creating
a workforce with the skills necessary
to develop industrial and service
economies.
•
•
Education – To address high
dropout rates and tremendous
gaps in education quality, reform
initiatives should focus on improving
curricula and teaching to increase
the competitiveness of the region’s
workforce.
Health – Healthcare systems will need
to adapt to the higher death rates from
chronic diseases rather than infectious
diseases. This trend necessitates
increasing the use of technology
and creating partnerships to help
finance growing demands on medical
resources.
Infrastructure – Considerable
investment in infrastructure such
as water and sanitation systems is
required to improve the plight of the
region’s urban poor.
Gender – Cultural and social
programmes such as microfinance
directed to women are necessary to
eliminate gender disparities evident in
higher unemployment rates and lower
wages for female workers.
“One of the major perceptions I have
from this meeting is the change in the
mood compared to last year. People
are talking about the future now.”
Luiz Fernando Furlan
Co-Chairman of the Board of Directors, BRF Brasil
Foods, Brazil; Co-Chair of the 2010 World
Economic Forum on Latin America
“Our governments are usually slow in
policy reforms, but those who take the
initiative and make the right decisions
– and we all know what we have to
do – will have much better results.”
Luis Fernando Alarcón Mantilla
Chairman and Chief Executive Officer, Grupo
Empresarial ISA, Colombia; Co-Chair of the
2010 World Economic Forum on Latin America
World Economic Forum on Latin America | 5
Demography, Democracy and Governance
6 | World Economic Forum on Latin America
Proposals
The holding of the World Economic
Forum on Latin America in Cartagena
underscored the significant progress that
the region has made in recent years in
strengthening democracy and improving
standards of governance. Colombia is
an example of a country that has put its
house in better order, tackling seemingly
insurmountable security challenges due to
a civil war and unfettered drug-trafficking
that had pushed the state to the brink of
failure, while at the same time bolstering its
evolving democratic political system.
By addressing head on the fundamental
issue of law and order, Colombia
and other nations can now afford to
focus on pressing challenges such as
poverty, inequality and the poor quality
of education. The new stability has also
This means tackling key development
challenges that are especially tough in a
region of rapid urbanization where 70% of
the population is city dwellers: the lack of
water and sanitation, the need to improve
education and bridge skills gaps, and the
weakness of the rule of law as manifested
by high levels of crime and corruption.
Achieving results in these fundamental
areas will be critical if countries are to
consolidate the democracies that they
have struggled to build. While most Latin
Americans support democracy, they are
also sceptical of the ability of politicians to
“It is important to acknowledge that
democracy gives results.”
Enrique Peña Nieto
Governor of the State of Mexico, Mexico; Young
Global Leader
“We are not absent from the
region. We put a lot of value in our
cooperation with Colombia and other
countries.”
Arturo Valenzuela
Assistant Secretary of State for Western
Hemisphere Affairs of the United Statesr
Exhibit 1: Most Latin American publics support democracy,
but are less satisfied with domestic politics
Support for democracy in Latin America
Percentage of respondents
100%
How satisfied are you with the way
democracy works in your country?**
Democracy is preferable to any
other type of government
75
50
25
* Population-weighted average of 18 countries
** Responses of "very satisfied" or "somewhat satisfied"
a
Venezuela
Uruguayy
a
Argentina
Latin America**
u
Peru
a
Colombia
o
Mexico
Guatemala
a
0
e
Chile
•
The fact that the region managed through
the global economic crisis without any
economic and social upheavals is evidence
that the homework has paid off and most
countries are on better footing than they
were in the boom-and-bust days. Yet,
if the promises laid down over the past
decade are to be fulfilled, this is no time
for complacency, not least because the
region’s favourable demographics – the
working-age population will expand until
2045, though in some countries it will start
to decline compared to the number of
retirees as soon as 2020 – offers a brief
window of opportunity for Latin America to
make real gains.
Hondurass
•
Law and order – Security should
be regarded as a fundamental
democratic value, without which
investment and economic growth are
impossible. Crime and terrorism are
not solely rooted in poverty, but must
be addressed through social and
economic programmes and not just
brute force.
Democratic governance – Pragmatic
policies that deliver tangible results will
bolster democratic institutions and the
faith of citizens in their leaders.
Regional governance – The region
may be better off pursuing limited
or focused mechanisms for regional
cooperation, such as an emergency
fund for humanitarian relief instead of
ambitious programmes that are likely to
fail or difficult to achieve.
Brazill
•
opened up fresh opportunities for both
foreign and domestic investment that have
already resulted in social dividends. Latin
American capital markets have expanded
threefold since 1995. The so-called “lost
decade” at the end of the 20th century
gave way to a decade of promise at the
beginning of this century, setting up the
region for what could well be a sustained
period of fast growth and rapid social
development.
Source: Latinobarometro (2009); UN population division (2010)
World Economic Forum on Latin America | 7
do what needs to be done. Enthusiasm
among citizens for democracy is less likely
to wane and jingoistic populism to win
favour if elected leaders deliver.
“If this region collectively, and
countries individually, don’t see
the power of coordination, then I
see this as a serious challenge. As
coordinated as the world was during
the crisis, I do fear that in the recovery
there will be a tendency for countries
to go it alone. That is a risk.”
James S. Turley
Chairman and Chief Executive Officer, Ernst
& Young, USA; Co-Chair of the 2010 World
Economic Forum on Latin America
8 | World Economic Forum on Latin America
Take the issue of security. The InterAmerican Development Bank has
estimated that Latin America’s per capita
GDP would be 25% higher if the region
succeeds in reducing its crime rate down
to the world average. Such a bonus could
produce significant social benefits if the
additional growth unlocked resources that
could then be channelled to education.
Colombia and Peru are recent examples of
countries that have enjoyed some measure
of success in improving security.
The key to fighting crime and corruption is
to abandon approaches that only employ
force as a weapon. While poverty should
not be mistaken as the main reason for
criminality, policy-makers should take
social and economic issues into account
when devising law-and-order strategies.
It is critical to focus on the efficiency of
law enforcement organizations and the
integrity of judicial systems. In fighting drug
cartels and gangs, producing countries
need to work with consuming countries
on ways to make the drug trade tougher
to conduct and less profitable, such as
decriminalization of some illicit substances
and the creation of alternative sources of
income for workers involved in growing
them.
Faith in leadership and institutions of
governance can be built and reinforced
if public- and private-sector players are
seen to act with resolve and efficiency in
times of turmoil. The cooperative efforts of
governments as the global economic crisis
unfolded have been an important factor in
restoring the confidence of citizens in the
markets. If collaboration breaks down and
countries revert to go-it-alone approaches
out of self-interest, cynicism is bound to
return and the road to full recovery will be
much more difficult.
The multinational response to the
earthquake in Haiti, the democratic
political transition in Chile even as the
country was mourning its own losses from
a temblor, and the regional approach to
resolving the political impasse after the
coup in Honduras last year were additional
governance highlights for Latin America.
Yet, beneath the surface, there remains
a great deal of scepticism that countries
will not fall into the same political traps,
fumble over persistent inefficiencies and
let longstanding rivalries get in the way.
As so many participants at the meeting
lamented, despite cultural affinities and
shared history and language, Latin
America is one of the least integrated
regions in the world.
For this reason, participants underscored
doable solutions over grand ambitions. For
example, 22-year-old Global Changemaker
Diego Ribeiro of Brazil proposed that a
regional emergency fund for humanitarian
relief be set up. The move by 11 Latin
American countries along the Pacific
Rim to create a free trade zone and
coordinate trade and investment policies
and standards is a clear attempt to create
a coalition of the willing that is ready and
able to engage the fast-growing Asian
economies, particularly China. Ultimately,
pragmatism may be the key to achieving
sustainable recovery and fulfilling the
promise of Latin America
“We are backing this region to
succeed.”
Graham Mackay
Chief Executive, SABMiller, United Kingdom;
Co-Chair of the 2010 World Economic Forum on
Latin Americar
“We have problems in human rights,
but we have made progress. [The US
has] to cooperate with us rather than
prevent the [US-Colombia] free trade
agreement from proceeding.”
Noemí Sanín de Rubio
Presidential Candidate, Colombia
World Economic Forum on Latin America | 9
Leading the Green Economy
10 | World Economic Forum on Latin America
Proposals
•
•
•
•
Deforestation – Innovative approaches
to protect biodiversity and valuable
natural resources, such as government
subsidies to low-income families
in exchange for commitments
to preserve forests, need to be
considerably enlarged and supported
by governments, private enterprise and
international institutions.
Private sector – Private-sectorsupported programmes to develop the
green economy, such as sustainable
logging or Amazon protection, should
be expanded beyond limited corporate
social responsibility initiatives to
achieve the scale necessary to protect
the region’s environment.
Market opportunities – Latin America
should avail of its tremendous
competitive advantages by developing
carbon trade, ecotourism and biofuel
production.
Metrics – Clearer standards for
measuring and reporting on carbon
emissions are necessary for Latin
America to lead the transition to lowcarbon growth.
Latin America will become the focus
of global attention regarding climate
change when the COP16 talks are held in
Cancun at the end of 2010. Against the
backdrop of COP15 in Copenhagen and
its failure to generate a global framework,
Latin American nations are increasingly
recognizing that they cannot afford to
wait for the international community
in protecting rainforests and reducing
emissions. While the region is responsible
for 12-20% of global emissions, nearly half
that figure results from deforestation and
land-use changes.
The REDD+ programme – Reduced
Emissions from Deforestation and
Degradation, plus (+) management,
conservation and enhancement of forest
carbon stocks – focuses on supporting
programmes that offer local solutions
to deforestation. Colombia’s Forest
Keepers and Brazil’s Bolsa Foresta
programmes represent one strategy in
which governments issue subsidies to
low-income families living in protected
forests, in exchange for their commitment
to protect these areas. Such programmes
offset the market incentives for families
to use the land for mining, agriculture or
potentially even drug trafficking, which
is a major source of deforestation.
Programmes that strengthen indigenous
populations are also a good strategy for
protecting biodiversity in the Amazon.
As inheritors of 10,000 years of
experience living in the region, indigenous
communities are an essential constituency
in protecting the region’s environment.
The scale of REDD+ projects must be
expanded to achieve the necessary
environmental impact, and the private
sector – particularly multinational
companies – can play a role in achieving
this scale. Several major companies have
become involved in marketing rainforest
products to international customers
by offering hotel guests the chance to
donate to rainforest funds or promoting
sustainable logging. However, most of
these projects are restricted to corporate
social responsibility activities. Achieving
the desired environmental impact will
require larger-scale involvement from the
private sector, which could come from tax
incentives, public-private partnerships or
new market opportunities.
Latin America’s emissions due to land-use changes are the
highest in the world, on a per capita basis
Greenhouse gas emissions per capita
Greenhouse gas emissions per capita,
2000 (t CO2e/person)
15
For the carbon market to grow, standards
for GHG emissions must be established.
At the moment, no clear metrics for
measuring pollutants or reporting
corporate data govern the market, and the
reporting that does take place tends to be
selective and fails to provide a clear picture
of current emissions.
Increasing biofuel production also offers
the potential of economic growth.
Sustainable sugar cane plantation and
ethanol production for this purpose must
be reconciled with goals of food security
and zero net deforestation. Again, lack of
clarity regarding a global climate change
framework has stalled the growth of this
market.
Latin America can increase its
competitiveness as a leader in the green
economy by improving a broad range of
social and economic metrics, such as
infrastructure development, education
quality and research spending. The lesson
of recent years is that, to maximize the
potential of their resources and protect
against extreme events, nations must
establish their own vision for low-carbon
growth rather than wait for the international
community.
“The great tragedy of Copenhagen
was that the carbon market was left
in limbo. We don’t know the market
dimensions, the price of carbon,
or if the solution will be taxes or
concessionary financing, or what the
rules of the game are.”
10
Other
5
A significant portion of the world’s
biodiversity is located in the Amazon,
which gives Latin America unique
advantages in promoting ecotourism
and other potentially profitable economic
opportunities. The carbon market has
grown to approximately US$ 100 billion,
and this growth indicates the tremendous
potential for Latin America, which is
expected to increase trading particularly
with Asia in the next two years. However,
the stalled global climate change talks
have failed to produce clear parameters
for this market, and the lack of clarity
has inhibited many potential players from
getting involved.
Land-use change
Energy
0
Alicia Bárcena Ibarra
-5
China and India
World
Latin America
High income
Executive Secretary, United Nations Economic
Commission for Latin America and the Caribbean
(ECLAC), Santiago
Source: World Bank (2009)
World Economic Forum on Latin America | 11
New Opportunities for Cooperation
12 | World Economic Forum on Latin America
Proposals
•
•
•
Trade – Latin America should pursue
pragmatic strategies for deepening
regional integration such as the new
initiative to link countries along the
Pacific Ocean.
Infrastructure – Countries should
pursue more bilateral or plurilateral
cooperative projects such as the Itaipú
Dam.
Industry – To fully engage new
partners in Asia and other emerging
markets, Latin American economies
need to diversify their products and
services and make it easier for small
and medium-sized companies to
participate by investing in human
capital, skills training and innovation
development.
The global economic crisis has made clear
two important facts that must guide the
development strategies of Latin American
countries going forward. First, demand in
their traditional markets in North America
and Western Europe is not likely to
recover to pre-crisis levels in the nearto-medium term. Second, the dynamic
emerging markets in Asia, Africa, the
Middle East and Latin America itself offer
new opportunities to drive the fresh growth
the region needs to sustain economic
recovery.
But to take full advantage of these new
openings, Latin America must further
diversify its engagement with Asia and
other emerging-market partners beyond
commodities trade, and surmount
persistent rivalries and bureaucratic
obstacles to deepen regional economic
integration. In recent years, these
prescriptions have been on the table, but
the crisis could serve as the catalyst that
finally allows pragmatism to overcome
stasis.
Consider the challenge of regional
integration. There are obvious benefits
to be gained from bilateral cooperation
in the areas of infrastructure and energy
security. Brazil and Paraguay, for example,
have collaborated in the construction and
running of the Itaipú Dam and hydroelectric
power plant – shared costs, shared risks,
shared benefits. There are numerous
opportunities for such cooperation in
other sectors, including ecotourism and
telecommunications.
In trade, if recent moves by 11 Latin
American economies along the Pacific
Ocean to come together lead to a viable
free-trade zone with common trade
and investment rules and standards, it
would be a triumph in stark contrast to
previous trade regionalization efforts such
as Mercosur and the Free Trade Area of
the Americas (FTAA). Efforts should be
made to conclude bilateral and plurilateral
trade arrangements within the context of
the multilateral Doha Round negotiations
under the World Trade Organization (WTO).
And countries should find ways to unblock
stalled or unimplemented free trade
agreements such as the one Colombia
and the US signed in 2006.
“NGOs and the private sector
can expedite the time frame [of
reconstruction] by many years. We
have to direct investments to where
Haiti has real potential.”
Lorenzo A. Mendoza
Chief Executive Officer, Empresas Polar,
Venezuela; Young Global Leader
With 9% of Latin America’s trade, China
is now the region’s third largest trading
partner. (Last year, China surpassed
the US as Brazil’s top trading partner.)
India, meanwhile, has less than 2% of
the total. If the full potential of transPacific commerce is to be achieved, Latin
Exhibit 1: Trade with the US has fallen from 50% of Latin America's
trade in 2002 to 33% in 2009
Latin America’s trade partners
Total trade
(US$, billions) $736
$955
$1,353
$1,932
n/a
Percentage of Latin America's
total merchandise trade
100%
Other
75
3%
16%
50
25
0
50%
2002
5%
19%
45%
2004
* includes trade with Hong Kong and Macao
** through 3Q 2009
6%
8%
8%
China*
21%
24%
Latin America
41%
36%
33%
2006
2008
2009**
20%
US
“We have common roots. We
all agree on strengthening our
democratic institutions because what
is at stake is our future. Integration is
possible.”
Fernando Armindo Lugo Méndez
President of Paraguay
Source: IMF Direction of Trade Statistics (March 2010)
World Economic Forum on Latin America | 13
America must create new opportunities
at home by providing the necessary tools
to companies, both large and small,
to take advantage of the opportunities
offered by China, India and other emerging
economies. Air and sea connections, for
example, need to be improved; there are
currently no non-stop air links between
Latin America and Asia. In addition,
Latin American businesspeople are often
reluctant to conduct business in English.
The costs of doing business in distant Asia
can be out of reach for most small and
medium-sized companies
“We all want integration. However,
when we get to the nitty-gritty, each
country starts to fight for its own
industries and agriculture. What
it would take is a much broader
attitude. We have to think beyond
all paradigms so that integration
becomes a reality.”
Ricardo Martinelli
President of Panama
14 | World Economic Forum on Latin America
Latin American economies must also
explore ways to expand further beyond
commodities trade to gain more value from
its partnership with Asia. To achieve this
will require significant investment in human
capital to develop the skills necessary
to drive higher-value industries and the
innovation required to produce goods and
services that Asians will buy.
The drive to engage more fully with Asian
economies, particularly China and India,
could become a catalyst for forging new
partnerships among Latin American
economies that could bolster intra-regional
trade, which accounts for only 20% of the
region’s total trade, compared with 50%
for Asia and 70% for Europe. By pooling
resources and comparative advantage and
joining forces to create a bigger market,
countries can boost their collective and
individual competitiveness. This could lead
to cross-border mergers and acquisitions
and the emergence of more “multilatinas”,
or global Latin American companies.
The recent earthquakes in Haiti and
Chile have amply demonstrated that
Latin American nations have the capacity
to overcome political, ideological and
cultural divisions to join forces in a time
of emergency. Similarly, the G20-led
efforts to address the impact of the global
economic crisis demonstrated the value
of multilateral approaches. The question
is whether such successful instances of
regional and global collaboration can be
replicated more broadly. For example, Latin
American countries, particularly its bigger
economies, Mexico and Brazil, could play
a critical role in bringing the Doha Round
to a conclusion.
Indeed, the reconstruction effort in Haiti
over the long term could prove a test of
how long the goodwill and cooperative
spirit can last. To achieve full recovery
of what is the poorest nation in the
Western Hemisphere will require massive
investment and a series of public-private
partnerships across sectors and countries.
The same is true if Latin America is to play
its role in sustaining the recovery from the
global economic crisis and in contributing
to international efforts to address climate
change. With regard to global warming,
the announcement by regional business
leaders in Cartagena that they support
REDD+ projects and related initiatives
to reduce greenhouse gas emissions
from deforestation was an encouraging
milestone.
The paradox of Latin America has long
been that a region where nations share
so much history and culture has not
integrated as well as other parts of the
world. But Latin American nations appear
to be waking up to the reality that they
must hang together and offer Latin
American solutions to global problems – or
else they will be left behind to fight among
themselves over the crumbs of the global
economy left by more nimble, fast-moving
players.
“The multiplicity of crises is heralding
a change. This is a wonderful
opportunity for the whole continent to
profit.”
Álvaro Colom Caballeros
President of Guatemala
“Where are the innovation centres?
The biggest challenge today is how
to bring about quality education
throughout the region.”
Leonel Fernández
President of the Dominican Republic
World Economic Forum on Latin America | 15
Paths towards Economic Recovery
16 | World Economic Forum on Latin America
Proposals
•
•
•
•
Infrastructure – Investment in
infrastructure should focus not only
on classic utilities such as water
and electrical grids but also on
telecommunication systems and
education.
Foreign capital – To attract the capital
needed to fund the upgrading of
infrastructure and other investments
will require strengthening regulatory
frameworks and increasing
government transparency.
Regional and Asian markets – In the
face of decreased consumer spending
in the US and Europe, Latin American
businesses should focus on regional
markets and on Asia. Governments
can support this shift by pursuing
bilateral trade agreements and
increasing intra-regional regulatory
collaboration.
Commodities – Improving education
can reduce the region’s dependence
on the commodities sector by creating
a workforce with the skills necessary
to develop industrial and service
economies.
Relative to last year’s economic collapse,
the economy of Latin America is a success
story in weathering the global recession.
After an average decrease in GDP of
2% last year, Latin American economies
are expected to grow at 4% in 2010.
Macroeconomic reforms established by
many governments helped reduce debt
ratios, control inflation and position Latin
America for long-term growth. However,
the region still lags Asian growth rates.
To increase its competitiveness and
promote economic development, Latin
American governments will need to
continue practicing fiscal discipline and
establish clear visions for infrastructure
development, education spending and
improvements in specific sectors such as
agriculture.
Historically, the region has looked to
demand from US consumers as its primary
export market. Over-reliance on the US
consumer has had severe implications
for sectors such as Mexico’s auto and
manufacturing industries in particular,
and continued softness in US demand
will mean that Latin America will need
to develop new strategies to grow its
economy.
A major barrier to developing new markets
has been poor infrastructure. Some
estimates indicate that infrastructure
spending will need to be tripled in the
coming years to meet market and
demographic needs. Many major
projects are already underway, such as
the widening of the Panama Canal and
preparing Rio de Janeiro for the 2016
Summer Olympics. However, outdated
water, electrical and transportation
systems continue to increase the cost
of doing business in Latin America and
hamper economic growth.
“Now is the time to celebrate that we
were able to manage the crisis, but a
new wave might be coming and we
need to be ready.”
Liliana Rojas-Suarez
Senior Fellow, Center for Global Development,
USA
Underdevelopment of the region’s
telecommunications infrastructure has
impaired entrepreneurship and market
efficiency in the region. Investing in
technology and telecommunications not
only improves entrepreneurship, but it
can also help make classic infrastructure
systems more efficient, due to innovations
such as “smart” electrical grids that use
technology to structure energy delivery.
Exhibit 1:The region's economy shrank by 2% in 2009
Economic growth in Latin America
8%
Colombia
Latin America
6
Brazil
World (PPP)
Annual change in GDP
4
2
0
-2
Mexico
-4
-6
-8
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 2010F 2011F
Source: IMF (2009); PwC forecasts (2010)
World Economic Forum on Latin America | 17
Access to capital is likely to be a challenge
for many nations attempting to make such
infrastructure upgrades, given the scale
and duration of these projects. Mexico,
for example, has modified regulations
governing pension funds to allow them
to invest in future revenue streams of
infrastructure projects, such as tollbooths
and other utilities. Foreign investment
will also be necessary to support these
projects, and the ability to attract outside
capital will be a major factor in determining
the competitiveness of Latin American
nations.
Good governance is an essential metric
in luring foreign investors, and the lack
of regulatory stability has hampered
economic development in the region,
more so than investor interest or the
availability of funds. Foreign investors
need assurances that contracts will
be enforced and projects can mature
in stable regulatory environments.
Chile has demonstrated a long track
record of improving transparency of
its legal systems, and this history of
past performance is one of the best
ways to entice foreign funds. Inability to
access large pools of foreign capital will
restrict growth, not only for large-scale
investments, but also for new businesses.
Many small to medium-sized enterprises
in Latin America face double-digit interest
rates because of the difficulty of identifying
venture capital, angel investors or options
to conduct public offerings.
Improving regional cooperation would
increase the availability of capital for such
purposes and could increase market
efficiency. Though economic integration
has been talked about for years in Latin
America, little progress has been made.
Large economic disparities within the
region – from tremendous markets such as
Brazil to tiny, poverty-ridden islands such
as Haiti – have caused some experts to
conclude that full-scale market integration
is unlikely in the near future and potentially
undesirable. Instead, Latin American
governments should focus on establishing
internal agreements to support trade.
These intra-regional agreements, as
well as trade agreements with Asia,
have become even more important as a
result of political barriers to US free trade
agreements. Though talks began in May
2003, the trade agreement with Colombia,
for example, continues to be stalled in the
US Congress.
Another impediment to economic recovery
has been education. Underdeveloped
education systems throughout the region
have contributed to the region’s reliance
on raw commodities trade, rather than a
strong service industry or even exports
of industrial goods, which would yield
higher prices. Latin America has access to
valuable natural resources, as well as high
availability of water, which has made it a
leader in agricultural production. Improving
education could help create more options
for converting resources into high-value
exports.
“There is a need for us to rebuild
on the ground the governance
structures of Haiti. The critical issue
is what we can do to ensure that the
administrative capacity is there to
deliver.”
David John Howard Thompson
Prime Minister of Barbados
Agriculture constitutes a large part of the
Latin American economy, but growth in
this sector must be balanced against
threats to the environment. Agriculture
consumes the majority of the world’s
supply of drinking water, and increasing
arable land is traditionally tied to
deforestation. Considerable strides have
been made in improving farming efficiency,
Asia to account for the bulk of emerging markets
expenditures on infrastructure
Emerging markets forecast infrastructure spending
Infrastructure spending, including property,
in emerging markets (US$, billions)
$3,500
Africa
Middle East
3,000
Latin America
2,500
Eastern Europe
2,000
1,500
Asia
1,000
500
“To turn over sovereignty as far as
political issues is something we don’t
have and probably can’t have in the
future.”
José Miguel Insulza
0
2008
2009
2010
2011
2012
Source: Morgan Stanley Research; World Bank; Global Insight (2008)
18 | World Economic Forum on Latin America
2013
2014
2015
2016
2017
Secretary-General, Organization of American
States (OAS), Washington DC
which has helped decrease average
energy consumption of corn, soy and
cotton production. Increasing agricultural
productivity in the future will require
additional investments in technology,
research and education.
Latin America historically has lagged in
technological innovation and education.
Following the model of Singapore
and China by investing in “innovation
hubs” could help generate more
entrepreneurship, greater productivity
and jobs. In addition, higher education
in Latin America tends to be extremely
separated from the private sector.
Improving collaboration between academia
and business could also help stimulate
innovation. Though Latin American
economies proved their resilience during
the last crisis, continued discipline and
bold investments in infrastructural and
educational upgrades will be needed to
increase competitiveness in the future.
“We have to take into account
democratic principles, Christian
values and good governance. Publicprivate partnership should start from
the bottom. We need to have a
dialogue with the grassroots.”
Joseph Philippe
Founder, Fonkoze, Haiti
World Economic Forum on Latin America | 19
Reducing Inequality in Latin America
20 | World Economic Forum on Latin America
Proposals
•
•
•
•
Education – To address high
dropout rates and tremendous
gaps in education quality, reform
initiatives should focus on improving
curricula and teaching to increase
the competitiveness of the region’s
workforce.
Health – Healthcare systems will need
to adapt to the higher death rates from
chronic diseases rather than infectious
diseases. This trend necessitates
increasing the use of technology
and creating partnerships to help
finance growing demands on medical
resources.
Infrastructure – Considerable
investment in infrastructure such
as water and sanitation systems is
required to improve the plight of the
region’s urban poor.
Gender – Cultural and social
programmes such as microfinance
directed to women are necessary to
eliminate gender disparities evident in
higher unemployment rates and lower
wages for female workers.
Latin America continues to trail all other
regions in terms of equality. In the most
extreme case of Bolivia, the richest quintile
of the population earns more than 40
times more than the poorest 20%. In more
typical Latin American nations, the income
disparity between the richest and poorest
quintile is more than a 20-fold difference
in household income. Progress has been
made in reducing poverty in recent years:
the number of Latin Americans living
in poverty decreased by 11% between
2003 and 2008. Still, persisting economic
divisions contribute to social unrest and
inhibit the region’s economic prosperity.
Reducing social inequality requires
improving education and job skills. The
region has made great strides in boosting
student enrolment, but youth in the region
will lack competitiveness in global job
markets if dropout rates are not reduced
and education quality is not improved. In
Mexico, 97% of students enrol in primary
education but only 25% graduate from
secondary school, and this rate is not
uncommon in the region.
Further, the quality of education in the
region is likely to hamper prosperity. The
Programme for International Student
Assessment (PISD) – a metric of education
quality created by the Organisation for
Economic Co-operation and Development
– indicates that 64% of Argentinean
ninth graders enrolled in schools lack the
ability to solve math problems involving
more than two digits, and 58% of those
students are functionally illiterate. Such
data suggests that dramatic changes
are needed in terms of what and how
children are taught, in order to reduce
social disparity. Some suggest that
tangible skills should be the focus of
training in impoverished rural areas. In
Colombia, new collaborative learning
programmes that targeted remote regions
resulted in better education quality in
rural versus urban areas. Emphasis
on math, science and technology will
also be necessary to improve regional
competitiveness; however, international
employers have stressed that on-the-job
technical training can always be offered.
Basic communications skills and work
ethic are essential skills for maintaining a
competitive workforce.
Improvements in public health systems
will also be needed to respond to
demographic shifts that have pushed
the majority of Latin Americans to urban
areas. The majority of deaths in the region
are now caused by chronic, rather than
infectious, diseases, and this change
poses greater demands on healthcare
systems. Cardiovascular diseases, cancer
and obesity, for example, are typically more
expensive to treat than infectious diseases.
While costs can be offset by investments
in preventive care, the demands posed
on the region’s healthcare systems will
continue to grow. Many countries have
privatized aspects of medical care,
such as health insurance and hospital
management, and more public-private
partnerships will be required to absorb the
growing demands on healthcare systems.
Technology also offers prospects
for improving health at lower costs,
particularly for regions that lack access
to medical facilities. Thirty per cent of
the region’s population lives in remote
areas, and the overwhelming majority
uses mobile phones. Devising flexible,
technological solutions to medical care
can improve not only treatment for these
individuals, but also health monitoring
to improve detection of pandemics and
respond to emergencies. Technology can
also improve the efficiency of storing and
sharing medical data. The earthquake in
Haiti destroyed hospitals as well as the
medical records they stored. Utilizing
cloud computing could offer an affordable
solution to increasing technological
capacity and the ability of medical
practitioners to share data.
In addition to changes in health,
urbanization has resulted in severe housing
and sanitation deficits in low-income areas.
Roughly 80 million Latin Americans lack
access to clean water, and many parts
of the population spend more than 30%
of their income to buy it. The majority
of impoverished Latin Americans are
urban dwellers, and alleviating poverty
will depend on devising solutions to
improve services to these areas. Several
programmes in Asia have succeeded
in converting slums into commercial
developments with mixed-income housing.
For such experiments to take hold in Latin
America, it will also be necessary to tackle
cultural mentalities that have traditionally
resisted socioeconomic integration.
Parity between women and men has also
lagged in the region: unemployment rates
remain far higher for women than men,
and women typically receive fewer years of
schooling. Several innovative microfinance
programmes have focused on providing
loans specifically to women. These
programmes not only empower women,
but they can also help solve practical
urban problems, such as housing.
Low-income homes in Latin America are
typically built on a room-by-room basis
and financed by high-interest consumer
credit. Microfinance programmes in Brazil
now offer low-interest loans to women
for such construction, which reduces
costs and provides a vehicle for improving
livelihoods in low-income areas. These
programmes, like many others that focus
on social inequality, will be needed to have
a meaningful impact on poverty reduction.
“To improve education, more of the
same is not enough.”
Vicky Colbert
Founder and Executive Director, Fundación
Escuela Nueva Volvamos a la Gente (Escuela
Nueva Foundation), Colombia; Social
Entrepreneur; Global Agenda Council on
Education Systems
World Economic Forum on Latin America | 21
Summaries of Private Meetings
Engineering & Construction Industry
Partners Meeting
Investing in the Andean Region
•
•
•
•
Infrastructure is a huge challenge in all
sectors across the region. Energy and
mining are currently hitting bottlenecks
in transporting both equipment and
product. Transport opportunities are
critical to export not just raw materials,
but also finished products with value
added by the producing country.
Local sources of capital, including
pension funds, are becoming
increasingly important for investments
in countries with attractive conditions.
Private equity funds have an important
role as an intermediary to bring
pension funds’ long-term capital into
infrastructure investments, since they
have the skills that pension funds often
do not have to analyse complex, longterm investments.
Capital may be increasingly raised
outside traditional money centres.
Brazil is already doing this, raising
capital in China, in Chinese currency, to
invest in Brazil. Other countries in the
region may do the same in the future.
22 | World Economic Forum on Latin America
Mining & Metals Industry Partners
Meeting
From Seedling to Solution:
Partnerships for Reducing
Deforestation
•
•
•
REDD+ presents an attractive
emissions reduction option for the
industry, in terms of both costs and
benefits. Private sector involvement
already exists through philanthropic
and corporate social responsibility/
sustainability activities, and the
development of REDD+ markets and
carbon financing generates important
opportunities for private sector
engagement.
Risk and insurance products can
provide an innovative way of thinking
about the challenges of leveraging
capital to pursue the reduction of
deforestation, beyond existing funds or
carbon credits, and of aligning interests
across the value chain to ensure the
sustainability of mining activities.
Through pilot programmes, credible
systems for monitoring and reporting
of deforestation should be developed
together with third-party certification.
“Latin America has moved from what
was a lost decade into the first 10
years of this century, to the decade of
promise. The fundamentals have been
laid down to lead to the next decade
of fast-growing social and economic
development.”
Klaus Schwab
Founder and Executive Chairman, World
Economic Forum
Open Borders: The Opportunities
for Travel, Tourism, Trade and
Development in Latin America
Reducing Deforestation in Latin
America: Moving from Dialogue to
Action
•
Moving to action means unlocking private
capital flows to reduce deforestation. Such
action requires:
• Businesses to invest in activities across
the value chain of sustainable land use
and implement “learning by doing”
REDD+ activities at scale
• Forest nations to put in place
regulatory frameworks for REDD+,
including provisions for the
recognition of the rights of indigenous
communities, effective local
governance, identification of economic
development needs, and risk mitigating
incentives to attract private finance
• Developed country governments to
implement regulatory frameworks that
generate effective demand for the
carbon value of the mitigation created
by REDD+ activities and provide
public financing when such cannot
be provided through private sector
engagement
• UNFCCC to fully recognize REDD+,
including its use as an offset
mechanism and setting clear rules for
what qualifies as a rewardable action,
and define guidelines for early actions
as official rules are further developed
•
•
Competitiveness indexes for travel,
tourism and trade are important tools
to prioritize reforms, monitor progress
of a country over time and promote
the country’s positive image and
opportunities it offers investors abroad.
It is important to understand, manage
and work with these indexes.
Providing incentives for people
wishing to invest in the tourism sector,
streamlining bureaucratic processes
to speed up and broaden trade with
the outside world, providing new
mechanisms for private investment,
and improving Colombia’s image
internationally to better reflect the
country’s current reality are a few of
the opportunities identified to improve
travel, tourism and trade in Colombia
and the region.
Challenges in Colombia and
the region’s travel, tourism and
trade sectors include establishing
tourism as a long-standing, national
priority; upgrading and developing
infrastructure; preserving the cultural
and national patrimony; and prioritizing
investments to support a tourism
policy based on the country’s scarce
resources.
All parties should report results to ensure
transparency.
World Economic Forum on Latin America | 23
Acknowledgements
The World Economic Forum would like to thank the following companies for their support as Partners or Supporters of the World
Economic Forum on Latin America:
Strategic Partners
Accenture
Alcoa
AUDI AG
Bank of America
The Boston Consulting Group
CA Inc.
Cisco
The Coca-Cola Company
Ernst & Young
GE/NBC Universal
Goldman Sachs
Google
Heidrick & Struggles
Huawei Technologies
Intel Corporation
Kudelski Group
Marsh & McLennan Companies (MMC)
Nestlé
PepsiCo
UBS
WPP
Zurich Financial Services
Regional Partner
Banco Hipotecario SA
Meeting Supporters
Inter-American Development Bank
Pacific Rubiales Energy
Host Broadcaster
Radio Televisión Nacional de Colombia RTVC
The World Economic Forum wishes to thank the Government of Colombia for serving as host country of the World Economic Forum on
Latin America. The Forum would also like to thank Proexport for its contribution to the success of the meeting.
The World Economic Forum would also like to thank The Coca-Cola Company and PepsiCo for their support.
24 | World Economic Forum on Latin America
World Economic Forum on Latin America | 25
Contributors
Emilio Lozoya Austin is Director, Head of Latin America, at the World Economic Forum. The World Economic Forum on Latin America is
under his direct responsibility.
Arturo Franco is Community Manager, Latin America, and a Global Leadership Fellow. Jacques Marcovitch is Professor, University of
São Paulo, Brazil, and Senior Adviser to the World Economic Forum. Nathalie de Preux is Senior Community Relations Manager, Latin
America; Antonio Human is Senior Community Relations Manager, Latin America; and Begoña Martinez Gorriz is Senior Programme
Associate. Rosanna Mastrogiacomo, Senior Specialist, Events; and Laura de Wolf, Associate Director, Events.
The Report Writers were Mary Bridges and Alejandro Reyes.
Helena Halldén, Editor
Nancy Tranchet, Associate Director, Editing
Design and Layout: Kamal Kimaoui, Associate Director, Production and Design
Layout: Floris Landi
Photographs by Fabián Ricardo Alvarez, Edgar Domínguez and Andrés Espinoza
Special thanks to PricewaterhouseCoopers for their help in preparing data and statistics underpinning this report.
The World Economic Forum would like to express its appreciation to the summary writers for their work at the World Economic Forum
on Latin America, Cartagena, Colombia. Summaries are available at www.weforum.org/latinamerica2010/summaries.
26 | World Economic Forum on Latin America
The World Economic Forum is an independent
international organization committed to improving
the state of the world by engaging leaders in
partnerships to shape global, regional and industry
agendas.
Incorporated as a foundation in 1971, and based
in Geneva, Switzerland, the World Economic
Forum is impartial and not-for-profit; it is tied to no
political, partisan or national interests.
(www.weforum.org)