Intra-Regional Relations Meeting of High-Level Officials on Productive and Industrial Development in Latin America and the Caribbean Caracas, Venezuela 03 and 04 October 2013
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C O N T E N T S RAPPORTEUR S REPORT 3 A. DEVELOPMENT OF WORKS 4 B. CONCLUSIONS AND RECOMMENDATIONS 18 C. CLOSING SESSION 22 ANNEXES: I. AGENDA 25 II. III. IV. SPEECH BY AMBASSADOR ROBERTO GUARNIERI, PERMANENT SECRETARY OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC SYSTEM (SELA) 35 SPEECH BY MR. LENIN ECHEVERRÍA, FIRST VICE-MINISTER OF INDUSTRY OF CUBA, PRO TEMPORE PRESIDENCY OF THE COMMUNITY OF LATIN AMERICAN AND CARIBBEAN STATES (CELAC) 39 SPEECH BY MR. GABRIEL PORCILE, ECONOMIC AFFAIRS OFFICER OF THE PRODUCTIVE AND BUSINESS DEVELOPMENT DIVISION OF THE ECONOMIC COMMISSION FOR LATIN AMERICA AND THE CARIBBEAN (ECLAC) 43 V. SPEECH BY MR. CARLOS CHANDUVI-SUÁREZ, HEAD OF THE UNIDO SECRETARIAT S PROGRAMME FOR LATIN AMERICA AND THE CARIBBEAN 47 VI. DOCUMENT SUBMITTED BY UNIDO: A CASE STUDY FOR THE MINISTERS OF INDUSTRY AND ECONOMY OF THE LATIN AMERICAN AND CARIBBEAN REGION 51 VII. LIST OF PARTICIPANTS 55 VIII. LIST OF DOCUMENTS 65
3 RAPPORTEUR S REPORT 1. The Meeting of High-Level Officials on Productive and Industrial Development in Latin America and the Caribbean was organized by the Permanent Secretariat of SELA, in collaboration with the Pro Tempore Presidency of the Community of Latin American and Caribbean States (CELAC) and the Executive Secretariat of the Economic Commission for Latin America and the Caribbean (ECLAC), and held at the headquarters of SELA in Caracas, on 3 and 4 October 2013. 2. High-level officials from the following Member States of SELA took part in the meeting: Argentina, Barbados, Bolivia, Brazil, Chile, Cuba, El Salvador, Grenada, Guatemala, Guyana, Haiti, Jamaica, Mexico, Nicaragua, Panama, Dominican Republic, Suriname, Trinidad and Tobago, and Venezuela, as well as representatives of the following institutions: Community of Latin American and Caribbean States (CELAC), Caribbean Community (CARICOM), Economic Commission for Latin America and the Caribbean (ECLAC), the Common Market of the South (MERCOSUR), the Inter-American Development Bank (IDB), CAF-development bank of Latin America, United Nations Industrial Development Organization (UNIDO) and the Colombian Federation of the Software Industry and Related Information Technologies (FEDESOFT). For SELA, the meeting was attended by Ambassador Roberto Guarnieri, the Permanent Secretary, and officials of the Permanent Secretariat. The list of participants is included in Annex VII. 3. At the opening session, speeches were delivered by Ambassador Roberto Guarnieri, the Permanent Secretary of SELA; Lenin Echeverría, First Vice-Minister of Industry of Cuba and representative of the Pro Tempore Presidency of CELAC; and Gabriel Porcile, Economic Affairs Officer of the Productive and Business Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC). a. Ambassador Roberto Guarnieri stressed the importance of the meeting and addressed the issue of productive and industrial development in the context of economic integration, from the perspective known as the factor proportions problem. In his view, solving this issue is a prerequisite for sustainable economic growth, overall efficiency and productive employment of the economically active population. He emphasized his conviction that full economic integration in Latin American and Caribbean countries is a key to achieving this objective. He explained that full economic integration should be understood not only as the expanded market of goods and services by surmounting the various obstacles affecting international trade, but also as the institutional and regulatory integration. Further, he noted that it is essential to outline an agenda focused both on the convergence of institutions and macroeconomic, fiscal, monetary and exchange policies, in order to facilitate the movement of production factors of capital, labour, technology and business competition, along with trade of goods and services. He added that only in this way it is possible to set the common grounds in their essential foundations of public policies, including microeconomic policies themselves, standards and procedures regulating competition and possible market failures. In this way, a more efficient global and national allocation of the considerable and diverse collective resources available in Latin America and the Caribbean may me promoted. He further emphasized that, in his opinion, subregional integration should take place in a context of wide opening to the outside world. His speech is included in Annex II.
Permanent Secretariat Intra-Regional Relations 4 b. Mr. Lenin Echeverría, the First Vice-Minister of Industry of Cuba, which holds the Pro Tempore Presidency of CELAC, welcomed the participants and thanked the Permanent Secretariat of SELA for organizing the meeting. Echeverría termed the meeting auspicious for finding ideas, explaining criteria and exploring means for developing the industry sector in Latin America and the Caribbean based on CELAC. According to Echeverría, this does not preclude the participation of other organizations that can help promote industrial development capable of sustaining the economies of the countries in the region. Finally, he thanked all attendees and, especially, the Bolivarian Republic of Venezuela for hosting the meeting. His full speech is included in Annex III. c. Mr. Gabriel Porcile, Economic Affairs Officer of the Productive and Business Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC), greeted the audience on behalf of the Executive Secretary of the agency and welcomed the invitation to the meeting. Next, he emphasized the significance of the meeting and added that ECLAC has made early efforts to boost an industrial policy in the region. He praised the fact that such initiative has been included in the regional agenda. His full speech is included in Annex IV. A. DEVELOPMENT OF WORKS 4. Next, the Permanent Secretary presented the Draft Agenda for consideration by the delegations. The agenda was adopted without amendment and is included in Annex I. The documents presented and the resulting conclusions and recommendations are available on SELA s Web site (www.sela.org) at http://www.sela.org/view/index.asp?ms=258&pagems=114681. HIGH-LEVEL MEETING The High-Level Meeting was moderated by Lenin Echeverría, the First Vice-Minister of Industry of Cuba, which holds the Pro Tempore Presidency of CELAC. The following officials took part in the meeting: 5. Claudia Schatan, SELA s consultant, who spoke about Productive Development and Industrialization in Latin America and the Caribbean. At the end of the presentation, the moderator invited delegates to voice their stance about the ideas and proposals presented by Ms. Schatan. 6. Ignacio León, the representative of the Inter-American Development Bank (IDB), asked the speaker for her opinion on the legislative reforms that have been implemented recently in the region with the aim of designing public policies to promote productive development. León also asked Ms. Schatan to disclose some of the recommendations she would make to promote the legislative agenda in connection with the topic. 7. Then, the speaker said that no productive development policy can be successful in the absence of other regulatory policies with a regional scope. She said these policies need to be harmonized. In her view, the competition policies are very important, as they help level the playing field for the different actors in the productive field. In this regard, she referred to the privatization process that took place during the eighties and nineties.
According to the speaker, such process was carried out without a prior regulatory and policy framework, which eventually resulted in the emergence of monopolistic practices that caused a rise in prices and adversely affected the quality of products, with consequent damage to the population. 8. Next, Ambassador Roberto Guarnieri thanked Ms. Schatan for her speech and said that it was worthy of reflection and deeper consideration. He referred to the possibility of standardizing the relevant legislations in the Member States of CELAC. He pointed out it was highly necessary to keep in mind that the meeting was crucial to the immediate agenda of CELAC, as essentially the approach to industrial development based on relatively shared grounds is the key to deepening economic integration. With regard to trade liberalization, he said significant progress has been made. However, he said trade integration is going through a period of relative stability, adding that opening the doors to the mobility of other factors of production was of the essence. He remarked that this requires a favourable basis, because it cannot be decreed, yet it can be induced by relevant public policies that promote and facilitate the mobilization of such factors. Next, he pointed to the factor of labour at all levels of expertise. However, he also highlighted the factor of domestic savings. There are large domestic savings, he said, that are not often injected into projects or investments in the countries of the region. In his view, the capital mobilization around the area of CELAC is much more limited and difficult than towards other regions in the global economy. He attributed this fact to the yields on savings deposits and their conversion into investment, but he also said it could be due to regulatory restrictions. He noted this is an item on the CELAC agenda and an important factor, among many others, that could result from the meeting. He highlighted the importance of the meeting in terms of the regional integration process and CELAC. He thanked the speaker for her comments and for mentioning what she called the public-private partnerships because, he said, each sector has its scope and management capacity, and harmony is of the essence. Finally, he said harmony between the domestic public and private sectors is extremely important, as well as collective harmony, which can be achieved if public policies gradually converge, particularly those related to industrial development. However, he stated that all public policies relating to the mobilization of resources and factors are equally relevant. 9. The speaker thanked for the comments. Regarding public-private partnerships, she said in LAC and the world, large transnational and trans-latin companies have their own agenda and a large weight, and will increasingly affect the course of development in the countries where they are based. She stated that business strategies have to be brought in line with national strategies, which does not imply that the State will impose requirements on businesses as it did in the past. She added that there are other mechanisms that could motivate businesses to generate more suppliers locally, more training, create research and development centres, and promote the exchange of experiences gained in their own territories with the countries where they operate. 10. Then, Carlos Chanduvi-Suárez, the Head of the UNIDO Secretariat s Programme for Latin America and the Caribbean, said he was pleased to have the opportunity to participate in an event of such significance to the productive and industrial development of Latin America and the Caribbean. He added that the synergy with CELAC significantly favoured the regional vision. 5
Permanent Secretariat Intra-Regional Relations 6 He said industrialization is a core element to boost economic growth and development and added that experience shows that there is a strong link between industrial productive capacity, economic growth and the level of development of nations. He stressed that the countries that have made more progress towards achieving the Millennium Development Goals (MDGs) are those which, in turn, have attained significant and rapid industrial development. In this regard, he noted that UNIDO has a mandate to assist the least developed economies in their industrialization. To that end, UNIDO works with governments and the private sector to foster competitive industrial production, develop international industry partnerships and promote socially equitable and environmentally friendly industrial production. He further referred to the relationship between this international organization and the Conference of African Ministers of Industry (CAMI), to which it has traditionally provided technical and financial support. Finally, he reiterated the UNIDO support for SELA activities related to this area and submitted for consideration by the attendees a document entitled A case study for the Ministers of Industry and Economy of Latin America and the Caribbean, prepared within the framework of cooperation between UNIDO and the African Union. He said the paper could be an important reference for discussion. His full speech is included in Annex V. He then made the presentation Towards a Sustainable and Inclusive Industrial Development. Then, the moderator opened the debate and invited attendees to express their opinions and concerns on the topic addressed by the speaker. 11. The Argentine delegation referred to the urgent need to make better use of human resources in the region and raised the issue of head-hunting of highly skilled individuals in Latin American and Caribbean countries. Then, they asked what could be done to stop human talents in the region from migrating and develop their professional activities preferably in their home country rather than abroad. They said large companies with simultaneous operations in different LAC countries make investments in R & D and training only in some of the countries where they operate. In their view, the relevant countries should take note of what such companies are doing that could be implemented by those where multinational and trans-latin companies operate. Finally, they remarked that it is imperative to require these companies to invest in research and development, as a sine qua non prerequisite for the development of the region. 12. Carlos Chanduvi-Suárez said that, in his view, transnational companies distribute their resources discretionally and seem to have little interest in endorsing development policies. Rather, they usually opt for a market that is homogenous in terms of demand, thus eliminating the basic and cultural values of the countries in the region. He added that the solution lies in joining efforts in those countries for creating an economy of scale for transnational companies to invest in them. He added that there are good training centres that can be used to optimize human resources training. Further, he said the region has knowledge and good practices, and the required synergies can be galvanized, as the governments have the adequate mechanisms for such purposes. Once the economy of scale is created, foreign companies will invest more and become more interested in areas such as research and development, and training. 13. Claudia Schatan said she understood the frustration of some countries over the loss of human resources migrating abroad. She acknowledged the efforts made to train the
youth, many of whom are absorbed by multinationals. In her opinion, human talent needs to be repatriated. For such purpose, she suggested encouraging professionals who are abroad to return to their countries of origin by offering them attractive conditions. She noted that, in any case, countries should keep in contact with such professionals and invite them to teach and work in their own country. She added that the interconnection between academic and research networks could help cash in on human resources abroad. She advised countries where multinationals have initiatives in the fields of Research and Development, and training to share their experiences with those where foreign firms do not invest in those areas. 14. The Delegation of Jamaica said the goal for most of the countries in the region was the creation of job and wealth, as well as promoting the competitiveness of their economies. In the Caribbean, especially Jamaica, they said some reforms have been institutionalized, but have failed to achieve the transformation that the country needs, possibly because the process has not been undertaken in a coherent and structured manner. They added that although they succeeded somehow in attracting investment, they failed to prove capable to absorb investment. They attributed this to the fact that both the government and the private sector lack the required skills. Finally, they said their country has tried to build such skills, not only at the institutional level but also in the context of SMEs. 15. Mr. Carlos Chanduvi-Suárez agreed with Ms. Schatan that the issue was competition. Further, he said it is necessary to realize that the process of industrial policymaking should be carried out in a competent and coordinated manner, including medium and long-term actions. He added that it is necessary to integrate the actions at the institutional level and that many countries have lacked such corporate vision as they could not build a country with a clear sense of direction. Next, he exemplified the idea with the experiences of UNIDO in countries such as Brazil, Colombia, Mexico, Uruguay and Argentina. He said this boils down to building a shared vision of the country that involves the strategic aspect, identification of more favourable market niches, and visualization of complementarities at the level of production chains, among other aspects that influence the development of countries. 16. Then, Gabriel Porcile, Economic Affairs Officer of the Productive and Business Development Division of ECLAC, spoke about the Structural Change for Equity. Next, the moderator invited participants to express opinions or comments on the topic presented by the speaker. 17. The Guyana delegation regretted the failure to discuss a key issue: the role of governments. They said the issue of development, especially industrial development, should be subject to deeper analysis. In their view, every time a government in the region has tried to be more proactive by working with the private sector, problems have emerged with some neighbours, especially in the north. They said such situation has caused much confusion in the private sector, which should be viewed as it is in Asia and the United States. The Guyana representative added that in Guyana anyone mentioning cooperatives is labelled as leftist or socialist. However, in Canada, there are agriculture cooperatives that are private companies, owned by farmers. He said that there is the view that farmers in Guyana should not expect anything from the government, while in the United States it is exactly the opposite, as farmers depend on the government. He noted that state 7
Permanent Secretariat Intra-Regional Relations 8 regulations are necessary and can be soft and effective as in the northern countries in Europe or Canada and that LAC should follow such examples. Finally, he emphasized that, in industrial development, governments must assume the important role that corresponds to them in the best possible way. 18. Mr. Carlos Chanduvi-Suárez said the approach of the Delegation of Guyana is fundamental. He reiterated the need to take a pragmatic stance and understand that regardless of ideology, there are instruments to be applied consistently to streamline the State, whose role is essential, but it should be free of ideological differences. He added that it was necessary to move towards a process of socialization of education. He referred to Korea, whose government, he said, plays its role by leading the economy, designing strategies and coordinating the actions of the public sector with those of the private sector. 19. Mr. Gabriel Porcile said there is a very strong national and international legitimacy for industrial policy. He added that social inclusion and the green topics have legitimacy and are largely endorsed. In his view, many are engaged in industrial policymaking and are not subject to that kind of criticism, such as the WTO, which does not allow this, because they engage in industrial policy-making for the lawful objectives of promoting social inclusion or protecting the environment, and those things generate less intense reactions. 20. The Delegation of Argentina said it was necessary that studies referred to Latin America and the Caribbean were developed taking into account the ideological stories associated with the development process. 21. The representative of CAF-development bank of Latin America said that the World Bank has ascertained, through studies and surveys, that one of the hurdles facing companies is finding skilled labour. This is true for the SMEs which, he said, do not find skilled labour simply because there is not enough. There is a problem of low supply and high demand. Finally, she asked the panel about the outlook for skilled labour in the region. 22. Mr. Carlos Chanduvi-Suárez said the problem is that SMEs do not have the financial ability to pay the actual cost of the available qualified labour. He added that if they were more efficient, companies could pay, as they would have the necessary productivity, noting that an efficient sector that provides a market for the qualified labour is required. Finally, he said the proposed solutions should integrate government leadership and support for the education sector. 23. Ambassador Roberto Guarnieri referred to comments by the Ambassador of Guyana regarding the role of the government. He said it was necessary to qualify this important role in terms of its outcome and effectiveness in achieving goals related to collective welfare and the ultimate goals of the State. He remarked that each goal has a tool. He added that full employment, economic growth, and increased productivity are effective tools for this purpose. He stressed that companies require state regulations that are common for all the members of a given organization. He pointed out that SELA is an instance for harmonizing regional views, and is able to coordinate views vis-à-vis foreign capital as well. He said that it is necessary to consider the adoption of a common regional agenda to deal with multinationals, as part of a common industrial policy. Further, he termed the regulation of foreign capital a very necessary measure. He added that this issue could be included as an item on the agenda for the eventual ministerial
conference on industrial policy, as common standards are required depending on multinationals and foreign direct investment. Spending on R & D could greatly benefit from a common standard, which would be part of a shared industrial policy. Then, he referred to the Schumpeter s statement that for change, for increasing productivity, monoproduction is destroyed and production is promoted. He said this is the effect of innovation, which at the time of the great economist had a huge social cost for everyone that worried nobody, which is not conceivable at the present time. Finally, he stressed that State intervention was very necessary because these processes of retraining, training, education, which are necessary to reinsert the displaced unproductive staff in other areas, cannot be left to the market. 24. Ms. Claudia Schatan talked about her experience in Korea on a mission to study the issue of education and production. She said that the country had merged the Ministry of Innovation or Science and Technology with the Ministry of Education, in order to closely coordinate the needs of science and technology with education. Regarding the role of the Korean State, she said that it maintains an ongoing dialogue with the productive sector and regularly reviews the careers and curriculum, depending on the needs of the industry. She stressed that such synergy between public and private sectors, as well as among the universities, businesses and government, works very well in Asian countries. 25. The delegation of Dominican Republic suggested including the energy issue in the debate, as it has a significant weight for competitiveness in the region s countries. 26. Mr. Carlos Chanduvi-Suárez said UNIDO has made significant efforts in the energy area and knows the case of Dominican Republic. He explained that in addition to energy, specifically energy efficiency, it was very important to talk about business efficiency in terms of process improvement and optimization of the industry, as well as about the indicators of growth that has prepared the OECD in the area of natural resources. He noted the industry should know how to support their partners in improving processes, and human, organizational, energy and environmental resources of the company to make them more efficient. 27. Regarding the presentation of the data in his paper, Mr. Gabriel Porcile said he had shown regionally aggregated data because the patterns are actually very similar. Finally, he said when you compare each of the Latin American countries with countries in both Asia and Europe, the patterns found in terms of productivity and domestic employment are highly similar INTRODUCTORY SESSION: PRODUCTIVE AND INDUSTRIAL DEVELOPMENT POLICIES 28. The session was opened by Mr. Francisco Lazo Marín, the Vice-Minister of Trade and Industry of El Salvador, who made a presentation entitled Política industrial y transformación productiva para impulsar la inversión, el empleo y el desarrollo (Industrial policy and productive transformation for boosting investment, employment and development). Then, the moderator opened the debate and invited attendees to voice their views and concerns about the topic presented by the speaker. 29. Mr. Carlos Chanduvi-Suárez thanked the speaker for what he described as an excellent analysis to create a State vision, a vision of the country. Referring to the tool called Product Scope, he asked how the participatory process had taken place and how it was disseminated among the population and among the shareholders, so that 9
Permanent Secretariat Intra-Regional Relations 10 they could appropriate it and work together. He agreed with the speaker that this preliminary work is very important and that the lesson was to understand that the process must be analytical, serious and participatory, where all voices are heard and that it must be a State policy as well. 30. The Delegation of El Salvador asked the speaker to elaborate a little more on the analytical methodology he used, as well as the intention of turning the issue into State policy. 31. The speaker responded by noting that initially the industrial policy was agreed with key sectors, including SMEs. He added that the starting point was a study on Productive Transformation prepared by the National Reserve Bank, the Ministry of Economy and the Investment and Export Promotion Agency (PROVESA). He explained that the government decided to promote the plan, but had to create the conditions to make this a State policy. Therefore, it was necessary to involve agents of structural change and design a policy of rapprochement with them. Then, he provided details of the process of consultation with various sectors, which based on the premise that it was not a government proposal but a joint effort between the public and private sectors. He announced that the plan would be submitted to the candidates for the Presidency of the Republic, for implementation regardless of who is elected. 32. Mr. Juan Díaz Mazadiego, Director-General of Foreign Trade, Secretariat of Economy of Mexico, referred to the axes of the industrial policy in Mexico. The moderator then opened the floor and invited the participants to share their views and concerns about the topic discussed by the presenter. 33. Mr. Ignacio de León, IDB Representative, referred to the localization of innovation policies at the regional level, which, he said, is very important in Mexico because of the federalism that characterizes this country. Considering the need to build local capacity for the purpose of strengthening public policies with a strong, highly-specialized component, he asked the presenter what the synergy with local governments not aligned with the governing party was like and whether those governors had indeed seen it as a State policy. 34. The presenter said that party politics has not played any role, because there is an increased awareness in Mexico about the needs that must be met in the fields of industrial policy and economic policy, in general. It is, he said, a logical framework matrix and a results-based budget, which, together with transparency, has promoted the dissemination of information, thereby helping strengthen such awareness among citizens and the different sectors. He added that the current industrial policy has a high demand from the private sector. Finally, he said that this is the way to add cross-sectional character to the industrial policy. 35. The delegation of Argentina inquired about the mechanism of participation, referred to several others that are widely used, and asked the presenter to elaborate on the subject. They also expressed interest in the experience gained by Mexico from the implementation of the free trade agreement between the U.S., Canada and Mexico (NAFTA). 36. The presenter responded by saying that the Federal Government is responsible for providing regional forums in which its officials can hear proposals from citizens that are then entered in and published on a Web site and are ultimately incorporated into the
National Development Plan. He added that, in terms of industrial policy, they do so with sectoral agendas developed through second-generation forums and workshops involving specialists who review the proposals, thus contributing to the creation of a consensusbased agenda with no imposition by the Federal Government. SESSION I: REGIONAL INTEGRATION AND PRODUCTIVE AND INDUSTRIAL DEVELOPMENT This session was moderated by Mr. Juan Acuña, Director of Integration and Cooperation of the Permanent Secretariat of SELA. 37. Ms. Leela Ramoutar, Specialist in Private Sector Facilitation in the Caribbean Community (CARICOM), presented the paper Regional integration and productive and industrial development. 38. Then Mr. Camilo Rivero, National Coordinator of the Productive Integration Group (GIP) of the Common Market of the South (MERCOSUR), made the presentation Programa de Integración Productiva del MERCOSUR (Influencia del proceso de integración del MERCOSUR en el fomento del desarrollo productivo e industrial de sus países miembros) (Programme on MERCOSUR Productive Integration - The Impact of MERCOSUR Integration Process on the Promotion of the Productive and Industrial Development of its Member Countries). Following that, the moderator invited the participants to express their opinions and concerns about the topics discussed by the presenters. 39. Mr. Ignacio de León, IDB Representative, inquired about the particulars of the participation of Venezuela in MERCOSUR Structural Convergence Fund (FONDEM). 40. Mr. Camilo Rivero said that when the Fund was originally created, Venezuela was not a member of MERCOSUR. Then, he added, a new situation was brought about which resulted in Venezuela entering the bloc after Paraguay went out due to a temporary suspension, and such situation led to a new composition of both contributions and beneficiaries. Finally, he said it was a temporary decision, as the expected reinstatement of Paraguay as a full member of MERCOSUR would result in a new re-composition of the distribution of resources within the Fund. 41. Mr. Carlos Chanduvi-Suárez inquired about MERCOSUR Permanent Regional Observatory of Productive Integration, referred to by the presenter. He said he felt that it was being used to analyze internal capacities only as he had not heard any references to global trend analyses, also inquiring whether it was an omission or, rather, a planned process to be undertaken in the future. 42. Mr. Camilo Rivero responded by saying that the Observatory also discusses global trends on trade and production issues, as well as everything arising from the major schemes of the world economic system. 43. Ms. Claudia Schatan inquired whether they had already seen the results of the integration programmes referred to in the presentation. 44. In answering her, Mr. Camilo Rivero claimed that some initiatives had been identified so far which were being discussed in order to turn them into productive integration projects. He added that they are carrying out sectoral studies, and that depending on the complexity of each initiative, the Productive Integration Group, 11
Permanent Secretariat Intra-Regional Relations 12 together with stakeholders and any other factors the participation of which may be deemed necessary to carry out such projects, will grant approval so that they can receive the resources needed for implementation, noting, however, that only bilateral initiatives, such as the Argentina-Brazil and the Argentina-Uruguay initiatives, have been identified so far. 45. The delegation of Uruguay noted that since MERCOSUR State Parties took up an appropriate, proactive and sectoral industrial policy, they began to move towards productive integration and towards a changed perception of MERCOSUR as a political instrument to achieve growth and development, and not just as a customs union, which, in his opinion, is a process that has gained momentum in Uruguay and in Paraguay, Argentina and Brazil as well, thus giving rise to a new institutional framework. As regards FONDEM, they argued that there are clear examples of available instruments and products such as the Uruguay-Brazil electrical interconnection, a supported infrastructure project and several cross-border processes between Argentina and Brazil, also supported by this Fund. Concerning the funds composition, he said that because Venezuela is a new member of MERCOSUR, it is still to integrate fully into both FONDEM and the Guarantee Fund of MERCOSUR (GAFOPYME). He explained that, in the case of GAFOPYME, while investment is based on the same criteria used with FONDEM, usage is distributed virtually on equal parts because the intention is to promote productive integration with at least binational companies, and therefore efforts are being made to ensure a balanced usage of this US $100-million Fund by the State Parties (each 25%). Finally, he said that once Venezuela joins the Fund, aliquots shall be reviewed. 46. Ambassador Guarnieri said that conceptually it seemed to be the same situation, adding that he had greatly appreciated the presentation made by CARICOM because they had been very frank and very accurate and because they had admitted that despite having virtually established a single market and after having addressed the trade integration issue, they have serious difficulties to continue with the integration process, which he considered to be a conclusion of great importance. As regards MERCOSUR, he said that it has allowed for great progress in terms of trade, as evidenced by the liberalization and expansion of the internal market, increased efficiency and enhanced mutual trade. However, he added that it seemed to him that MERCOSUR was facing great difficulties to continue to make headway in the field of industrial integration. He argued that in both cases there is a problem with policy harmonization, and that the CARICOM countries face a situation of strong financial constraints, have a low rate of growth and a huge debt burden. He pointed out that such situation is actually a major concern for SELA and that a meeting to be co-sponsored by the Permanent Secretariat and the Association of Caribbean States (ACS) has already been scheduled to address the issue of the debt burden in the Caribbean countries and the limitations it imposes on fiscal management, as well as the timely and adequate consideration of issues that need urgent budgetary attention, because they have to divert resources to service the debt. He added that it is a very serious problem that requires the participation of all of us, including all relevant institutions, and should be recognized by the CELAC Member Countries and, of course, by the membership of SELA.
Then, he said he thinks that due to its economic dimension, the challenge facing CARICOM calls for the establishment of common institutions that may pave the way to moving forward in the process of harmonization, in the field of macroeconomic policy and in terms of regulatory policy. So he concluded that it is a noteworthy development that two different mechanisms that have progressed considerably in the commercial sphere are now facing such situation which can only be solved through the harmonization of policies and by implementing a series of widely shared and properly applied public policies. After that, he asked the presenter what the experience with the Caribbean Development Bank had been like and if CARICOM had already thought of a scheme that supported by global financial institutions such as the World Bank could eventually provide funding for the institutional strengthening of the Community. In this connection, Ambassador Guarnieri added that the institutional strengthening of global programmes offered by the World Bank and the IDB at the national level could also be requested by CARICOM to be applied to the bloc as a whole. He said that, in such a case, the Permanent Secretariat of SELA and, perhaps CELAC, could provide CARICOM members with full support, adding that he would be mindful of their requests in this regard. He stressed that the priorities and specific needs of CARICOM Member States and, in general, of the Member States of SELA, are of the highest priority to the Permanent Secretariat. In addition, he reassured the representative of CARICOM of the Permanent Secretariat s willingness to pay prompt attention to any request that it could possibly support, also asking her kindly to convey such willingness to the authorities of CARICOM. Regarding the productive integration project, he expressed doubts about the nature of the projects that are being considered and said that to his knowledge, several initiatives had not materialized. Then he raised some key questions on the subject, namely: Do these initiatives include a strong component of official involvement? Are they officially promoted? Are these initiatives supported by public funds? Are they mainly business initiatives rather than public initiatives? Finally, he said the answers to these questions could be crucial, because the concept of productive integration refers more than anything else to structural topics, and not to industrial policy as such, not to industrial projects, with that being a point the clarification of which he would really appreciate. Friday, 04 October SESSION II: DIVERSIFICATION, INDUSTRIAL DEEPENING AND PRODUCTIVE COORDINATION This session was moderated by Ms. Sofía Rojo, Economic Affairs Officer of the Productive and Business Development Division of ECLAC. 47. The session began with a presentation given by Ms. Vivianne Ventura-Dias, SELA s consultant, who elaborated on the topic of Cadenas de valor, pymes y políticas públicas. Experiencias internacionales para América Latina y el Caribe (Value chains, SMEs and public policies. International Experience and Lessons for Latin America and the Caribbean). The moderator opened the floor for comments and questions from the audience. 48. Ambassador Guarnieri congratulated the presenter and stressed the conceptual and analytical richness of her presentation, adding that, in addition to the expressed conclusions, it could lead to other conclusions of relevance to the development of public 13
Permanent Secretariat Intra-Regional Relations 14 policies in the fields of development and productive integration. With regard to the inclusion of SMEs in global value chains, he said that it looked like a significant approach to capturing the added value that is being generated by high-tech industries. He added that public policies for SMEs in the countries of the region should be directed towards promoting and facilitating their access to such global value chains, thus gaining a place in the processes they are generating technologically and, in terms of income, being able to achieve the best results. He referred to two other points discussed by the presenter: the concept of time and the concept of horizon on which State policies should be based. With respect to the latter, he said that it is very important and that the concept of long-term undertaking which transcends a regular government term, covering several administrations is now absent from the national policy development process, which often results in disruptions and/or loss of continuity as governments change. He said that this is a very significant contribution to the identification of how, where and on what horizon policies should be defined in this field. He claimed that the insertion of region-based companies into global value chains could result both internally and regionally in a branching process in the countries of the region, thus incorporating other sectors into such global chains that are changing the landscape of international trade. Ambassador Guarnieri also said that a kind of Value Web was forming as such insertions help create new branches which, in turn, can boost productivity in other regions and in other sectors. Finally, he commented that such Value Web seemed to be the modern version of the Rounding about, a traditional concept in economics which, he said, was an excellent corollary to the document presented. 49. Mr. Gabriel Porcile said that the Argentine Government is working on the formation of value chains, referring specifically to the integration of Argentine SMEs in the automotive sector companies. In this regard, he alluded to the issue of applicable standards which, he said, they have been managing with the support of the National Institute of Industrial Technology. He noted that a multinational auto company had required that they should follow German standards for the manufacturing of oil pumps, even though Argentine SMEs in this sector had already been following national standards for 25 years. Then he asked the presenter a question as to how these technological barriers imposed on SMEs by multinationals could be cleared. He mentioned that in the 1990s, when nobody was yet talking about value chains, companies had to specialize and a number of medium-sized companies followed that road to be eventually absorbed by multinationals, which resulted in the loss of local capacities for innovation with the associated loss of the ability to create new products because they could only be designed and developed by multinationals. Finally, he wondered if the term value chains was not actually masking a reappearance of the specialization issue. 50. Ms. Leela Ramoutar added a point that she acknowledged she had failed to explain clear enough in her presentation the previous day. She said that CARICOM is committed to a process of productive integration as a result of the review of the Treaty of Chaguaramas, which refers to productive integration as the production in more than one Member State by a single business entity or the production shared by more than one business entity in several Member States. She added that the Treaty addresses crossborder investment in the area of services and that it suggests a demand for productive integration both in the manufacturing sector and the services sector. She said that there have been some natural initiatives for integrated production within the Community,
meaning that companies have done so on their own, without assistance from the Community, but only in the financial services sector. Ms. Ramoutar also noted that CARICOM has not progressed much in terms of integrated production, because it has not conducted any studies identifying the most competitive sectors or the natural resources of a Member State that could be linked with the production capacity of other Member States of the Community. Finally, she made reference to the fact that Compete Caribbean, a branch of the IDB, offered to conduct a study aimed at exploring how to establish links between the agricultural sector and the tourism industry, because the latter is getting almost all of its supplies from outside CARICOM, which results in many products of the Community going to waste due to the difficulties to sell them outside CARICOM. 51. Ms. Ventura-Dias, the presenter, expressed gratitude for the comments on her presentation and said that, in her view, the problem of inequality generally has to do with inequality in land tenure, warning that as long as this problem remains unsolved in the countries of the region, any other steps taken will only be a palliative. She noted that, in the cases of Korea and Japan, the agrarian problem was solved after the war. Hypothetically speaking, she said that in the case of Korea relative equality preceded business development, that the two experiences are very similar, and that Korea had emulated Japan in this field. With regard to value chains, she said that she has doubts because the existing relevant papers are based on case studies only, that evidence is very singular and that there is no aggregated and/or compared data. What is clear, she said, is its complexity. Then, for illustrative purposes, she cited the recent scandal in Europe over horse meat found in some widely consumed products, such as lasagna, even at schools. She explained that in order to identify the involved companies, a production map for such lasagna was drawn, showing that the related production activities had been carried out by an interrelated set of about twenty companies in several countries of the European continent. Ms. Ventura-Dias also spoke about how the globalization of technological knowledge led to process distribution or fragmentation first within and then beyond the limits of the traditional company that used to be responsible for the entire production chain for the purpose of reducing costs and avoiding responsibility. She stressed that for the consumer, value chains translate into a dissolution of responsibilities that has resulted in a decreased product quality. She pointed out that rather than accomplishing SME integration, the goal should be to identify how they can participate with greater added value in a world where production as well as capital and basic decisions is increasingly concentrated, while activities are increasingly dispersed. She argued that it is not only a matter of equipping SMEs and offering them to multinationals, and that it is necessary to align business strategies with national strategies, which is to be understood by politicians and businessmen. In addition, she referred to industrial policies vis à vis public assets, noting that specific policies and horizontal policies had long been discussed and that there had been considerable criticism of the insufficiency of horizontal policies. She added that it was not enough to offer quality public assets, such as telecommunications, energy and legal security, but targeted policies cannot be discussed before such assets are made available. Finally, she recalled that back in the fifties, protectionist policies and emerging industries were strongly criticized on the grounds that they had no capacity for 15
Permanent Secretariat Intra-Regional Relations 16 technological innovation, instead of, she said, promoting the development of technology policies as Asians did to protect the technological capacity of their companies. 52. Then Ms. Lucía Ferguson, Director-General of Industries, Ministry of Industry and Trade of Panama, spoke about Diversificación, profundización industrial, y articulación productiva: temas puntuales vinculados con la producción industrial en Panamá (Diversification, industrial deepening and productive coordination: Specific issues linked to industrial production in Panama). 53. Subsequently, Mr. Camilo Morales, Bolivia s Vice-Minister of Large and Medium- Scale Industrial Production, discussed the subject of Articulación productiva (Productive coordination). 54. Following that, Ms. Sofía Rojo, Economic Affairs Officer, Productive and Business Development Division of ECLAC, spoke about La importancia de la política industrial para la región en el contexto global (The importance of the industrial policy for the region in a global context). After these presentations, the moderator opened the floor and invited the participants to share their opinions and concerns about the topics discussed by the presenters. 55. In reply to the allusion made to Europe, and referring specifically to Central Europe, Mr. Carlos Chanduvi-Suárez said those countries never accompanied the process resulting in the market failure and that they had opted instead for a strong and regulatory State and for an internal market development based on regional complementarities. He added that more aggressive countries, such as Portugal, Greece, Spain and England, had opted for the market economy, with the already known consequences. Meanwhile, Latin America and the Caribbean, he said, should opt for regional complementarities, with CELAC acting as a promoter of the potential or that something of the region, including the use of Brazil s value chains and Bolivia s elements, among other things. Finally, he said that regionalization should be an objective for this forum and that it can be aligned with a CELAC s philosophy. 56. Ms. Vivianne-Dias asked the presenter, Mr. Camilo Morales, to elaborate on the concept of productive complexes and to explain how the earnings in a public-private sector relationship are controlled. Then, she explained that she, in her presentation, wanted to draw attention to two contingent elements, namely deverticalization and offshoring of activities, which, she said, are processes that companies have undertaken for historical reasons and that there is no determinism for the trade in tasks to continue as it exists today. She added that there are actually some activities that have technological determinants to be able to return, such as textile activities, but some technological changes can help make other activities to be vertical again, such as digital printing. Finally, she said that these days playing all the cards on a trend that has contingent factors that determine it should be avoided. 57. Mr. Gabriel Porcile said that the close relationship between trade liberalization and investment is very important. He added that the United States, for example, is building a transatlantic alliance and the Pacific Alliance to facilitate access to markets. Its objective is to enter the Chinese market. He added that as soon as the U.S. can remove tariff barriers, it will be easier for it to produce in the countries where its businesses are located. He pointed out that the countries in the region must be cautious in this matter, because