March 2001

SEMINAR: TOWARDS COMPETITIVENESS: THE INSTITUTIONAL PATH

IDB ANALYZES MAIN ROADBLOCKS TO PRIVATE SECTOR DEVELOPMENT IN LATIN AMERICA

Business survey shows dissatisfaction, institutional shortcomings in region

For over a decade, Latin America has bet on private sector-driven economic growth. The region’s businesses, nevertheless, still face large obstacles including scarce and expensive credit, excessive taxation, and cumbersome regulation, and unstable rules of the game. In addition, in many countries they face problems such as violence, corruption and inadequate infrastructure.

The result is a climate that limits productivity and discourages business development. This is one of the reasons for the relatively small size of Latin American businesses in comparison to competitors elsewhere, especially in terms of their assets and ability to generate employment.

The means to overcome these roadblocks will be examined at a March 16 seminar organized by the Research Department of the Inter-American Development Bank at the headquarters of ECLAC in Santiago, prior to the IDB’s Annual Meeting in the Chilean capital. The seminar will bring together representatives from the public and private sectors of Latin America as well as distinguished scholars and international experts. It will be inaugurated by Chilean Finance Minister Nicolás Eyzaguirre. IDB interim Chief Economist Eduardo Lora will discuss institutional obstacles to competitiveness in Latin America.

Several panels of experts will later examine these obstacles, which are frequently referred to by Latin American business people in international polls. These surveys have found that the main obstacle is the scarcity of credit. This issue will be analyzed from different perspectives during the morning session, in order to determine which reforms would best stimulate lending to the private sector. In Latin America this kind of lending does not reach 35% of GDP, while in Southeast Asia it is practically double that ratio and in the most advanced nations it exceeds 100% of GDP.

A panel moderated by Chilean Chief of Banking Supervision Enrique Marshall will discuss the limitations faced by banking creditors in enforcing guarantees, collecting punitive charges for delays in repayments and taking part in the disposal of assets of bankrupt businesses. According to a study of creditor protection in 57 countries by IDB economists, in Latin America banks suffer from many restrictions that inhibit the financial sector’s growth.

Andean Development Corporation President Enrique García will moderate another panel, which will analyze the institutional tools available to improve small and medium enterprises’ access to credit. These businesses traditionally have had the greatest difficulty in obtaining financing.

A third panel, moderated by World Bank Chief Economist for Latin America Guillermo Perry, will analyze the reasons for the concentration of foreign direct investment in a handful of countries.

During the afternoon, the seminar will address regulatory issues in such key sectors as electricity and telecommunications, institutional incentives for technological development and the policies needed to lower costs and improve the efficiency of ports and transport infrastructure in the region.

A panel on regulation of electricity and telecommunications will be moderated by the president of the Central Bank of the Dominican Republic, Francisco Guerrero Prats. Participants will discuss their experiences with deregulation and privatization in different world regions as well as the results achieved and the lessons learned.

Technology and information technology will be analyzed to see how to facilitate innovation in areas ranging from physical infrastructure to education, and from research to intellectual property protection. This panel will be moderated by the Finance Minister of Trinidad and Tobago, Gerald Yetming.

The last panel will be headed by Chilean Public Works Minister Carlos Cruz Lorenzen. It will analyze regulatory issues related to transportation, a sector whose high costs are one of the main barriers to trade in Latin America. Panelists will focus on ports, the experiences with reform in different countries of the world and the impact of antiquated port infrastructures as well as inefficient customs.

Guillermo Calvo, IDB Chief Economist designate, will close the seminar.