Growth, Competitiveness and Sustainable Development

Although most countries in Latin America and the Caribbean in recent years have posted their highest growth rates of the past quarter of a century, the region continues to face the challenge of achieving greater competitiveness in the global economy. Growth in the region varies widely from country to country and is slower than in other emerging markets. Moreover, the region’s growth is due in large part to extremely favorable external conditions, which may eventually change.

According to the 2007 Global Competitiveness Report, which measures competitiveness in 131 countries around the world every year, there are great disparities among the countries of Latin America and the Caribbean. Topping the list as the most competitive country in the region was Chile, which ranked 26 in the world, followed by Barbados (50), Mexico (52), Panama (59) and Costa Rica (63). The other Latin American and Caribbean countries were ranked below the world average. Paraguay, Nicaragua and Bolivia were the lowest-ranked countries in the region.

Ten of 22 countries in the region rose in their ranking, 11 declined and one remained the same. Honduras rose the most, advancing by 13 places, Guatemala by 10, Costa Rica nine and Uruguay eight. On the other end of the spectrum, El Salvador, Argentina and Jamaica dropped by 10, nine and seven positions, respectively.

Every year since 2003 the World Bank has published its Doing Business report, which indexes business regulations and their enforcement in 178 countries. In its most recent report, Singapore, New Zealand, the United States, Hong Kong and Denmark were ranked at the top—countries with the most favorable business climate. Of the 24 Latin American and Caribbean countries included in the ranking, Chile was first in the region at 33, even though it dropped by five places. Eight countries rose in their ranking, most notably Colombia, which jumped up 17 places, from 83 to 66. The Dominican Republic, Paraguay and Trinidad and Tobago each advanced seven places. The rankings of 14 other countries fell (see Table II • Competitiveness Rankings).

According to the report, Colombia was among the 10 countries of the world that implemented the largest number of reforms to make doing business simpler. These measures included increasing the transparency of the public information disclosed by companies that are quoted on the stock market or that plan to go public, simplifying tax payments and improving the ports and customs systems to expedite cross-border business.

To address the challenge of achieving increased growth through greater competitiveness, the Inter- American Development Bank, jointly with the Center for International Development at Harvard University and several research centers in Latin America and the Caribbean, is carrying out a comprehensive research project to determine what factors are preventing the region from attaining higher, more sustained growth rates. The project includes diagnostic studies on growth for 14 countries in the region: Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Guatemala, Guyana, Nicaragua, Panama, Paraguay, Peru, Mexico and Trinidad and Tobago.

The purpose of the studies is to identify the obstacle to growth whose removal would have the greatest impact. Case studies are also being conducted on successful exports of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico and Uruguay. This research is helping to identify and design policies to improve competitiveness.

IDB operations continue to include a sizeable number of loans and grants to support reforms to improve the business climate; reduce transaction costs; improve private sector access to financing, especially for small businesses and microenterprises; strengthen institutions; and develop mechanisms for public and private sector dialogue (see Box 4 • Public-Private Partnerships for Competitiveness in the Caribbean).