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Box 1 • San José consensus

Early childhood development, prudent fiscal management and infrastructure rank at the top of cost-effective solutions to Latin America’s problems.

If Latin American and Caribbean governments had $10 billion to solve their most urgent problems, how should they spend it?

Nine renowned economists, along with graduate students from countries throughout the region, on October 25, 2007 released lists of 44 programs, ranked by priority, in response to this hypothetical question. The economists listed early childhood development programs, prudent fiscal rules and increased investment in physical infrastructure as the three policies that would offer the greatest development impact per dollar invested. By contrast, more than 30 graduate students gave top billing to nutrition programs for preschool children, conditional cash transfers for education and increased access to health care.

The proposals were the result of the San José Consensus, named after the Costa Rican capital where it was held. The unprecedented decision-making exercise was organized by the Research Department of the Inter-American Development Bank, the Copenhagen Consensus Center and Costa Rica’s INCAE business school. Based on a methodology originally applied at the Copenhagen Consensus of 2004, the San José Consensus consisted of three days of structured presentations and debates on 44 possible solutions to problems in 10 specific areas. Each participant assigned a priority to the solutions according to his or her assessment of their costs and benefits based on the data available in the literature.

The original 10 challenges were selected through a survey of Latin American and Caribbean professionals, including policymakers, academics, business representatives, journalists and researchers. The 10 problems highlighted in the survey were education, violence and crime, poverty and inequality, fiscal policy, democracy, infrastructure, forests and biodiversity, employment, public institutions and health. For each challenge, a top academic in the field wrote a “solution paper”

offering a number of potential solutions, with the costs and benefits of each one. In addition, an “alternative view” author presented his or her opinion on the solution paper, in some cases offering alternative solutions to the challenge.

The two final rankings of the solutions to these 10 challenges, which represent a median of the individual rankings by both the economists and the students, were released at a press conference that featured comments by IDB President Luis Alberto Moreno, Copenhagen Consensus Center Director Bjorn Lomborg, INCAE President Arturo Condo and Costa Rica’s Vice President Laura Chinchilla.

“We do not have enough resources to solve all our problems at the same time, so we have to prioritize solutions,” Moreno said. “This exercise— and the debate it generates—is an excellent opportunity to discuss how our societies can get more welfare for their money.” Moreno underscored that the rankings should not be seen either as a rigid prescription for policymakers or official recommendations of the IDB. “The region’s countries face very diverse problems, and no one formula can be applied universally,” he said. “That is why we think this sort of debate should be repeated at the national level throughout the region.”

Academic experts at the San José Consensus included Nobel Laureate in Economics Finn E. Kydland, Chilean Finance Minister Andrés Velasco, former United Nations Under-Secretary-General José Antonio Ocampo, Harvard University professor Ricardo Hausmann, former director of the United Nations Development Programme’s Poverty Group Nora Lustig and Nancy Birdsall, president of the Center for Global Development in Washington, D.C.

The author of the solution paper on poverty and inequality, Sebastian Galiani, said he chose early childhood development as a top solution because, “These projects are designed to improve the physical, intellectual and social development of children early in their life, generally from birth to age six. There is a wide range of interventions that belong to this category. We now know that the most effective of these interventions are targeted toward younger and disadvantaged children and are of longer duration, higher quality and higher intensity. Also, they are integrated with family support, health, nutrition, or educational systems and services. One intervention we studied in much detail was preschool education. It turned out to be particularly cost-effective.”

Miguel Braun, the author of the fiscal solution paper, commented that “education and health in general, and early childhood development in particular are key to ensure social justice, equality of opportunity and poverty reduction. I am glad this issue was selected by the expert panel, accompanied by the need to implement credible and enforceable fiscal rules that can contribute to prudent fiscal management, a cornerstone of any serious social policy.”