SANTIAGO, Chile - Business development faces formidable hurdles in Latin America due to the scarcity of financing and severe deficiencies in its infrastructure, specialists said today at a seminar organized by the Inter-American Development Bank.
These obstacles, among others, help explain the region’s low levels of productivity and the small size of its firms, compared with their competitors in other regions of the world.
"In the race to development, if that is the goal of competitiveness, we are clearly falling behind," said the IDB’s acting chief economist, Eduardo Lora, in a presentation during the seminar Towards Competitiveness: The Institutional Path.
The forum held at the headquarters of the UN’s Economic Commission on Latin America and the Caribbean (ECLAC) was the first in a series of 16 seminars ahead of the annual meeting of the Boards of Governors of the IDB and the Inter-American Investment Corporation.
During the two-day seminar, economists from the IDB, ECLAC, the World Bank and other international institutions were joined by government officials and private sector leaders in a discussion of the issues that hamper Latin American nations’ ability to compete in world markets.
The first session, held on Thursday, was devoted to the analysis of mesoeconomic and microeconomic aspects of competitiveness, based on studies conducted by ECLAC on productivity trends in Latin America and the opportunities to use technological innovations, information and scientific knowledge to raise productivity.
The second session focused on institutional problems, seen from a macroeconomic standpoint. Participants analyzed reports produced by the IDB’s Research Department and other international institutions on the factors that prevent the region from mobilizing its resources more efficiently.
Panelists discussed the lack of financing, the regulatory problems in key sectors such as energy and telecommunications, policies that might foster the development of new technologies and the pressing need to make the regions’ ports more efficient.
In his presentation, Lora laid out the results of the "Business Environment Surveys", a series of opinion polls conducted among thousands of firms in 73 countries around the world. The sample included companies based in 20 Latin American and Caribbean countries.
In the surveys, one in three Latin American entrepreneurs cited the scarcity of financing as the mayor roadblock. Their second most frequent complaint was the complexity of regulations and taxes. In third place came the instability of policies, topping other concerns about crime, corruption and unpredictable judicial systems.
The data from these surveys was buttressed by the results of an analysis of the financial statements of large companies in 52 countries, among them those of 13 Latin American nations. This report showed that the region’s leading firms are tiny when compared to companies in other regions of the world. Latin America placed last in terms of average total assets of the 25 largest companies in each country.
Latin American firms also are small when measured by the number of jobs they generate as a proportion of their assets and the population of working age in their countries, even though the region has a relative abundance of labor.
However, Latin American companies are not small in terms of capital and reserves for the size of their national economies. This suggests that firms in this region are underleveraged.
Lora added that integration to international markets is not enough to raise productivity and accelerate growth. To reach those goals, Latin America will have to defend macroeconomic stability, mobilize its resources more efficiently and implement policies that can help stoke output.