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Opportunities for public-private partnerships

Heads of state and business leaders to unite for the development of Latin America and the Caribbean at a Business Summit, which will precede the Sixth Summit of the Americas

Executives of large companies operating in Latin America and the Caribbean will meet April 13–14 with heads of state and government to discuss prospects for economic development in the region. The CEO Summit of the Americas will be held in Cartagena, Colombia, in conjunction with the Sixth Summit of the Americas.

More than 10 presidents and prime ministers and 500 business leaders from 22 countries of the hemisphere will participate in the event, which is being organized by the Colombian government and private sector with technical support from the Inter-American Development Bank (IDB).

The IDB prepared five technical papers for the meeting that outline opportunities for the private sector to help the countries of Latin America and the Caribbean address development challenges.

A summary of the IDB documents and their principal points are as follows:

Social Development and the Private Sector

Two-thirds of the population of Latin America and the Caribbean subsist on a monthly income of less than $300. Governments in the region are facing financial constraints on their efforts to expand coverage and improve the quality of basic services. This represents an opportunity for the private sector to complement government efforts to improve public access to financial services, education, water and sanitation, electricity, health, and property rights.

  • Governments could share databases with the private sector on people who pay for basic services. The private sector could use credit histories and other information to offer financial services.
  • Public-private partnerships to provide health and education services could help to reduce the quality gap and increase coverage.
  • Governments could develop strategies with private firms for training young people to enter the workforce with better skills.
  • Private universities are entering low-income urban and rural areas, expanding coverage, and improving educational quality.

Human Capital for Economic Growth

Other challenges the region must address to strengthen economic growth are the availability of human capital and the solidity of national innovation systems. In 2007 there was only one researcher for every 1,000 people in the region’s workforce. Today there are 2.5 professionals with doctoral degrees per 100,000 inhabitants. But of these, only 1.6 have degrees in science or engineering. To help develop a new knowledge economy, the public and private sectors could do the following:

  • Reform the educational system to meet the demands of the labor market and work with the public sector to ensure that job training is more responsive to the needs of business.
  • Promote the direct participation of the business sector through internships, mentoring, and job training programs.
  • Encourage investment in research and development, and strengthen links between companies, universities, and national science institutes.

Globalization: Value Chain Development in the Americas

The region is a huge market with an enormous growth potential for value chains, which have not yet been developed. Only Mexican companies have been able to develop such value chains through integration with counterpart firms in the United States. Government officials need to ensure a homogeneous regulatory and institutional framework and incentives to reduce tariff barriers. In general, the region’s countries must improve infrastructure and transportation logistics, telecommunications, and information services. Public-private partnerships can help to increase regional productivity through the following:

  • Improve the efficiency of port and airport infrastructure
  • Modernize information and communication technologies
  • Promote the creation of regional production networks to generate more employment

Economic Growth and Natural Resources in Latin America

The region’s abundant natural resources must be managed through appropriate public policy. In some cases, the use of non-renewable natural resources (minerals and hydrocarbons) has resulted in sustained economic growth. Similarly, renewable natural resources (water, soil, forests, and fisheries) are of vital importance to the regional economy. Economic returns from non-renewable natural resources account for more than 15 percent of GDP in five countries (Bolivia, Chile, Ecuador, Trinidad and Tobago, and Venezuela), and between 5 percent and 10 percent in six countries (Argentina, Brazil, Colombia, Guyana, Mexico, and Peru). The management of income generated by these resources is affected by political interests, making it necessary to establish clear rules and define the role of the private sector. Opportunities for public-private partnerships include the following:

  • Increase investment in technology and capital
  • Create clear rules that respect the environment
  • Promote corporate social responsibility
  • Provide access to efficient financing and marketing

Intelligent Transport and Infrastructure

With economic growth in Latin America and the Caribbean, most cities face challenges in sustainability, increased congestion, pollution, and higher energy demand. About 80 percent of the region’s population lives in urban areas, and 198 cities with populations greater than 200,000 contribute more than 60 percent to the region’s GDP. The 10 largest cities account for half of the region’s economic output. Environmental conditions in many urban centers in the region are rapidly worsening. As a result, it is necessary to forge a shared agenda with the private sector as follows:

  • Provide specialized infrastructure for urban cargo transport
  • Promote technological advances in transportation and data analysis systems
  • Create more efficient and robust transportation services
  • Incorporate green policies in industrial regulatory frameworks
  • Streamline shipping processes
  • Collaborate in planning