The European Commission for Latin America and the Caribbean (ECLAC) says Latin America and the Caribbean must embrace a new vision of productive development policies (PDPs) to escape the trap of low capacity for growth in which it is mired and to be able to tackle the challenges imposed by the new global geopolitical context.
In a new report titled ‘Panorama of Productive Policies in Latin America and the Caribbean 2025: How to escape the trap of low capacity for growth’, was presented by ECLAC’s Executive Secretary, José Manuel Salazar-Xirinachs.
He told a news conference that the trap of low capacity for growth can be attributed largely to a slow productive transformation and more than a decade of corresponding stagnation, and even decline, in the region’s labour productivity rate, which has fallen below average global productivity since 2017.
ECLAC warns that although the document indicates a 2.2 per cent rise in the region’s labour productivity between 2023 and 2024, that increase is not enough to surmount the overall lag.
The study points to great diversity regarding productivity levels and growth between countries, territories, companies of different sizes and sectors in the region, with the lowest-productivity sectors accounting for the largest share of employment in Latin America and the Caribbean.
The lowest productivity rate is seen in the agriculture, livestock and forestry sector, representing just 44 per cent of the region’s average productivity, according to data from 2023. It is followed, among the sectors with the lowest productivity, by commerce, with 69 per cent, and construction, with 77 per cent.
Meanwhile, microenterprises account for a mere 12.5 per cent of the productivity of the region’s large companies, which is a much bigger gap than what is seen in more developed economies.
‘The quandary facing Latin America and the Caribbean is substantial: either we begin a new era of high, sustained, inclusive and sustainable growth, or we head for a third lost decade,’ said Salazar-Xirinachs.
He said to avoid the latter scenario, countries must scale up and improve their productive development policies based on a new vision that includes, among other things, working on strategic agendas around driving sectors, multilevel and multi-stakeholder.
‘Let’s raise the political profile of these policies and delve deeper into the ‘hows,’ meaning how to carry out these transformations in practice,’ Salazar-Xirinachs said, recalling that the Panorama’s 2025 edition being presented today joins other documents and projects by ECLAC that aim to provide practical guidance on how countries and their territories can use PDPs to accelerate their productive transformation.
The report analyses various productive development policy efforts being carried out in the region in light of the recommendations that ECLAC has been formulating, which include sector prioritization, resource allocation, leadership at the highest level, collective construction, the territorialization of policies, the utilization of cluster initiatives, and monitoring and evaluation.
ECLAC said that although progress has been made, there are significant opportunities for improvement in the way the region has been developing PDPs, the Commission affirms.
According to the report, the ability to scale up and improve productive development policies depends, in part, on the way in which countries and their territories align their science, technology and innovation (STI) efforts with their economies’ productive transformation.
ECLAC sats the region is clearly lagging on STI investment, with investment levels in research and development of around 0.56 per cent of gross domestic product (GDP), far below the countries belonging to the Organisation for Economic Co-operation and Development (OECD) (three per cent), the United States (3.6 per cent) and China (2.6 per cent).
ECLAC said however, the impact of STI policies depends not only on greater resources, but also on the design, operation and coherence of the strategies, institutions and instruments involved.
For that reason, ECLAC recommends strengthening multi-stakeholder coordination and governance, bolstering the technical, operational, political and prospective (TOPP) capabilities of the entities in charge of STI policies; diversifying and scaling up tools; increasing the financing of STI while also enhancing its direction and quality; and harnessing opportunities for regional and extra-regional cooperation in this area.
In addition, the Commission stresses that cluster initiatives and other productive articulation initiatives are a powerful tool for the multi-stakeholder and multilevel articulation that new-generation productive development policies require, which means they should play a leading role.
To date, ECLAC has identified 712 active cluster and productive articulation initiatives in 20 of the region’s countries. The most highly represented sectors in these initiatives are agriculture, manufacturing industries, tourism, and information and communications technology.
It said of this total, 58 per cent receive financing from national governments, 51% from subnational governments and 39 per cent from the private sector.
ECLAC said productive articulation initiatives do not occur spontaneously but rather require deliberate policies, which is why the report offers multiple recommendations grouped into 11 guidelines, such as utilizing these initiatives to work on strategic agendas around prioritised sectors under national and subnational PDPs; increasing the resources invested and ensuring the continuity of productive articulation initiatives.
The report also analyses the opportunities for the region’s productive transformation arising from climate change and the energy transition.
According to ECLAC’s calculations, between US$2.1 and US$2.8 trillion dollars in investments are needed in the region, cumulatively by 2030, in order to fulfill climate commitments while simultaneously driving economic growth.