World Economic Forum on Latin America 2007

World Economic Forum on Latin AmericaThe Power of a Positive Regional AgendaSantiago de Chile, 25-26 April 2007

Report

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Page 2

Preface

Page 3

Summary: The Power of a Positive Regional Agenda

Page 6

World Trends and Issues

Page 10

Changing Perspectives and Priorities in Latin America

Page 14

Understanding the Mindset of Latin American Policy-makers and

Business Leaders

Page 18

Achieving Equitable Income Distribution in Latin America

Page 22

China and Latin America

Page 26

Acknowledgements

Contents

2 | World Economic Forum on Latin America

Preface

Latin America’s current historically high levels of electoral democracy and political stability, coupled with its recenteconomic success, is changing mindsets in addition to inter- and intraregional trade and investment flows. This year’stheme, The Power of a Positive Regional Agenda, highlighted the need to acknowledge and consolidate recent regionalsuccesses, as well as to re-evaluate strategic priorities and working assumptions as the region enters an era ofnewfound opportunities and emerging risks.

The World Economic Forum’s regional activities are designed to look at the past in order to deepen our understandingof history, but also to look forward and establish priorities for the future. Viewing the past, our members agreed on theirrelative satisfaction with the improved regional macroeconomic stability, democratic progress and poverty reductionindicators, although not with levels of inequality. As regards the future, an agenda or common denominator as a priorityfor the medium term was achieved by building up a Santiago Consensus. This Consensus should help shape a clearand positive regional agenda in order to boost economic growth with more equitable income distribution.

The region is growing faster than in the past, but not as fast as other emerging markets, and clearly not fast enough totackle its dramatic socio-economic imbalances. Most countries have benefited from positive international trends, suchas lower interest rates, a very benign liquidity environment and historically-high commodity prices. Higher productivityrates and therefore more economic growth will mainly derive from innovation and investments in human capital in thenext few decades. Therefore, the current positive trend will only be sustainable socio-politically if the Latin Americanleadership is able to craft effective strategies to create more quality jobs, manage social tensions and establish clearlong-term plans with national consensus across the political spectrum.

No single institution can be expected to both anticipate and address the region’s evolving agenda. Therefore, theprogramme of the World Economic Forum on Latin America was designed to generate insight and guide action in orderto improve the alignment of the region’s industrial, political, social and economic agendas. Moreover, the programmewas organized under five thematic pillars to help participants make the most of the opportunity to shape the regionalagenda. At the core were sessions aimed at understanding the impact of world trends on the region, the economicinfluence of China on Latin America and ensuing opportunities, and boosting infrastructure and energy investments inpriority areas. Other sessions focused on climate change and its opportunities for Latin American countries, andworkshops engaged in understanding the shifts in power within the region and the changing perspectives of the newlyelected leaders. Discussions aimed to improve the investment climate, the productivity and thus the competitiveness ofthe region’s economies through the sharing of lessons learned.

Recent data on investment flows and regional investment plans shared by Forum member companies in Santiago pointto increased regional integration led by the business sector. This positive trend will slow, however, if the various regionalstakeholders do not act rapidly to increase physical integration through infrastructure investments and if they do notwork wisely on a pragmatic political integration plan that can help the region act in a coordinated manner and influencethe global agenda, thus enhancing the prospect of improving the quality of life of the region’s population.

Emilio LozoyaAssociate Director,Global Leadership Fellow,Head of Latin America


Summary: The Power of a PositiveRegional Agenda

More than 400 business, government and civil societyleaders gathered in Santiago for the World EconomicForum on Latin America. The recent economic growththat the region has experienced – over 5% on averagein the past three years – and its increasing politicalmaturity have offered Latin American countries theopportunity to pursue real reform at a time when therisks they face appear manageable. A major challengeis to prepare the continent’s economies to withstandthe shocks that have previously been their undoing.This will require creating the conditions to encouragenew investment and participation by the private sectorand inspire policies aimed at achieving equitableincome distribution. In particular, increased investmentin infrastructure, human capital and R&D, as well asaccelerated institutional reforms, are needed.

“Globalization is creating winners and losers,” saidJean-Pierre Rosso, Chairman, Centre for GlobalIndustries at the World Economic Forum, referring tothe emergence of dynamic global growth companies.But that assessment equally applies to countries andregions. The question is whether Latin America isprepared to take the steps to ensure that itseconomies and its enterprises are ready to compete inthe global economy – and win.

Continuing on from work done at last year’s gatheringin São Paulo, participants aimed to demonstrate “thepower of a positive regional agenda”, the theme of themeeting in Chile. By the end, they had shaped theSantiago Consensus, a list of priorities for change inLatin America. They include a focus on education,

environmental responsibility, investment in innovation,the creation of efficient tax systems and publicspending procedures, and infrastructure development.This winning strategy, concluded Richard Samans,Managing Director, Centre for Public-PrivatePartnerships at the World Economic Forum,represents “a more deliberate and multifaceted effortto achieve higher growth and equity”.

“The current benign international economic trend,coupled with the improved regional macroeconomicsituation, offer a very important occasion to carry outthe second-generation reforms that were agreed uponas priorities in the Santiago Consensus. It is clearlyeasier to carry out these public policies with thesupport of the private sector and civil society whenthe accounts are balanced or even in surplus,” saidEmilio Lozoya, Head of Latin America at the WorldEconomic Forum. The opportunity offered by themomentum for a positive agenda of action must beseized.

The Santiago meeting was organized around five sub-themes: “World Trends and Issues”, “ChangingPerspectives and Priorities in Latin America”,“Understanding the Mindset of Latin American Policy-makers and Business Leaders”, “Achieving EquitableIncome Distribution in Latin America”, and “China andLatin America”.



Latin America is experiencing an unprecedentedperiod of strong economic growth relative to the past20 years and stable political development. Economicgrowth has been bolstered by the region’s growingtrade relationship with Asia, particularly China, whilepolitical institutions have been strengthened by aseries of democratic elections across the continent.• There remain real risks to Latin America’s prosperityand stability, including the potential for a hardlanding in China or an economic slump in the US.As it gets more deeply integrated into the globaleconomy, Latin America may also become morevulnerable to shocks from outside the region.

• High petroleum prices and volatility in the marketpresent tough challenges to oil-consuming countriesand substantial windfalls for energy producers.

• Such environmental risks as climate change couldbe turned into an opportunity rather than remain athreat to Latin America.

• While the private sector must take a greater role inthe economy, the government must take efforts topursue policy reforms that will ensure that LatinAmerican economies can weather the shocks thathave previously been their undoing.

Changing Perspectives and Priorities inLatin America

The emergence of the Santiago Consensus indicateshow perspectives and priorities are changing in LatinAmerica. The new priorities for the region areeducation, innovation and institutional reform.• The only viable path for the region is towardsprosperity with equity. The focus must be on greaterinvestment and stronger growth as well as onreducing poverty.

• The environment must be a priority for sustainablegrowth as well as a business opportunity for theregion.

• Tax reform and sound public spending are crucial tostimulating growth and productivity in the region.

• Private investment is fundamental to addressingdeficiencies in infrastructure in the continent.

• Governments must aim to break their economiesout from the boom-bust commodity price cyclesthat have marked Latin America’s pastdevelopment.

Understanding the Mindset of LatinAmerican Policy-makers and BusinessLeaders

The populism of Latin America’s past is giving way toa more clear-headed leadership style marked bypragmatism and innovation. The changing mindset inthe region is reflected in shifting views on theenvironment and corruption.• In contrast to the infallible strongmen of the past,Latin American leaders are more willing to admitproblems and mistakes and to take a realisticapproach to solving them.

From left to right: Martín P. Redrado, President of the Central Bank of Argentina; Andrés Velasco, Minister ofFinance of Chile; Pamela Cox, Vice-President, Latin America and the Caribbean, World Bank, Washington DC;José C. Grubisich, Chief Executive Officer, Braskem, Brazil, and Co-Chair of the World Economic Forum on LatinAmerica; John Lipsky, First Deputy Managing Director, International Monetary Fund (IMF), Washington DC


• In the area of infrastructure development, Chile hasdemonstrated that a pragmatic strategy can yieldresults.

• Forward-looking Latin American business leadersare driving positive changes in environmental policy.

• The old image of Latin America as a corrupt societyis being refuted by an increasing number of successstories that provide anecdotal evidence that thesituation is improving.

Achieving Equitable Income Distribution inLatin America

The top priority of the Santiago Consensus, educationemerged as the chief means to achieve equitableincome distribution in Latin America.• Deficiencies and disparities in education are the rootof social inequality and, as a consequence, ofpolitical risk.

• High-quality education is a necessary preconditionfor innovation.

• Throwing money at the problem is not a sufficientsolution. Instead, investment in education isnecessary to improve the quality of schools.Business should be encouraged to play a role ineducational reform and development.

• To improve the quality of education requires, bettercurricula, effective benchmarking and assessment,the creation of stimulating environments for learning,the professionalism of teachers, and strongparticipation of parents and the wider community toensure that schools are properly funded andstudents are inspired to learn.


The deepening of trade and investment ties betweenChina and Latin America has turned the two sidesfrom distant friends to strategic partners with a rangeof common interests.• For a real partnership to evolve, China and LatinAmerica will have to develop a more texturedrelationship based on more than commodities andraw materials trading.

• Latin American business must find ways to exploitthe opportunities offered by China’s economic rise.Economies in the region must also takes steps toboost their comparative advantages to allow themto compete in a global economy in which China andIndia have become key players.

• China’s emergence should inspire Latin Americaneconomies and companies to pursue criticalreforms that will strengthen their ability to withstandthe pressures of globalization.

From left to right: Alejandro Jara, Deputy Director-General, World Trade Organization (WTO), Geneva;Andronico Luksic Craig, Vice-Chairman, Banco de Chile, and Co-Chair of the World Economic Forum onLatin America; Alberto Padilla, Senior Business Anchor, CNN en Español, USA; Zhang Shoulian,President, China Minmetals Non-ferrous Metals, People's Republic of China, and Co-Chair of the WorldEconomic Forum on Latin America; and Luiz Fernando Furlan, Minister of Development, Industry andForeign Trade of Brazil (2003-2007)


As the global economy has continued its bestperformance in a generation, Latin America has beendoing its part. The region is expected to grow by upto 5% in 2007-8, the sixth year of expansion. In thepast four years, GDP per capita has increased by16%. The continent’s GDP is nearly the same asChina’s, although its 550 million population is half thatof the Asian giant’s. Its steady growth has seen itsshare of global GDP growth increase nine percentsince 2002 (see Figure 1). Goldilocks is alive and wellin Latin America.

Figure 1: Latin America's Steady Role in Driving Global Growth

Source: IMF; PricewaterhouseCoopers analysis

10%

8

6

4

2

0

-2

20012000 2002 2003 200620052004 2007F 2008F

Latin

Am

eric

a&

Car

ibb

ean

shar

eof

glob

alG

DP

grow

th

On the political front, Latin American institutions lookstronger than they did just five years ago. Despiteheadlines trumpeting a new left-wing nationalist wave,in more than a dozen elections in the region over thepast year, populist candidates did not sweep intooffice as had been predicted. While the two maincandidates disputed the results of presidential polls inMexico and corruption scandals shook the campaignin Brazil, both countries – the two biggest economiesof the region – emerged with their commitment todemocracy strengthened.

This favourable environment inspired manyparticipants at the World Economic Forum on LatinAmerica to hail the region’s progress. “We can look atLatin America with a positive perspective,” declaredJosé Miguel Insulza, Secretary-General of theOrganization of American States (OAS) in Washington,DC. “Democracy is working in most territories and theeconomy is growing. In comparison with other regionsand the past, the region is growing more than it has inthe past 30 years.”


I remain optimistic about what this region

can accomplish and I believe that we have

the people, resources and institutions

existing now to address the big problems it

faces but it is a question of working together.

So an agenda focusing on dialogue and

cooperation is going to be essential.

Thomas A. Shannon Jr, Assistant Secretary, Bureau ofWestern Hemisphere Affairs, US Department of State,Washington DC

““

Economies of the region have been improving

and expanding, pulling many people out of

poverty.

Alejandro Jara, Deputy Director-General, World TradeOrganization (WTO), Geneva

“ “

Yet there were certainly voices in Santiago thatwarned of the risks that could spoil the “just-right”outlook. The closer economic ties between LatinAmerica and Asia, particularly China, that have beenforged in recent years mean that a hard landing of thered-hot Chinese economy could have a majornegative impact on the region. A slump in the UScould have a similar effect. Because its economieshave become better integrated with the internationaleconomy, the region has benefited from the spread ofglobal growth but is also more vulnerable. LatinAmerica's commodities-driven growth wave couldslow down abruptly. “The business cycle is not dead,”cautioned Felipe Larraín Bascuñán, Professor ofEconomics, Catholic University of Chile. Expansionsdo not last forever.

The energy sector in particular presents both rewardsand risks. The growth in demand from China and Indiahas in part driven oil prices up, resulting in highercosts for many economies – notably net energyimporters (see Figure 2) – but substantial windfalls topetroleum producers such as Venezuela. The rising

Figure 2: Latin American Energy Imports

Source: IEA

Energy supplies are not evenly dispersed across the region

Argentina

Net energy exporter (>10 Mtoe)Net energy exporter (<10 Mtoe)

Net energy importer (>10 Mtoe)Net energy importer (<10 Mtoe)

Net imports, 2004(million tonnes of oil equivalent)

Mexico

Colombia

Chile

Brazil

There is a broad consensus amongst leaders

of government and the private sector about

the path to grow the economy while

providing greater openness for everyone to

participate in that prosperity.

Andronico Luksic Craig, Vice-Chairman, Banco de Chile;Co-Chair of the World Economic Forum on Latin America

“ “

It is not sufficient to bring growth back to our

economies. We should focus on how to bring

about a stable macroeconomic position and

combine growth and investment to reduce

poverty.

José C. Grubisich, Chief Executive Officer, Braskem, Brazil;Co-Chair of the World Economic Forum on Latin America

“ “



demand for biofuels has been a benefit to thosecountries such as Brazil that have moved ahead in thedevelopment of alternatives to oil (see Figure 3).

But as in fast-growing China, perhaps the biggest riskto Latin American stability and prosperity remains thetensions and stresses that result from the inequalitiesin the region. While inequality in the region hasdecreased slightly over the past 17 years (see Figure4), Goldilocks has to share more of the rich porridge.“There is broad consensus among leaders ofgovernment and the private sector about the path togrow the economy while providing greater openness

Figure 3: Renewable Energy in Latin America

Source: Maplecroft

Brazil ranked 12 among 123 nations around the world in terms of renewable energy use

Mexico

Brazil

Colombia

Chile

Argentina

Renewable Energy Index (REI)

2.5–5.00–2.5

7.5–10

No data

5.0–7.5

Note: Higher scores indicate higher relative levels of renewable energy consumption in 2001.

for everyone to participate in that prosperity,” saidmeeting Co-Chair Andronico Luksic Craig, Vice-Chairman, Banco de Chile. The Santiago consensusspelled out that essential recipe for sustainability andconfronting the challenges of globalization: investmentin education, innovation and infrastructure matchedwith a strong commitment to reform burdensome taxsystems and redress environmental misdeeds. “It isnot sufficient to bring growth back to our economies,”said José C. Grubisich, Chief Executive Officer,Braskem, Brazil, and Co-Chair of the World EconomicForum on Latin America. “We should focus on how tobring about a stable macroeconomic position andcombine growth and investment to reduce poverty.”

The private sector will inevitably have to play a majorrole in pushing forward the Santiago Consensus. Butfor the private sector to come to the fore will requirethe public sector to create the right environment andconditions to allow it. The key is governance. “Theissue for Latin America is not the diagnosis but ratherit is a problem of action and management,” LuizFernando Furlan, Brazil’s former Minister ofDevelopment, Industry and Foreign Trade, toldparticipants. A priority for policy-makers is to addressthe volatility that has typified the economicdevelopment of the region, as well as its politics. Themain objective of reforms, said Martín P. Redrado,President of the Central Bank of Argentina, must be to

Every country needs to find its own way, but

we also need to take a look around the world

at what works in countries that are successful.

More interregional collaboration and

networking would help that.

Beatriz Nofal, Secretary of State; President, AgenciaNacional de Desarrollo de Inversiones (ProsperAr), Argentina

“ “


ensure that Latin America can weather shocks to itsfinancial system and achieve fiscal order andmacroeconomic stability. “This is one of the biggestchallenges – how to create permanent public policiesthat will make all cycles transitory and how to mitigatethe volatility that we have suffered in past years.”

Latin America’s great fortune is that it is experiencing asustained period of economic growth. “These goodeconomic results are a starting point for reducingvolatility in order to make the region more attractive forinvestors,” concluded Argentinean State SecretaryBeatriz Nofal, President, Agencia Nacional deDesarrollo de Inversiones (ProsperAr). The question iswhether the region can move quickly on the prioritiesoutlined in the Santiago Consensus and masterglobalization rather than succumb to its pressures.

Figure 4: Inequality Across the Region Is Down Slightly Since 1990

Source: Economic Commission for Latin America and the Caribbean, World Bank

faster than averageGDP growth

slower than averageGDP growth

0.65

0.60

0.55

0.50

0.45

0.40

Gin

icoe

ffic

ient

,200

3/20

05

Gini coefficient, 1990

0.40 0.45 0.50 0.55 0.60 0.65

Countries in which inequality increased

Countries in which inequality decreased

Latin America (weighted ave.)

Colombia

Brazil

Honduras

Chile

Mexico

ParaguayVenezuela

Ecuador

Argentina

Costa Rica

Uruguay

PanamaEl Salvador

World Economic Forum joins forces withInter-American Investment Corporation tofight corruption in Latin America

Combating corruption on the continent came under thespotlight at the World Economic Forum on LatinAmerica. In a bid to bolster the fight, the WorldEconomic Forum’s Partnering Against CorruptionInitiative (PACI) and the Inter-American InvestmentCorporation (IIC) signed a Memorandum ofUnderstanding aimed at countering corruption andbribery. The agreement will encourage corporations totake a “zero-tolerance” stand on corruption and toimplement effective anti-corruption programmes in theregion. The joint activities will concentrate on LatinAmerica and the Caribbean.

IIC Board Chairman, Luis Alberto Moreno, President ofthe Inter-American Development Bank, signed theMemorandum of Understanding with World EconomicForum Managing Director, Richard Samans, a Boardmember of the PACI, on the first day of the WorldEconomic Forum on Latin America.

The agreement will lead to the development of a PACIframework and tools tailored for supply chain entities ofmultinational corporations and particularly for small andmedium-sized enterprises. The two parties also intend toraise awareness on the issue in the region and engagemany more companies in the active fight againstcorruption. In addition, the IIC is in the process ofrevising its internal policies on anti-fraud and corruption,and intends to do so in order to be consistent with thePrinciples for Countering Bribery developed by PACI.

www.weforum.org/paci


Changing Perspectives and Priorities inLatin America

It would make a great campaign platform forsome ambitious politician: better schools,cleaner air and water, equitable taxes, morepublic works and advances in science andtechnology.

These themes form the core of the SantiagoConsensus, the result of a survey designed forparticipants during the 2007 edition of the WorldEconomic Forum on Latin America.Coincidentally or not, the list of priorities in largepart reflects the region’s most glaringweaknesses according to The GlobalCompetitiveness Report 2006-2007. LatinAmerica ranks near the bottom in such keyareas as the quality of institutions andinvestment in research and development. “Thereare many challenges in the region in order toimprove our competitiveness in the world, butthe priorities for the region must be innovation,education and institutions,” said Felipe LarraínBascuñán of Catholic University of Chile. “Thereport shows significant deficiencies; what weneed to do is find solutions in these three keyareas.”

The Washington Consensus emerged in the1990s as a free market recipe for stability andgrowth for countries ridden by debt,hyperinflation and worse. The formula includedprivatization, trade liberalization and fiscaldiscipline. Most countries of Latin Americaadopted at least part of the programme, andmost improved their macroeconomic numberssignificantly as a result.

However, the Washington Consensus was notdesigned to address the region’s other graveproblems – such as poverty, inequality andquality of life for the majority of citizens. “Chilehas achieved high growth rates but incomedistribution remains a large problem,” saidRicardo Lagos Escobar, President, FundaciónDemocracia y Desarrollo, Chile.

The Santiago Consensus aims to take up wherethe Washington Consensus left off. The toppriority, education, is addressed in a separatesection of this report (see pages 18-20). Thisessay will outline the thinking that emerged fromthe meeting on the other key issues.

Chile has achieved high growth rates but

income distribution remains a large problem.

Ricardo Lagos Escobar, President, FundaciónDemocracia y Desarrollo, Chile; President of Chile(2000-2006)

“ “

There are many challenges in the region in

order to improve our competitiveness in the

world, but the priorities for the region must

be innovation, education and institutions.

Felipe Larraín Bascuñán, Professor of Economics,Catholic University of Chile

“ “

In a session that focused on the SantiagoConsensus, Pamela Cox, Vice-President, LatinAmerica and the Caribbean, World Bank,Washington DC, expressed surprise at thechoice of the environment as the number twopriority. “Not that it isn’t important, but youwouldn’t expect to see that in a meeting ofmostly business people,” she said.

But in parallel discussions in a session entitled“Business Strategies in Climate Change”, JulioMoura, Chief Executive Officer and Chairman ofthe Board, GrupoNueva, Chile, and Vice-President, World Business Council forSustainable Development (WBCSD), Switzerland,noted that, “We can transform this into abusiness opportunity.” Outlining some of thesteps his own company is taking, such as joiningthe Chicago Climate Exchange and investing inbiomass energy, he concluded, “Climate changeis good business.” Early evidence includesBrazil’s global leadership on biofuels and the useof the carbon credit mechanism by manycompanies. Added Olav Skalmeraas, President,Norsk Hydro Brasil, Brazil, whose company has

invested heavily in alternative energy, “I think thatLatin America has a great opportunity in thisarea.” It’s an investment that is already paying offwith the region’s share of global carbonemissions already falling (see Figure 1).

Figure 1: Latin America's Carbon Emissions

Source: Energy Information Administration

4.3%

4.2

4.1

4.0

3.9

3.8

3.7

3.6

2000 200420032001 2002

Regional share of world emissions falling

Sou

than

dC

entr

alA

mer

ica

shar

eof

wor

ldca

rbon

dio

xid

eem

issi

ons

Climate change is good business. We can

transform this into a business opportunity.

Julio Moura, Chief Executive Officer and Chairman of theBoard, GrupoNueva, Chile; Vice-President, World BusinessCouncil for Sustainable Development (WBCSD), Switzerland

“ “

With globalization, companies must modernize

in order to compete, and this includes improving

performance on the environmental front.

Laggards will be penalized by insurance

companies, banks and investors that perceive

them as risky. This will require hefty

investments, but if companies don’t invest they

will lose competitiveness, be faced with higher

costs of financing and suffer damage to their

reputations.

Karen Poniachik, Minister of Mining of Chile

““



Taxes are a more obvious choice. Businesspeople love to gripe about them. But in LatinAmerica, they really do have a point. Theinformal economy, defined as activity that doesnot generate tax revenues, accounts for nearlyhalf of GDP in the region. Not only does this putthose who play by the rules at a competitivedisadvantage, but informality also generatesgreater income inequality, reduced workertraining and lower R&D investments.

As half of economic actors escape scot-free,many of the region’s governments lean extrahard on those who do file returns. This problemis particularly acute in Brazil, where the tax loadreaches Scandinavian levels of nearly 40% ofGDP – without corresponding benefits in publicservices. Luiz Fernando Furlan, Minister ofDevelopment, Industry and Foreign Trade ofBrazil (2003-2007), remarked that taxes are amajor impediment to growth and productivity.“We have a tax burden which belongs in the firstworld,” he said.

Infrastructure development also ranked high onthe list of priorities in the Santiago Consensus.There seemed to be agreement amongparticipants that private investment isfundamental to growth in this area. “Whenresources are scarce, the public sector shouldinvest only where the private sector is unable orunwilling,” said L. Enrique García, President andChief Executive Officer, Corporación Andina de

Fomento (CAF), Venezuela. Many participantscalled upon elected leaders to create a long-term vision for infrastructure development thatwould include a clear definition of the roles of thepublic and private sectors. “Companies havestepped up to the extent that governments haveallowed them to,” stated Vitor Hallack,Chairman, Camargo Correa, Brazil. “If there werea long-term vision, there would be greaterpossibilities.”

In the latest Global Competitiveness Report, onlyBrazil and Chile scored respectable grades forefforts to spark innovation. Just 2.5% of R&Dspending worldwide takes place in SouthAmerica. Andrés Velasco, Minister of Finance ofChile, argued that Latin America must break outfrom the boom-bust commodity price cycle byfinding new sources of growth, productivity andstability. “The challenge for us is to growregardless of the cycles” and the key isinnovation, he said. Noted Horst Paulmann,Chairman, Cencosud, Chile, “The success of ourcompanies is due to innovation. Education andtraining are therefore important.”

Some high profile figures notwithstanding, noneof the above will come as much of a surprise toLatin American leaders or students of the region.“The issue for Latin America is not the diagnosisbut rather one of action and management,” saidFurlan. “We know what to do and need to getdown to it before we lose momentum.”

Panellists of the update session on China's development andchallenges

Vitor Hallack, Chairman, Camargo Correa, Brazil, and L. EnriqueGarcía, President and Chief Executive Officer, Corporación Andinade Fomento (CAF), Venezuela

World Economic Forum on Latin America reachesthe “Santiago Consensus”

Participants at the World Economic Forum on Latin Americaagreed on five top priorities for the region – an actionprogramme for achieving and sustaining higher productivityand growth with equity. They include education, theenvironment, R&D investment, efficient taxes andinfrastructure.

The so-called Washington Consensus – the set of policyprescriptions promoted in the 1990s to support therestructuring of crisis-hit economies – proved to be a set ofnecessary albeit insufficient conditions to achieve sound andequitable growth. However, with the region’s countriesgrowing by over 5% on average in the past three years andthe incidence of poverty falling below 40%, a new set ofcommon priorities is needed to guide the relevantstakeholders. The Santiago Consensus is thus aimed attaking Latin America to that next level.

“The familiar agenda of structural reforms to boostproductivity is still essential,” John Lipsky, First DeputyManaging Director, International Monetary Fund (IMF),Washington DC, told meeting participants. He added that itis also important to achieve a measure of macroeconomicstability and to open up markets to trade. Chile is the bestexample of a country that has combined all three factors toachieve the highest per capita income growth in the region inthe past 25 years.

Infrastructure is the key priority, said meeting co-chair JoséGrubisich, Chief Executive Officer, Braskem, Brazil. If LatinAmerica is to secure its place in the global supply chain, itmust invest in upgrading its infrastructure. “If we want to besuccessful, we need to make it easier to move capital andproducts to and from the region and inside the region,” hestressed.

More generally, the priority has to be to boost investment.“The question is how we may be able to invest more,” saidAndrés Velasco, Minister of Finance of Chile. “We have tohave good sound projects. And we can agree that a majorpriority is to reduce the costs of investment.” This meansreforming capital markets, ensuring that the banking systemis sound, bringing interest rates down, and promotinginnovation and venture capital. All of this will then drive newgrowth. “If we accept the idea that growing means toinnovate, then to innovate means to be daring and to dosomething different,” Velasco said.

www.weforum.org/latinamerica


40%60%

56%

90%46%

6%56%

25%

12%29%

15%38%

8%17%

19%60%

17%

54%25%

21%33%

46%

63%19%

37%

65%

Balanced budgets and counter-cyclical policy

Efficient tax collection and transparency in spending

Strengthening of Institutions

More investment in education with a focus on quality

Targeted poverty reduction and minimal social safety nets

Access to housing through schemes that support demand

Coordinated and focus efforts to fight against crime and corruption

Investment in and Profesionalization of the Civil Service

Greater Regional cooperation on energyIncrease Private and Public Investment in InfrastructureRegional infrastructure promotion and dispute resolution

Strengthen banking regulation and adherence to international financial

Promote greater central bank independence

Greater liberalization of cross-border capital transactions

Expand for SMEs access to Financial Services

Improve creditor rights and credit bureaus

Risk mitigation instruments to help SMEs access long-term finance

1. Macroeconomic management, fiscal discipline and counter-cyclical responses

2. The role of the state and the private sector

4. Infrastructure and Energy

Labour and Capital Productivity enhancing reformsStricter enforcement of Corporate Governance Laws

Reducing informality and promoting decent workIncrease the Supply of skilled labour

A balanced improvement in Flexibility of Labour market

Governments and Business Increase R&D investmentsMore stringent protection of intellectual property

Environmental sustainability policies

Greater encouragement and promotion of Free Trade

5. Competitiveness

6. The Labour Market

7. Innovation

8. International Trade

9. Environmental Sustainability

3. Financial System

Percentage of Participants that selected the topic as one of their top 10 priorities

The Santiago Consensus


Understanding the Mindset of Latin AmericanPolicy-makers and Business Leaders

The modern political history of Latin America couldeasily be written as one of regional populism.Sometimes elected, sometimes rising to power byforce, strongmen like Getúlio Vargas, Fidel Castro,Augusto Pinochet and Omar Torrijos managed topersonalize power and policy-making. Some, like JuanPeron, created legacies of personal “ismos” – as inthe term “peronismo,” which describes a movementthat survives more than three decades after theArgentinean politician’s death.

Populism is of course far from dead, but in recentyears a more clear-headed leadership style has begunto emerge and even prosper. Rather than fall back ondogma, the new brand of leader understands that theworld is not a simple place and thus eschewssimplistic formulae. He or she favours pragmatic yetinnovative solutions to those persnickety oldproblems. Perhaps best exemplified by the bold urbanreformers Enrique Peñalosa, former mayor of Bogotá,and Jaime Lerner, former governor of Paraná and ex-mayor of Cutitiba, this exclusive club includes nationalfigures like Chilean President Michelle Bachelet andher predecessors of the post-Pinochet era.

This new way of thinking served as a foundation forthe debates during the World Economic Forum onLatin America in Santiago.

For starters, refreshingly, nobody professed to have allthe answers. On the contrary. Talking about crime,Eugenio Burzaco, Founder, Fundación Fundar Justiciay Seguridad, Argentina, a Young Global Leader said,“There is no single solution. There must be integratedpolicies.” Likewise, on education, Jeffrey Puryear,Vice-President, Social Policy, Inter-American Dialogue,USA, remarked, “There are no magical solutions tothis problem; it’s more than just buying bettertechnologies – action is needed in a variety of areas.”

Also refreshing, in contrast to the infallibility of thestrongmen, was the willingness to recognize problemsand admit mistakes as part of a process of problemresolution. Addressing the region’s inability to ride thecurrent global economic wave to more investment ininfrastructure, Vitor Hallack of Camargo Correa, noted,“It is too bad that we Brazilians and Latin Americanshave not capitalized on this opportunity as well as wecould have.” Recalling his country’s much touted anti-drug campaign, Jorge A. Uribe Echavarría, Partnerand Director, DeLima Marsh, Colombia, and Ministerof National Defence of Colombia (2003-05), said, “Thefirst thing you have to do is admit that there’s aproblem. Then you can confront it.”

Democracy is strong and stable. Stability is

what the people require.

Luiz Inacio Lula da Silva, President of Brazil

“ “

The first thing you have to do is admit that

there’s a problem. Then you can confront it.

Jorge A. Uribe Echavarria, Partner and Director, DeLimaMarsh, Colombia; Minister of National Defence of Colombia(2003-05)

“ “


In the crucial area of infrastructure development, Chilehas taken the lead in developing a new approach.“Since there are clear rules, Chilean and foreignbusinesspeople are willing to accept risk,” said RamónAboítiz, Chairman and Chief Executive Officer, SigdoKoppers, Chile. Regulations and contract terms haveremained firm, agreed Francisca Castro, ConcessionCoordinator, Ministry of Public Works, Chile. “It isimportant to have clear rules and that they berespected,” she said. “This explains why Chile hasbeen successful.”

But most countries lag behind, leaving themodernization of the state as the key step needed toinduce greater investment in infrastructure in LatinAmerica. This would encompass a change in mindsetfrom “government to state”, as some put it, thusensuring stable rules for investors as politicians comeand go. It would also include efforts to combatcorruption and improve both public administration andeducation. “There is a long way to go withmodernization of the state,” said Luis E. Frisoni,Senior Partner, South America,PricewaterhouseCoopers, Brazil. “The state has tostick to its core business and do it more efficiently.”

Another area where innovative pragmatists are gainingground is environmental policy. Under thedevelopmentalist model of the 20th century, “pro-environment” meant “anti-business”. But at theSantiago meeting, forward-looking business leadersbroke that philosophical stalemate. “I am convinced asa businessman that global warming is real,” said JulioMoura of GrupoNueva. “In Chile, we could say thatour carbon emissions are so small that it doesn’tinvolve us, that others should take the initiative. Butthe effects of global warming will not be distributedproportionally. We can mitigate the effects if we act.”

Moura didn’t stop there. “Social responsibility is notcharity. It is not something you do after you’reprofitable,” he said. “Global warming has to be part ofthe business strategy. It is an issue to be handled bythe CEO.”

If environmental responsibility is part of the newthinking, corruption is not. The stereotype depictsLatin American societies and cultures as inherentlycorrupt (see Figure 1 for Transparency International’sCorruption Perception Index for Latin America).

[To combat corruption,] companies must

make it clear that they have a zero-tolerance

policy and that it is part of their core values.

And they must state that publicly, so it will be

taken seriously.

John M. Beck, Chairman and Chief Executive Officer,Aecon Group, Canada

“ “

Susan L. Segal, President and Chief ExecutiveOfficer, Council of the Americas, in the sessionentitled "2007 Update: Global Risks andRegional Response Strategies"


Conventional wisdom holds that without a bribe, youcan’t get a contract. But John M. Beck, Chairman andChief Executive Officer, Aecon Group, Canada, andUribe Echavarría tell stories of Zero Tolerance forcorruption. And they tell success stories.

“If our proposal is better, we will get the contractwithout corruption,” said Beck. “Companies mustmake it clear that they have a zero-tolerance policyand that it is part of their core values. And they muststate that publicly, so it will be taken seriously.”

Figure 1: Perceptions of Corruption in Latin America

Source: Transparency International

Mexico

Brazil

Colombia

Chile

Argentina

Corruption Perception Index (CPI) 2006

2.5–5.00–2.5

7.5–10

No data

5.0–7.5

Note: Lower scores indicate higher perceptions of corruption

Zero tolerance also works on the government side,noted Uribe Echavarría. “In two years, nobody offeredme a single bribe,” he said. To guarantee transparencyin one large purchase, he called in business leadersand asked them to monitor the process and reportback with any scuttlebutt. The deal went off without ahitch.

Hardly flamboyant, innovative pragmatism might seemto be at a disadvantage in marketing terms. But if itschampions can deliver the goods, voters may indeedfollow – as they have for the last decade in Chile. “Wewant to grow to be inclusive and be inclusive togrow,” said Chilean President Bachelet.

The workshop on “Securing Latin America’s Energy Future” Hector Rangel Domene, Chairman, Grupo FinancieroBBVA Bancomer, Mexico, in the “Financial Drivers ofGrowth” session

Chile, Brazil and Colombia most attractive inLatin America for private investment ininfrastructure

The World Economic Forum released a new index at theWorld Economic Forum on Latin America which measuresthe attractiveness for private investment in infrastructure inthe region. Chile, Brazil, Colombia and Peru ranked at thetop of the index with the most attractive environment, whileVenezuela, Bolivia and the Dominican Republic came at thebottom of the rankings.

Covering 12 economies in Latin America and the Caribbean,the new study assesses the main drivers of privateinvestment in infrastructure projects for ports, airports, roadsand electricity. Poor infrastructure was identified in theSantiago Consensus, as well as at the World EconomicForum on Latin America in 2006 in São Paulo, as a majorobstacle to the region’s ability to compete globally. It wasalso named as one of the priority areas in which the Forumneeds to explore alternatives and catalyse actions toovercome the current shortcomings.

The study features the Infrastructure Private InvestmentAttractiveness Index (IPIAI), a customized, methodologicaltool gauging the institutions, factors and policies making itattractive for private investors to invest in infrastructureprojects. An assessment of infrastructure investmentopportunities is also performed for each of the countriescovered.

The study is based on publicly available hard data as well asperception data. In particular, the authors used the resultsfrom the World Economic Forum’s Executive Opinion Survey(EOS) and conducted a mini-survey among practitioners andlegal experts on government readiness to deal with andmanage private investment projects. Data from the Centred’Etudes Prospectives et d’Informations Internationales(CEPII) and Latinobarómetro were also used.

www.weforum.org/infrastructure

From an investor’s perspective, the report

provides a customized toolkit for investment

decisions and location choices in Latin

America while it guides policy-makers in the

choice of the best policies to foster their

national attractiveness for private investment

in infrastructure and in prioritizing sectors

and measures.

Julio Estrada, Research Projects Manager for LatinAmerica at the World Economic Forum

“

“


Global Competitiveness Ranking and Infrastructure Private Investment Attractiveness Ranking

Source: World Economic Forum

Chile

Mexico

Uruguay

El Salvador

Colombia

Peru

Guatemala

Brazil

Argentina

Dominican Rep.

Venezuela

Bolivia

1

3

5

7

9

11

13

135791113

IIPIA Rank

GC

I200

6-20

07R

ank

Benchmarking NationalAttractiveness

for Private Investment inLatin American Infrastructure

B

Rank Country Score

1 Chile 5.432 Brazil 4.403 Colombia 4.334 Peru 4.235 Mexico 4.046 Uruguay 4.027 El Salvador 3.978 Guatemala 3.649 Argentina 3.4110 Venezuela 3.3711 Bolivia 3.3412 Dominican Republic 3.33

Infrastructure Private Investment Attractiveness Index


Achieving Equitable Income Distribution inLatin America

The priority is to take a great leap to ensure

quality education for all.

Michelle Bachelet, President of Chile

“ “As a means for achieving equitable income distributionacross the continent, education loomed as the leadingpriority among participants in the World EconomicForum on Latin America. The topic popped up in themost unexpected places – even in sessions with titleslike “Latin America’s Challenges and the World’sShifting Power Equation.” In the Santiago Consensusshaped during the meeting, education was identifiedas the top issue on which the region must focus.President Michelle Bachelet of Chile told participantsthat for her country and other Latin American nationsto reach a higher level of growth and productivity, “thepriority is to take a great leap to ensure qualityeducation for all.”

Panellists in the session on “Global Risks andRegional Response Strategies” pinpointed thedeficiencies and disparities in education as the root ofsocial inequality and thus of political risk. “Political riskand social inequality are one and the same,” said onepanellist (see Figure 1). “It will be impossible to cutpolitical risk if large parts of society do not feelincluded.” Added another, “If we cannot ensurechildren a better standard of education, we will notjust be facing a failed nation but a failed continent.”

Moreover, high-quality education is a necessaryprecondition for innovation, a regional weaknessaccording to the Forum’s Global CompetitivenessReport. “You cannot achieve greater productivitywithout innovation,” said Andrés Velasco, Minister ofFinance of Chile. “There is no magic recipe. In humancapital and education, we must move on from quantityto quality.”

As the minister inferred, school attendance hasimproved considerably in most countries in the last 15years. Some have attained near universal enrolment.In Brazil, for example, 97% of children between theages of 7 and 14 are on the rolls. And educationalbudgets are increasing: in Argentina plans to boostspending from 4% to 6% of GDP by 2010 – thusmatching the OECD figure of 5.9%. The Braziliangovernment ranks as the world’s number onepurchaser of textbooks.

Figure 1: Education and Prosperity in Latin America

Source: UN; IMF

$12,000

10,000

8,000

6,000

4,000

2,000

0

GD

Pp

erca

pita

,200

4(P

PP

,US

$)

Years of schooling (2004 or most recent)

7 8 9 10 11 12 13 14 15 16

Citizens of wealthier economies tend to stay in school longer

Colombia

VenezuelaSuriname

GuyanaEl Salvador

Panama

Uruguay

Chile

Brazil

Mexico

Peru

Bolivia

Paraguay

HondurasNicaragua

Guatemala

Argentina

Costa Rica


Education is an issue requiring urgency of

action. We need to organize education policy

so that it favours the multiplication of

effective schools.

José Weinstein, Manager, Education, Fundación Chile

“ “ There is no magic recipe. In human capital

and education, we must move on from

quantity to quality.

Andrés Velasco, Minister of Finance of Chile

“ “Yet despite improved enrolment rates, test figures inreading, math and science show educationalperformance lags woefully behind the rest of the world(see Figure 2). The Inter-American Dialogue “ReportCard on Latin American Education” gave the region a“D,” or poor grade, for its test scores; the state ofschools in poor, rural and indigenous communities;national standard setting; and efforts to improveteacher quality. Studies have found that 60% of LatinAmericans – and at least half of all Chileans – cannotunderstand what they read, according to ErnestoSchiefelbein, University Professor, FundaciónOportunidad (Luksic), Chile. In Brazil alone, some841,000 teachers lack college degrees.

Figure 2: Enrolment Rates Related to Educational Performance

Source: OECD

Latin American countries1

Other countries1

100%

90

80

70

60

50

Net

enro

lmen

tata

ge15

1 Latest available data: Argentina, Chile, Peru from 2000; othercountries from 2003.

2 Average of math, reading, and science scores.

300Low

450400 450 500 550 600High

Brazil

South Korea

Spain

Thailand

Mexico

Indonesia

United States

Argentina

Peru

Uruguay

Chile

Performance2

World Bank figures show that the governments oflarge Latin American countries are not channellingadditional funds into improving education (see Figure3). And since throwing money at the problem is atbest an insufficient solution, many of the brainstormingworkshops during the meeting – including onedevoted exclusively to education – dedicated muchtime to considering ideas for how to ensure a betterlearning environment for Latin American students.Among the proposals:• improve the quality of school infrastructure• build higher expectations for educational systemsamong the general population to improve studentmotivation and press politicians to act

• encourage businesses to help• begin schooling at an early age• get parents to encourage their children to learn• boost teacher wages to attract and retain the bestpeople

• use the Internet and cutting-edge technologies• improve the performance evaluation of bothstudents and professors

• encourage the private and public sectors to worktogether to design curricula and address otherproblems


José Weinstein, Manager, Education, Fundación Chile,said that there are five elements important toimproving the quality of education: a modern, well-organized and effective implementation of schoolcurricula; high, demanding goals and a system ofmeasurement; an organized, stimulating climate forlearning; professionalism and teamwork amongteachers; and the strong participation of parents andthe general community to assure that schools arewell-funded and students are inspired to learn. “This isan issue requiring urgency of action,” he added. “Weneed to organize education policy so that it favoursthe multiplication of effective schools.”

Figure 3: Public Expenditures on Education in Large Latin American Economies

Source: World Bank, World Development Indicators

6%

5%

4%

3%

2%

2000 20032001 2002

Commitments rising in Mexico but falling in Argentina

Pub

licsp

end

ing

asp

erce

ntag

eof

GD

P

Argentina

Brazil

Colombia

Mexico

Latin America & CaribbeanChile

To achieve and sustain higher growth we

really need to address inequality issues and

build in social policies into the region.

Pamela Cox, Vice-President, Latin America and theCaribbean, World Bank, Washington DC

“ “

Latin America@Risk report identifies key risks tothe region’s continued rise

The Latin America@Risk report, released at the WorldEconomic Forum on Latin America meeting, emphasizes thestrength and robustness of Latin America’s economies, whileexploring the key economic, environmental, geopolitical andsocietal issues that put that progress at risk. While all four ofthese issues emerge from the broader global riskenvironment, the regional manifestations present particularchallenges for governments, industry and civil societythroughout Latin America.

“Global risks play out uniquely in Latin America, but alsodifferently across the region, which is incredibly diverse,”notes the Global Risk Network’s Gareth Shepherd, co-authorof the report. “But these four issues – social inequality,political instability, economic vulnerability and climate change– are on the radar of all of the region’s strategic thinkers.”

The report argues that Latin American economies are muchless vulnerable to sudden disruption than they have been inpast decades, thanks primarily to improved fiscal positions.But with much incremental growth arising from commodityexports, global risks such as a hard landing of the Chineseeconomy or rising protectionism from the United Statescreate new challenges for the region. Fiscal discipline andcounter-cyclical policies must be strengthened to build theregion’s “margin of safety”.

Likewise, while democracy and political stability remain athistorically high levels across the region, pockets ofpopulist/anti-globalist storm clouds threaten to spreadthroughout the highly interdependent region. Meanwhile,global climate change presents serious trade-offs for theregion – not least between the seizing of opportunities (e.g.aggressive expansion of biofuel production) and themanagement of life-sustaining resources (e.g. rainforest andfreshwater).

Perhaps the region’s greatest ongoing concerns are socialand economic inequalities – which remain the mostsignificant in the world. Political reform, the encouragementof small and medium enterprises and, crucially, education,remain the region’s best mitigators of inequality-drivenpopulist backlash.

www.weforum.org/globalrisks


COMMITTED TOIMPROVING THE STATE

OF THE WORLD

Latin America@Risk

A Global RiskNetwork Briefing



After the Asia-Pacific Economic Cooperation (APEC)forum summits became annual events on thediplomatic calendar more than a decade ago, visits byLatin American leaders to Asia and Asian leaders toLatin America became more frequent. Yet whenever aLatin president turned up in Beijing or an Asian primeminister headed to São Paulo, the getting together ofdistant friends seemed more quaint happenstancethan a meeting of valued trading partners withstrategic mutual interests. But by 2004, when ChinesePresident Hu Jintao spent two weeks touringArgentina, Brazil and Chile before passing throughCuba, that had changed. Both sides hailed Hu’s tripas a milestone in three decades of Chinese relationswith South America. The reason: trade and investmentbetween China and the region had been climbingsharply in recent years – and many South Americancountries were reaping the benefits of China’s soaringdemand for commodities, still the backbone sector ofthe continent’s economies. In 2005, Latin Americawas the second largest recipient of Chinese FDI (seeFigure 1). And in 2006, trade between China and LatinAmerica rose to US$ 70.2 billion, up from about US$10 billion in 2000 (see Figure 2).

At this World Economic Forum on Latin America inSantiago, it was therefore highly appropriate that anumber of sessions focused on China and the impactof its zooming growth and widening geopolitical roleon Latin America. The region’s trade balance withChina has shifted from a deficit to a surplus in lessthan five years. Participants from both sides of thePacific stressed that the relationship was no flash inthe pan of commodities but rather a match ofcomplements with coinciding interests and a long,mutually beneficial future. “The trade and investmentrelationship between Latin America and China is along-term strategic partnership,” said meeting Co-Chair Zhang Shoulian, President of China MinmetalsNon-ferrous Metals.

Figure 1: China's Foreign Direct Investment

Source: Deutsche Bank

Investment in Latin America in 2005 was second only to Asia

7%North America

6%Europe

4%Oceania

60%Asia

7%Africa

16%Latin America

Cheap Chinese merchandise has done as

much as Alan Greenspan to keep down

inflation in the US.

Ricardo Claro Valdes, Chairman, Compania Sudamericanade Vapores (CSAV), Chile

“ “


But for a real partnership to evolve, China and LatinAmerica will have to develop a more texturedrelationship, certainly one based on more substancethan raw materials trade. Many in Latin America stilldo not know or understand the China phenomenon.Inasmuch as there is widespread scepticism aboutglobalization among Latin Americans, so is therewariness – even fear – of a rising China. Believerssuch as meeting Co-Chair Andronico Luksic Craig,Vice-Chairman of Banco de Chile, took theopportunity to rally the doubters. “Let’s dare, takerisks, step out,” Luksic urged participants. “We needto understand and shake hands with our friends inChina. We need to learn and know China.”

At one level, Luksic was exhorting Latin Americanbusiness to seek out higher-value trade andinvestment opportunities in China. This dovetailed withthe Chilean Finance Minister’s call for a transformationof Latin America’s economies so they are not captive

Figure 2: Latin American Trade Destinations

Source: IMF Direction of World Trade Statistics

1999 2005

Other (CAGR: 13.57%)

Total (CAGR: 9.61%)

Japan (CAGR: 9.59%)China (CAGR: 38.85%)

EU (CAGR: 7.80%)

Intra-Latin America (CAGR: 13.01%)

US (CAGR: 6.45%)

2005

Although trade with China and within the region are picking up, trade with the US still dominates

$1,200

1,000

800

600

400

200

0

Tota

ltra

de(U

S$,

billi

ons)

15%

3%5%

14%

19%

44%

of the boom-bust price cycles of raw materials. Whenthe commodities party ends, Latin America has to beprepared. Countries must not only exploit theopportunities that China offers but must also preparethemselves to exploit their comparative advantages tocompete in the global market against China, India andother emerging economies. This is particularly true fornations in Latin America that are not resource rich andmay not be benefiting directly from China’s hunger forraw materials to fuel its 11% annual growth.

For countries to boost their competitiveness andcome up with the products and services that Chinaand the rest of fast-growing Asia need and will buy,Latin American economies must pursue the keyprescriptions of the Santiago Consensus and investmore in education, innovation and infrastructure.Some in Latin America have pointed out that duringHu’s visit in 2004, China had promised to invest in anumber of infrastructure projects. While China hasbeen busily financing and building infrastructureacross Africa, it has not been as active or munificent

China and Latin America are two faces of the

same coin. China represents an opportunity.

It is a wake-up call for Latin America to

pursue reforms.

Javier Santiso, Chief Economist and Deputy Director,Organisation for Economic Co-operation and Development(OECD), Paris

“ “


in Latin America. The region should not sit and waitfor the bounty to come its way, but must move quicklyto address its competitive shortcomings such as thelack of infrastructure, countered Javier Santiso, ChiefEconomist and Deputy Director of the Organisation forEconomic Co-operation and Development (OECD).“China and Latin America are two faces of the samecoin,” he reckoned. “China represents an opportunity.It is a wake-up call for Latin America to pursuereforms.”

That is a key proposition of globalization. Globallycompetitive countries should motivate or even forceboth partners and rivals to improve themselves andbecome more productive and efficient. China’s currentadvantage is its ability to produce quality products ata reasonable price, but its own economictransformation is slowly turning this giant Asianeconomy into a formidable force in higher-valuesectors such as IT services and biotechnology thatrequire innovation, world-class infrastructure and therule of law to flourish. Latin America must follow suit.Like many Chinese companies that are going globalafter a period of reform or as a way to forcethemselves to become more competitive and hencebetter able to compete at home, Latin Americanenterprises have to reinvent themselves too.Concluded meeting Co-Chair José C. Grubisich, ChiefExecutive Officer of Braskem, “Global companies arelooking to India and China which gives our localcompanies the opportunity to restructure and toprepare a strong platform to move into theinternational market in a better shape.” That isprecisely how the rise of China is driving a powerfulpositive agenda for Latin America.

Leadership talent for global growthcompanies

To take on the world, high-growth companies need tohave the human resources to compete internationally.Latin America’s skilled executives have become a majorcompetitive advantage for global growth, said JoséGrubisich, Chief Executive Officer, Braskem, Brazil, andCo-Chair of the World Economic Forum on LatinAmerica. Business leaders in emerging economies arereshaping industrial sectors and creating new dynamicsin the global competitive landscape, panellists in asession dedicated to emerging business giants agreed.

“We have been successful in building a group ofexecutives who are exposed to the international market.One advantage is that they have been exposed tovolatile markets of high complexity, very big interferencefrom government, and inflation. This has created a groupof people ready to move into the international arena withgood multicultural experience ready to foster growth intheir companies,” Grubisich said.

According to Ricardo Villela Marino, Chief ExecutiveOfficer, Itaú Latin America, Brazil: “To be a globalchampion, you need to have the advantage not only athome but in all markets. Do we have the leadershipcapacity to do so? Our real assets are our people.”

“Globalization is creating winners and losers,” said Jean-Pierre Rosso, Chairman, Centre for Global Industries,World Economic Forum. “Some companies are takingadvantage of globalization by expanding to a globalscale.” Many of these global growth companies eithercome from emerging economies such as China, Indiaand Brazil or are focusing on those markets.

The World Economic Forum will draw together the newbusiness champions at its Inaugural Annual Meeting ofthe New Champions in Dalian, China, from 6-8September.

www.weforum.org/newchampions

To be a global champion, you need to have

the advantage not only at home but in all

markets. Do we have the leadership capacity

to do so? Our real assets are our people.

Ricardo Villela Marino, Chief Executive Officer, Itaú LatinAmerica, Brazil

“ “



The World Economic Forum wishes to recognize the support of the following companies as Partners orSupporters for the World Economic Forum on Latin America:

Strategic Partners

AccentureAudiAvayaCiscoHPKudelski GroupMcKinsey & CompanyManpowerMicrosoft CorporationNestléPricewaterhouseCoopersVolkswagen

Regional Partners

Banco HipotecarioGrupo Salinas

Meeting Supporters

Corporación Andina de Fomento (CAF)Gerdau GroupSigdo Koppers

Official Carrier

Iberia Group

The World Economic Forum additionally acknowledges herewith:The Ministry of Finance of ChileG-50 (Group of Fifty)ICARE

The World Economic Forum also thanks The Coca-Cola Company, PepsiCo and Television Nacional de Chile(TVN) for their support.

Acknowledgements


Contributors

Peter Torreele is Managing Director of the World Economic Forum. Emilio Lozoya is Associate Director,Global Leadership Fellow, Head of Latin America, at the World Economic Forum. The World EconomicForum on Latin America was under his direct responsibility.

Julio Estrada is Global Leadership Fellow, Latin America. Jacques Marcovitch is Professor, University ofSão Paulo, Brazil, and Senior Adviser at the World Economic Forum. Paula Verholen is CommunityRelations Manager, Latin America. Laura de Wolf is Senior Specialist, Events, and was the meetingcoordinator.

Report WritersAlejandro ReyesWilliam Hinchberger

Samantha Tonkin, Senior Media Manager at the World Economic Forum, worked with them to producethis report.

Editing and ProductionKamal Kimaoui, Associate Principal, Production and DesignFabienne Stassen Fleming, Senior Editor

PhotographersJorge Rodríguez PérezJuan Ernesto Jaeger CamposJuan Francisco Somalo Valor

The World Economic Forum would like to express its appreciation to the summary writers for their work atthe World Economic Forum on Latin America. Session summaries are available on our website at:www.weforum.org/latinamerica/summaries2007

The World Economic Forum would like to recognize the support of PricewaterhouseCoopers in compilingdata and statistics for this report.

The World Economic Forum is an independentinternational organization committed to improvingthe state of the world by engaging leaders inpartnerships to shape global, regional andindustry agendas.

Incorporated as a foundation in 1971, and basedin Geneva, Switzerland, the World EconomicForum is impartial and not-for-profit; it is tied tono political, partisan or national interests.(www.weforum.org)

Documents

World Economic Forum on Latin America 2007