Reforms for inclusive growth in Latin America


Remarks by Angel Gurría, OECD Secretary-General, delivered at the Rectoral Medal Award Ceremony, University of Chile

Santiago, Chile, 24 October 2013

Rector, Distinguished University Community, Ladies and Gentlemen,

It is a great honour for me to receive the Rectoral Medal of the University of Chile. I should like to thank the Rector, Victor Pérez Vera, and the entire academic and university community for this award. This medal brings me even closer to this great country, with which I have deep and close ties.

Throughout my professional career, the support of Latin American countries has been unwavering. From the time when I was in charge of international financial affairs in Mexico, during the search for solutions to Latin America’s debt crisis, up until my three-year period at the head of my country’s Chancellery, my efforts to promote a stronger, more balanced and inclusive global economy have been geared towards the integration of Mexico with similar countries in this region.

Now, since taking up my post as Secretary-General of the OECD, I have tried to transform this Organisation into a more open, global platform, one which is more sensitive to the goals and prospects of developing countries. My efforts to tighten links with Latin America have been part and parcel of this work.

The strengthening of co-operation with Mexico, the launching of enhanced co-operation with Brazil and support for the accession of Chile were the main features of the first stage of my mandate. However, this relationship has been enhanced through a Regional Strategy for Latin America, increasing interaction with other regional bodies and the deepening of relations with Latin America countries which could become members of our Organisation. Tomorrow, I shall be in Colombia to launch that country’s OECD accession process. In 2015, a decision will be taken on the accession of Costa Rica. Peru has also shown interest in becoming a member.

This fills me with joy because I know that this partnership is going to be highly beneficial for these countries; and likewise for the OECD, because Latin America is clearly becoming more important all the time, and its countries have much to contribute.

Latin America: towards inclusive growth

In recent years, the region has achieved impressive progress. Following one lost decade and two decades of huge effort, the majority of Latin American countries now have consolidated democracies, functioning public institutions, stable finances, economies that are open to trade flows and investment, and an increasing number of transnational enterprises.

The construction of these pillars has led to sustained growth rates. Between 2003 and 2012, the region recorded an average annual growth rate of 4%, which is well above the average achieved by more advanced economies. Although the crisis had a marked impact, exposing the need to step up the growth capacity of those countries even further, the resilience of the region has been admirable. This has facilitated progress towards reducing poverty and inequalities and creating an increasingly large middle class.

Chile exemplifies these achievements very well. As emphasised in the Economic Survey of Chile, which I have just presented, the application of a prudent fiscal policy coupled with a solid framework of inflation targets and a healthy, well-regulated financial sector, have led to a doubling of per capita income in 20 years and significant reductions in relative poverty.

These are major achievements. Latin America is on the right road, but there is still a long way to go. We cannot rest on our laurels, given the scale and complexity of the challenges ahead.

Ongoing challenges

Poverty and inequality are still affecting a large proportion of the Latin American population. Although income distribution has certainly improved in many of our countries, around 67% of Latin Americans are still experiencing poverty and vulnerability. Levels of inequality are still alarming: the ratio between the average income of the richest 10% and the poorest 10% of the population in Mexico and Chile is 27:1, in contrast to a ratio of 9:1 on average in OECD countries. In Brazil, this ratio is 50:1.

Another great challenge is the low educational levels of our countries. The figures for this sector are worrying. Only 47% of the Latin American workforce reaches secondary education level, and only 12% reaches tertiary education level. When measuring the quality of education, the PISA survey reports that around 84% of 15-year-old Latin American students are at the lowest performing level for mathematics, whereas about 50% are at the lowest performing level for reading.

Low productivity is another of the region’s main challenges. The productivity gap is an ongoing problem which reflects the low level of diversification of Latin American economies, their specialisation in non-intensive technology sectors and a failure to invest in research and development and innovation. Chile and Mexico have the lowest levels of productivity of the OECD member countries; even lower than those of Estonia and Russia. The situation in the rest of the region is similar or even worse.

Informal employment is another key challenge. In Latin America, informal employment is interacting negatively with social welfare systems, creating a vicious circle in which informal workers are undermining those systems through irregular contributions, meaning that the systems themselves are not even managing to reach half of those workers, thus leaving them with no access to social security networks.

This situation represents a pressing challenge for public policy, given that low registration levels and historically irregular contributions place people at significant risk of decreasing social mobility in the case, for example, of sickness, unemployment or retirement.

A time for structural reforms

In order to face up to these and other challenges, and to strengthen their capacity for growth, our countries need to continue their efforts to implement structural reforms. There is no other way.

Conditional transfer programmes have been very successful in eliminating extreme poverty, but they also have their limitations (for example when children grow up and stop going to school) and their risks (for example in terms of creating paternalistic dynamics within States). Our countries require thorough reforms to their fiscal systems in order to turn them into genuine instruments for inclusion and development, through measures such as the rationalisation of tax collection systems, formulation of results-led participatory budgets and introduction of mechanisms to ensure that the tax innovations are sustainable, to mention but a few.

Combating poverty and inequality means that we need to empower our young people by providing them with better education and improved skills. In order to do this, we need to implement wide-reaching reforms so as to identify policies and situate them in a long-term context, to introduce independent and effective assessment systems which are capable of providing teachers with incentives for personal improvement and which go beyond the classroom to promote more active parental involvement. We also need to measure the aptitudes and skills of our adults so as to be in a better position to tailor our educational systems to the needs of the labour markets.

Improving our educational systems is key to improving the productivity of our economies. With this in mind, it is also vital for us to implement reforms to: (1) create national innovation systems, aimed at enhancing competitiveness, creating employment and promoting social inclusion; (2) improve regulatory mechanisms, with a view to simplifying and speeding up procedures for creating enterprises and registering patents and property, public tendering procedures; and (3) improve infrastructure in the region by promoting integrated logistics policies, modern storage facilities, efficient customs procedures and certification processes, better use of information and communications technology and greater competition in the transport sector.

These are just a few examples of the possible reforms which could help to improve productivity, competitiveness and inclusion in our countries. Of course, there are other very important reforms such as promoting green growth, gender equality and the rule of law. The important thing is that fundamental changes are now being promoted in our countries, learning from local and international experience, with a faith in the future which many developed countries would envy.

Rector, Ladies and Gentlemen:

I leave you with these few thoughts and proposals for kick-starting the reforms which our countries require. They are mere glimmers in a broader constellation of initiatives which we are preparing in the OECD to bring about a more prosperous and inclusive Latin America. I hope that they will serve as a small token of my passion for these countries, of my constant search for new development instruments and more inclusive forms of international cooperation. This is why I am here with you today, in the University of Chile, receiving this recognition, for which I am most grateful.

Rest assured that I will continue to work enthusiastically and unflaggingly, from within the OECD, in close co-operation with Chile and its institutions, to help our countries to build development and the opportunities which all our people deserve.

Thank you very much.


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