Argentina’s challenge of redoubling efforts to boost productivity

Argentina, like the rest of the region, is challenged with devising and implementing an institutional reform agenda to improve companies' operation environment to  promote efficiency in the fund allocation, innovation and a greater productive integration. This is one of the suggestions of the 2018 Economy and Development Report (EDR) entitled “Institutions for Productivity: Towards a Better Business Environment” developed by CAF—development bank of Latin America—and presented today at the Organization of Ibero-American States (OEI).

The event was opened by Santiago Rojas, CAF representative in Argentina, together with Miguel Braun, Economic Policy Secretary at Argentina’s Ministry of Finance, and Luis Scasso, Deputy Director of OEI Argentina and Mercosur Regional Program Coordinator. Subsequently, Guillermo Alves, chief economist at CAF Directorate of Socio-Economic Research, explained the highlights of the 2018 EDR, which focuses on cross-cutting factors affecting companies, such as the degree of competition, access to resources and inter-business cooperation, labor relations and financing.

Santiago Rojas said that the report “provides a diagnosis of the challenges affecting the region’s productivity, concluding that its main problem is not what it produces, but how it produces it, due to the shortcomings in the mechanisms that control the entry and exit of companies, low innovation levels and an inefficient distribution of jobs and capital among businesses, including those in the informal economy.”

In addition, Deputy Director of OEI Argentina, Luis Scasso, noted: “The 2018 Economy and Development Report prepared by CAF highlights the problems facing Latin America and the Caribbean, which are associated with training and capital development issues and innovation processes, which slow down productivity growth in the countries of the region.”

The presentation of the 2018 EDR continued with an analysis by the Vice President of Knowledge of CAF, Pablo Sanguinetti, who moderated a panel featuring Bernardo Díaz de Astarloa, Undersecretary of Development and Productive Planning, Daniel Gómez Gaviria, senior economist of Finance, Competitiveness and Innovation at the World Bank, Gabriel Sánchez, chief economist at the Inter-American Development Bank, and Matías Bolis Wilson, chief economist at Argentina’s Chamber of Commerce.

During his presentation in Buenos Aires,

In Argentina's specific case, the report shows that despite its GDP per capita, equivalent to 35% of that of the United States (higher than the region average, which is 26%), it still has challenges related to its low local competitiveness. This situation is linked, for example, to barriers to entry (e.g. permits and licenses) and high tariffs that hinder competition.

On business financing, the 2018 EDR describes existing restrictions in the private sector credit market. In Latin America, this figure stands at 50%, measured as domestic loans granted to the private sector, while Argentina ranks last in the region with 14%, in stark contrast with Chile’s 112%.

Achieving sustained productivity growth requires redoubling efforts to enhance the institutional fabric, which translates into an environment that encourages more innovation, more efficiency in funds allocation and greater productive integration. Through the EDR 2018 presented today in Argentina, CAF aims to disseminate knowledge on the most useful initiatives for building bridges and advancing on the path towards further development in the region.