Industry, Innovation and Infrastructure

Our purpose in organizing this meeting is to hold an informal exchange of views on the recent evolution and future prospects of the Latin American economy, taking into account the effect of the external debt. It is not our aim that this meeting should give rise to commitments or consensuses, but simply that this exchange of views should help us to understand better the challenges faced and the possible options available for responding to them.

The purpose of this article is to analyse the more salient features of the performance and evolution of foreign capital in the Argentine economy during the military government which was in power from 1976 to 1983. In the introduction, a brief summary of the long-term situation is given, with emphasis being placed on the fundamental role which foreign capital has played in the economic development of Argentina throughout its history. Section One contains a discussion of the evolution of foreign investments authorized to establish themselves in the country, special aspects of their capital contributions and their distribution by sector and country of origin and, finally, an analysis of those investments which were channelled to the financial sector and those which originated in the United States.

One of the central aspects of development is the process whereby the penetration of technical progress into primary activities expels manpower, most of which has to be absorbed by urban economic activities.

The author examines the situation of young people within the framework of the deep changes that have occurred in Brazil in recent decades. There are three aspects that interest her most. First, she addresses employment and, in this context, the evolution of employment and wages and the effect the crisis has on them. In this regard, the most outstanding observation is that the urban economically active population has become younger since the 1970s as a result of the increased rate of young people’s participation, contrary to conventional assumptions that modernization will have the opposite effect. Second, she examines education and stresses that educational levels in Brazil are lagging well behind the observed economic progress. In fact, the proportion of young people with no instruction or only a few years of schooling is very large, particularly in rural or relatively less-developed areas, such as the North-East. Finally, she deals with the family, which has been greatly affected by changes in other spheres of society, and with young people’s relations with their families, which has given rise to a complex interplay of solidarity and conflict.

This article is dearly divided into two parts. The first reviews the controversy on unemployment and underemployment problems in Latin America, their nature and causes, and the measures which should be applied to eradicate them.

From the end of the Second World War to the close of the 1960s, the idea prevailed in Latin America that educational development was an indispensable requisite for the successful promotion of economic growth and distributive justice. Although opinions differed as to the level that should be given priority —primary, secondary or higher— all agreed that through the expansion of the formal education system a state of affairs would be reached that resembled the picture presented by the developed countries which served as models.

In the last years of the 1960s it was common practice for students of social conditions in Latin America to present university youth as one of the key agents in the processes of change. The story of its demands and the results of its actions since the Côrdoba movement form a very important element in the region’s socio-political history. However, the systematic study of the condition of the university student movement has not been brought up to date and its role in the processes of change in the region is one of the least known areas of social analysis. And this is why at the present time, given the dizzying transformation of socio-economic and political structures which the region has undergone, it maybe wondered to what extent such a capacity and potential exist.

The penetration of scientific and technical knowledge from the developed into the underveloped countries has often led to the latters’ acceptance of theories and techniques which are totally remote from their realities and interests, and are of no use to them as tools of interpretation or transformation.

The present development of Latin American mining depends on several factors, including the existence of natural resources, the geological knowledge of these resources in the countries, political stability to obtain long-term investments and, of course, the capital needed to stimulate this development. The author deals with all these aspects, but he concentrates on the need for capital —the importance of which is increasing in view of the current economic crisis— and above all, on the conditions that would increase the likelihood of obtaining foreign investments, since public and private national enterprises might not be able to cover this need by themselves. He thus suggests the design and application of formulas that take account of both foreign investment and the national interest, although it is recognized beforehand that such formulas are not easily transferable from one country to another.

The devastating effect of the financial crisis has rekindled the debate in Latin America on development strategies. The short-term logic of the recessionary adjustment has proven to be unw orkable, and in order to find a solution the form ulation of a new kind o f thinking aim ing at structural change is now required.

A major concern ro the developing countries in the commodity area has been their insufficient participation in the marketing of export commodities and the resulting low share of the final consumer pricesretained by them. In the light of the general assessment that international trade is conducted in a tightly controlled market environment, especially by transnational corporations, the paper attempts to bring to light some major features of commodity marketing, by examining the intra-firm trade in the said sector, with special reference to Latin America.

The writings of José Medina Echavarria made a decisive contribution towards enabling a whole generation of social scientists, in the broadest sense of the term, to gain a more thorough grasp of the intricate realities of Latin America.

The crisis of the 1980s was preceded in Peru by five years of economic stagnation which accentuated its effects. Gross investment fell sharply, as did industrial and farm production and construction. However, this fall was due mainly to activities connected with domestic demand, for activities responding to the international market did not have the same results.

In its article the author reviews a number of the main problems posed by long-range development planning and outlines his own views concerning them. He starts out by discussing the political aspects of planning and stresses that planning is part of a power-based decision-making process in which decision-makers’ mental images play an important role. His examination of the relationship between planning and them arket in mixed econom ies leads into a discussion of the “planning object” which, in the author’s opinion, should be regarded as a “multiorganization” composed of enterprises, political bodies, social organizations and movements, etc. In exploring the concept of the planning object, he identifies various types of economies (élite, formal and total) and the problems posed by each.

In this article the author analyses the evolution of Brazil’s rural sector in recent decades and some of its socio-economic effects both in the countryside and in the towns. Although only Brazil is considered here, the processes discussed and their repercussions are found to differing degrees in many other countries of Latin America.

The mining sector could play a decisive role in increasing the region’s exports, the need for which is even more pressing because of the burden of the external debt. In this respect, a very promising development is the establishment of OLAMI, whose main tasks will consist of building up a regional mining information system and promoting the transfer of technology through vertical and horizontal integration and horizontal co-operation in the fields of finance, management, prospection, production and marketing.

In 1982 the flow of external resources to Latin America suddenly stopped, and the countries of the region were obliged to devise economic policies consistent with the shortage of foreign exchange. This article makes a critical analysis of these policies and reviews a number of options.

In a series of 18 propositions, the author discusses what, in his judgement, are the problems affecting planning and what decisions will have to be taken in order to deal with them . In his view, planning is an important dimension of the capacity to govern and, hence, its improvement can only be attained within the context of a general improvement in the capacity to govern. To this end, the author proposes a selective and radical strategy for achieving major advances in a few crucai components of the decision-making process.

The organizers of this seminar set me the topic of “social actors and development options”. I accepted without much thought, attracted by the opportunity of remeeting old friends in an intellectual setting in which I spent a good many years. Now, however, I feel misgivings at tackling such a topic from the remote perspective of Vermont, dependent for information about Latin America on the sporadic coverage of the press and the occasional arrival of ECLAC documents, and speaking moreover before a group of people who are veteran actors by their own right in the drama of Latin America. I am practically condemned to warm up ideas that have already become commonplaces.

The Great Depression of the 1930s and the Second World War engendered an inward-directed growth process in Latin America, the continuance of which was later spurred by the important interests that grew up in connection with the region’s industrial production. The exhaustion of the import substitution process at the national level triggered a new intellectual effort to seek appropriate development strategies; thence arose the interest in economic integration which acquired great impetus from 1960 onwards. Integration enjoyed considerable success in terms of the expansion of trade among the countries participating in the various schemes, and mechanisms were soon added which helped to save foreign exchange in the financing of regional trade payments.

At the end of the 1970s Gista Rica was hit by the worst crisis in its history. The coffee boom ended abruptly in 1978, causing a sizeable drop in export earnings. Furthermore, public spending increased sharply, generating a deficit which was financed largely by short-term foreign borrowing. In addition, the exchange-rate slippage, in conjunction with the deterioration in the terms of trade, brought about the exhaustion of monetary reserves, and this situation was exacerbated even further by the higher interest rates in the international market.

The seventeenth session of CEPAL was held at Guatemala City from 25 April to 5 May 1977. In the course of the session the 32 States members of the Commission examined the report on its activities and analysed the Third Regional Appraisal of the International Development Strategy.

This article analyses the direct and indirect impact of new technologies on the Latin American economy, and in particular the way in which such technologies can become a factor capable of easing the present situation. Of particular interest is the contribution made by technical change to the increase in international competitiveness and to the necessary restructuring of national economies.

The crisis undergone by Latin America in the 1980s has been the most serious one to occur during its process of industrial developm ent, not only because of its intensity, but also because of the difficulties involved in designing and implementing options that might pave the way to solutions for the problems which originated it. The context of the crisis of the 1930s was entirely different: the region had only just begun its industrialization process, and the main body of problems at the time could not be attributed to industrial activity. Moreover, the self-contained nature of the economy insulated a large part of the population from the principal negative effects of the interrup tion of international trade and credit flows.

In recent years, many studies have been published on the question of the Latin American external debt; almost all of them have focused on economic, financial or political aspects of the issue. The distinguishing feature of this article is that it looks at the much less discussed legal questions involved.

The authors propose an analysis of dependent economies and societies in Latin America. They begin by discussing current forms of dependency, both in terms of the internationalization of the domestic market and in terms of structure of dependent capitalism.

Notwithstanding the enormous efforts made by the Latin American countries in the last five years to adjust their economies and despite the fact that the citizens of the developed nations are enjoying the benefits of the longest expansionary phase in the postwar period, the great majority of the peoples of the region find themselves immersed in one of the most profound economic crises in their history. They are enduring simultaneously a severe external constraint; levels of production and employment substantially and increasingly below their trend values; and, in many cases, inflations of exceptional virulence, although since mid-1985, several countries have achieved spectacular advances towards price stabilization.

The comprehensive planning of a government’s actions is useful only if it takes the form of a calculus which precedes and then provides for the monitoring of these actions so that day-to-day planning tasks become part of a practical process. The author asserts, however, that in the processes of government seen in the Latin American countries, a considerable gap generally exists between such plans and the actual process of discussion and decision-making which guides government action.

In this article the author depicts in general terms the main directions taken by youth social movements in the history of Latin America in this century. He begins by sketching in the student, military and political movements in and around the 1920s, when youth played a leading role, in university reform for example, together with some of the main doctrines, such as anti-oligarchism, Latin Americanism and the concepts of people and nation.

The Colloquium whose documents are presented in this issue of the R ev iew provided an excellent opportun ity to look at and discuss some of the aspects of planning theory and practice in mixed market economies, in search of new directions which could lead to more effective planning action to deal w ith the serious problems o f the region brought on by the international crisis. The debate was not easy, however, because the presenters adopted different systems of analysis: some took a general theoretical view, whereas others were more concerned w ith the specific contents of their proposals.

On the basis of an analysis of the historical evolution of real international interest rates, the author asserts that the main factor which increased the external debt burden in the 1980s was the excessively and unexpectedly high levels reached by such rates. This increase, which took both bankers and debtor countries by surprise, so that they do not appear to bear major responsibility for this process, mainly originated in the economic policy followed by the United States Government. Through mechanisms which are analysed by the author, this policy increased the debt service burden and reduced the volumes and prices of commodity exports, giving rise to a transfer of resources from the debtor countries which exceeds 3% of their gross domestic product per year.

Conversion of foreign debt is an econom ic policy instrument of both positive and negative potential for the regional economy. The positive potential includes reduction of the cumulative value of the debt and of the interest payments, improvement of the financial situation of enterprises, repatriation of fugitive capital, and direct foreign investment in priority sectors. The negative potential includes a net adverse effect on the balance of payments, increased inflation resulting from increased issue of money, denationalization of the economy using subsidized capital, and crowding out in the use of foreign exchange. The final mix resulting from conversion is determined mainly by the modalities with which this tool is used.

Taking a down-to-earth view of the probable evolution of the main economic conditioning factors affecting the countries of the region, especially the external debt, the author sketches the broad outlines of a strategy for stimulating medium- and long-term development. As regards the external debt he forecasts an increasingly conflictive situation, to the point at which its seriousness will lead to the acceptance of more flexible proposals by the creditor banks and countries. The conflicts will themselves hasten the historical process and help to generate the situations and actors that will strive to relieve the present stifling situation.

When the countries which fought in the 1914-1918 war -considered at that time to be the most brutal conflict in human history- signed the Versailles peace accords, it was said that nothing like it could ever happen again. Seventeen years later, however, a second world war broke out which was truly universal and ten times bloodier than its predecessor.

This article looks at the trade policy guidelines that the region should follow in order to achieve dynamic international economic linkages, in the light of the international context, the main normative conclusions that could be drawn from the theoretical debates on this subject, and some lessons that may be learnt from the study of successful cases. It is posited that in the countries of the region, trade policy can be an instrument for macroeconomic management, fiscal management and, at the microeconomic level, resource allocation; its use as a second-best instrument is justified when there are constraints on the use of the best possible solutions (in exchange rate policy, for example).

This article examines the capital regulation system used in the Chilean economy in recent years. It begins by describing the factors determining international capital movements in recent times and the role of the financial system in the intermediation of such flows. It then considers the Chilean policy on the regulation of capital flows, which seeks to solve the problem of how to reconcile the reduction of inflation with the maintenance of a real exchange rate compatible with export competitiveness. The policy instruments used include intervention by the Central Bank, which is reflected in a strong increase in the international reserves, together with open-market money sterilization operations.

When reforming pension systems, the arguments used must be carefully studied, since changes may involve substantial economic, social and political costs. The reforms which are being carried out in the region reflect this dilemma and are the result of various compromises affecting the new system as regards: i) the degree to which the benefits provided by the system and the administration of its reserve funds are isolated from the political process; ii) the necessary regulation and supervision of the markets with which the system interacts in order to effect the financial intermediation of its funds; iii) the appropriate combination of fiscal resources and pension fund surpluses to be used to pay the debt owed to pensioners of the former system and the commitments in terms of minimum pensions; iv) the provision of insurance schemes against disability and survival contingencies and possible fluctuations in the financial market, as well as covering the lifetime annuity option; v) the need to supply information so that members can take free and informed individual decisions, and vi) ensuring a capital market with a suitable combination of financial instruments to protect the system against inflation risks.

This article seeks to set forth the grounds for an approach integrating political governance, economic competitiveness and social integration as interdependent variables. To this end, it looks at the possibilities for Latin American society to simultaneously increase its capacity for democratic self-government, improve its economic competitiveness and tackle the main problems of social exclusion and poverty, since if this is not done the region will find it more difficult to take its place in the concert of modem democratic nations. In order to analyse the evolution of those variables from a systemic standpoint, each of them is first of all reviewed separately and then an attempt is made to construct an interactive scheme for their mutual relations, bearing in mind the economic and cultural conditions for productivity growth and the need for a social and political matrix which will give a sense of direction to the overall set of variables.

Most studies of the region’s economy say little or nothing about the status of its environment and natural resources; few references are made to the environmental quality of population centres or to fluctuations in natural resource stocks, especially of renewable resources, despite their crucial importance for the region’s development options. The no more than moderate pace of the region’s absorption of technical progress, the intensification of its international trade and the declining value of the region’s products in the international marketplace have all brought increased pressure to bear on its resources.

Land distribution in Latin America is characterized by striking inequality. Notwithstanding the emergence of modem structures in some regions, a few huge land holdings are found alongside a large number of small ones. This situation has long been considered undesirable for reasons of social equity as well as for reasons of efficiency. The topic remains high on the political agenda. The ultimately disappointing results of past redistributive reforms have caused contemporary policy-makers to search for alternatives. In recent years attention has focused on the institution of private property rights and land transactions through market mechanisms.

The Latin American countries’ reorientation towards market economies and their efforts to open their economies up to the international market since the 1970s have given rise to various sorts of financial policies. This article reviews some selected experiences in three areas of the financial sector: i) in the area of banking, eight different cases arc examined in which financial liberalization measures led to various problems in terms of bank solvency during the past 20 years; ii) in respect of the capital market, the rapid development of this market in Chile since the start of the 1980s is analysed; and iii) with regard to inflows of private external financial capital, the high rates exhibited by Mexico since the late 1980s are evaluated. Basing his approach on concepts that place financial liberalization within the context of the types of regulatory systems that establish the ground rules in this sector, the author emphasizes the need to develop the institutional structure of the financial system in a carefully planned manner in order to ensure the solvency and efficiency of financial institutions.

The technology employed by Latin America’s educational systems was developed by the countries which are now industrialized. This technology is labour-intensive, with expenditures being concentrated in the salaries of teaching staff and administrative personnel, and its effective utilization -as it is applied in the industrialized countries-entails a high level of expenditure per student. In line with recommendations made by international agencies, many Governments in the region have voiced their intention to raise the amount they spend on education to between 6% and 8% of the gross domestic product.

The principal sphere in which ECLAC’S theses are situated is that of economics. However, as befits an integrated approach to development, the theories it has propounded also include sociological and political aspects. The social aspects of development have been a focus of attention at ECLAC since its creation, and in this area too it has endeavoured to avoid the mechanical transposition of existing theories to the region. Through an interchange of ideas with specialists from other institutions, it has sought to identify the specifically regional dimension of the problems dealt with and to determine the precise social and political conditions conducive to economic development.

This article points out the apparent inevitability that any controversy will lead to a reductio ad absurdum, that is to say that the points of view under discussion will be carried to an extreme which distorts them and renders the discussion sterile. This seems to apply to a number of dilemmas which taken to their opposing extremes, become false dilemmas or disjunctive propositions which do not reflect the true nature of the options and causes at the heart of the real controversy.

In recent years, a new development model has arisen in Latin America whose spread has been facilitated by the changes which have taken place in the world economy (globalization, technological innovation) and their repercussions on the region. A consensus has been generated in respect of the model’s economic tenets, and there is also widespread agreement -which is gradually being reflected in concrete measures- on the role that should be assigned to the State. With regard to social policies, an awareness has been growing -with some difficulty- of the limitations of the traditional way of implementing them and the need to develop new criteria on their design and application.

This article analyses the interrelation between the macro-economic framework and growth. After reviewing the recent macroeconomic environment, highlighting progress and shortcomings, it focuses on the implications of the existence of gaps between production capacity and its degree of utilization or effective demand; the way in which persistent disparities in this respect affect the speed of expansion of the production frontier is illustrated by examples from the 1980s and 1990s. It then reviews economic policies that affect the degree of proximity between the production frontier and effective demand, with particular reference to the cases of anti-inflationary policies and external shocks.

Biodiversity has been touted by some as the developing countries’ new competitive advantage because these countries have sovereignty over the majority of the world’s biodiversity, the value of which is yet to be determined. Biodiveisity prospecting is the examination of biological resources in search of active compounds for pharmaceutical development, agricultural and industrial use. In this article, five cases of biodiversity prospecting are described, their future prospects are analysed, and policy options for other institutions and countries interested in pursuing such prospecting are discussed. The market for essential oils (particularly for cosmetics), phytopharmaceuticals and herbal preparations, agricultural chemicals, and industrial enzymes is much greater and easier to get into than that for new compounds to be tested for possible pharmaceutical use.

This article explores the challenges that small, less industrialized Latin American countries face in achieving sustained growth of manufactured exports. The improvement of export performance was one of the aims of the policy reforms adopted since the 1980s in line with the so-called Washington Consensus. The economic environment for manufacturing firms improved significantly, and growth of industrial production and exports was stimulated. Nevertheless, the manufacturing sector has not yet become a major engine of growth, and industrial exports have only recently started to increase. Moreover, manufactured exports depend to a high degree on strategies of foreign firms and arc mainly concentrated in relatively less dynamic sectors of world trade. Notwithstanding the broadness and comprehensiveness of the Washington Consensus, additional measures are needed in order to achieve the systemic competitiveness of manufacturing industries.

Surplus and creativity are two fundamental components of development whose relationships are complex and interdependent. If any new surplus broadens the horizon of life and calls for creative and innovative re sponses, the latter in turn need the surplus as the essential material medium through which they can come into being. Every culture, however, sets limits on the development of creativity which are in keeping with the process of reproduction of the society to which that culture belongs. The limits of the creativity specific to the culture which stemmed from the bourgeois revolution are fixed by the predominance of instrumental rationality, by the progressive subordination of all forms of creativity, and particulary science and art, to the process of accumulation.

Development in the Central American countries in the past quarter-century has shown positive features, which are brought out by the author: an annual average rate of economic growth of more than 5% , a near-doubling of real income per capita, expansion and diversification of exports, a surge forward in industrialization, the extension and improvement of communications and social services, and so on. Nevertheless, long-standing problems have remained, and new ones have arisen: external dependence, a tendency towards external disequilibrium, uneven distribution of the benefits of economic growth, with its consequences of poverty, unemployment, underemployment and marginal status, growing difficulties encountered by the political systems in coping with the divergent pressures of a rapidly diversifying society, and inconsistencies and conflicts between the public and private sectors. To this has been added, in recent years, the problems caused by the rise in the price of oil, inflation and growing external indebtedness.