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World Economic Forum on Latin America

Securing a Place in an Uncertain Economic Landscape
Cancún, Mexico 15-16 April 2008

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Summary: Securing a Place in an Uncertain Economic Landscape

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Global Trends and Economic Shifts

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Asia and Latin America

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Merging Business and the Environment

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Growth through Critical Investments

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Enhancing Innovation in Business and Social Issues

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1 | World Economic Forum on Latin America
2 | World Economic Forum on Latin America

Emilio Lozoya Austin
Head of Latin America, Global Leadership Fellow

The World Economic Forum on Latin America this The programme aimed to support regional leaders in
year took place as the world focused with perplexity their efforts to share perceptions and seek common
and concern on the global financial turbulence and its solutions to the multiple challenges. These include
potential risks and serious implications for the world promoting the modern face of Latin America and
economy. This unique gathering also took place as the emphasizing the best of its creative culture,
region closed a five-year cycle of economic growth of entrepreneurs and economic performance, as well as
over 5% per annum, income per capita growth of over its achievements in the realm of social issues and in
3% per annum, international reserves of over US$ 450 the preservation of its natural riches.
billion, poverty rates reduced from 44% to 35%, and
FDI inflows having reached US$ 95 billion in 2007. The diverse mix of participants set an agenda for
While the region’s economy has performed well, the 2008 to respond to the financial turmoil, design
enormous social challenges it is confronting demand proactive strategies to ensure economic sustainability
continued efforts to make growth more inclusive. and make the decade to begin in 2010 more
promising for the region. With the presence of eight
The 500 leaders from business, government and civil heads of state or government, over 40 ministers,
society from over 40 countries turned the World secretaries, governors and heads of international
Economic Forum on Latin America into an exceedingly organizations, and hundreds of CEOs, the meeting
relevant gathering. Together this unique concluded with a shared optimism about the recent
multistakeholder group evaluated the trends and macroeconomic achievements and the prospects for
changes in the global economy, in the political arena, a growing middle class, but also stressed the need for
in trade relations between Asia and Latin America as urgent action on long overdue aspects, including the
well as developments affecting investment to stimulate need for quality education, for more and better
regional growth and the search for innovation in infrastructure, for regional trade, energy and
business and social affairs. infrastructure integration, for higher saving and
investment rates, and the urgency of further structural
The agenda included a regional overview of business reforms on the institutional front to allow higher
and political strategies in five spheres: geopolitics; productivity growth and therefore more inclusive
competitiveness; energy security; growth with income economic growth rates.
distribution; and innovation related to security, climate
change and the preservation of biodiversity.

3 | World Economic Forum on Latin America
Summary: Securing a Place in an Uncertain
Economic Landscape

“This meeting will help all of us make a “There is now reconciliation between
much better Latin America and build a government and business. It’s not
Latin America that looks to the future anymore ‘economy versus society’; it’s
with optimism.” not ‘left versus right’. It’s ‘forward or
Felipe Calderón, President of Mexico
Klaus Schwab, Founder and Executive Chairman, World
Economic Forum

More than 500 business, government and civil society solutions in Latin America and this is one place where
leaders from over 40 countries gathered in the we can exchange ideas and develop good
glistening resort of Cancún on Mexico’s Yucatán perspectives for the future.” President Felipe Calderón
Peninsula for the World Economic Forum on Latin of Mexico concluded that the World Economic Forum
America. While the focus was “Securing a Place in an on Latin America had given the continent “the
Uncertain Economic Landscape”, the topmost issue opportunity to see how much we share and how it is
on everybody’s mind was how the US downturn and possible to overcome our differences”. He added:
the slowdown in the global economy would affect the “This meeting will help all of us make a much better
region. For all the uncertainty in the markets, Latin America and build a Latin America that looks to
participants took comfort in knowing that Latin the future with optimism.”
America’s economic performance in recent years has
been its best in decades, mirroring the strength in the The optimism was certainly palpable but it was mixed
global economy. with appropriate caution, especially with the prospect
of high food and oil prices continuing in the short
In facing the current slump, said José Sergio Gabrielli term. Central American and Caribbean leaders issued
de Azevedo, President and Chief Executive Officer, a dramatic warning about this “perfect storm” in one
Petroleo Brasileiro, or Petrobras, and a Co-Chair of plenary session. “The cautious optimism,” concluded
the meeting, “taking a regional perspective is very Klaus Schwab, Founder and Executive Chairman of
important because we have special questions and the World Economic Forum, “shows the resilience

4 | World Economic Forum on Latin America
Which is the most important initiative to make the decade beginning in 2010
more promising for Latin American countries?

1. Education: Construct a quality education system
2. Infrastructure and Investments: Boost infrastructure integration and promote intraregional trade
3. Security: Reform the criminal justice system to enforce the rule of law and fight crime
4. Economic Growth: Deal with the US recession
5. Economic Security: Promote access to sanitation, housing, banking and employment
6. Energy Security: Meet the growing demand for energy
7. Natural Resources: Use water and other natural resources responsibly

which has been achieved in Latin America’s has been shifting to Asia, the question is whether
economic, political and social development.” There is Latin America will ride the wave or fall behind. Can the
now, Schwab believed, “reconciliation between region find its identity?
government and business. It’s not anymore ‘economy
versus society’; it’s not ‘left versus right’. It’s ‘forward • Latin America’s recent economic performance has
or backwards’.” been its best in decades. But political differences
appear to have limited efforts to deepen integration.
At the World Economic Forum on Latin America, the • While the region’s relationship with the US used to
focus was definitely forward. In a vote in the closing be paramount, strains have emerged due to
plenary session, participants identified education, America’s post-9/11 policies and the ambivalence of
specifically the need to construct values and skills- many American politicians to the Bush
driven education systems, as the top priority for Latin administration’s pro-free trade agenda. Some Latin
America to achieve sustainable development and lay countries, notably Brazil and Chile, have now forged
the foundation for a promising decade starting in strong ties with Asia, especially China.
2010. (See the chart for full results.) • Latin American countries are beginning to feel the
benefits of opening up to the global market. Central
The Cancún meeting was organized under five sub- American nations, in particular, have realized the
themes: “Global Trends and Economic Shifts”, “Asia advantage of pooling resources and populations to
and Latin America”, “Merging Business and the create a larger, more competitive combined market.
Environment”, “Growth through Critical Investments” • Testing times lie ahead. In addition to the global
and “Enhancing Innovation in Business and Social economic slowdown and the downturn in the US,
Issues”. Latin American countries are facing a “perfect
storm” of high food and oil prices that could weaken
their economies and threaten social stability (see
Global Trends and Economic Shifts Figure 1).
• The key is for Latin American nations to work
As the pressures of globalization have pushed regions together as a region but also for each country to
and sub-regions around the world to deepen determine what restructuring and reforms it must
integration, and the global economic centre of gravity implement.

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From left to right: Jaime Morales Carazo, Vice-President of Nicaragua; Elias Antonio Saca, President of El Salvador; Patrick Manning, Prime
Minister of Trinidad and Tobago; Susan L. Segal, President and Chief Executive Officer, Council of the Americas, USA; Manuel Zelaya Rosales,
President of Honduras; Álvaro Colom Caballeros, President of Guatemala; Eduardo Sojo Garza-Aldape, Secretary of the Economy of Mexico

Figure 1: Commodity Price Rises Asia and Latin America
While metals and oil have risen sharply since 2003,
agricultural prices have shown a more recent rise
China and India have become global economic forces
at the same time that Mexico and Brazil have
themselves appeared on the radar screens of
Real commodity prices** (100=Jan 2003)

corporate strategists and investors. Some Latin

Iron Ore
American countries such as Brazil and Chile have
already developed strong trading links with Asia.
200 Oil*

Maize (corn)
• Confronted by the challenges of food and energy
security and rising inflation, China is a natural
Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 trading partner for the resource-rich countries of
* West Texas Intermediate crude oil
** Prices in constant US$, base month January 2008 Latin America.
Source: IMF • Some economies, notably Brazil, Chile and
Colombia, have focused on deepening relations with
Asia. Lingering unease with embracing Asia remains
in nations such as Mexico, which competes more
directly with China. Latin America is still a relatively
closed region.
• Latin America should avoid depending too heavily
on commodities trade with the resource-hungry
economies in Asia. That said, China’s strong growth
could help the region weather the current global
slowdown and a recession in the US.
• The challenge for Latin American economies is to
use the rise of China and India as catalysts for
change and restructuring to put themselves in a
better competitive position in the global economy.
“This is a perfect storm. We were on There is no room for complacency.
the right path but how long can we
withstand the situation? We have to
feed our people and commodities are
becoming scarce.”
Elias Antonio Saca, President of El Salvador

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Making the Most of Rising Commodity Prices

Central American leaders warned that the impact of climbing “The situation of rising commodity prices is really a mixed
food and oil prices could undo the recent gains their bag for Latin America,” said Luis Andrade, Director,
economies have made. “This is a perfect storm,” said Elias McKinsey & Company, Colombia. “The trend seems to be
Antonio Saca, President of El Salvador. “How long can we positive overall, but threats are looming, particularly on the
withstand the situation? We have to feed our people and inflation side.”
commodities are becoming scarce. This scandalous storm
might become a hurricane that could upset not only our Price controls “will not work”, according to Felipe Larraín
economies but also the stability of our countries.” Bascuñán, Professor of Economics, Catholic University of
Chile. “An important public policy issue is how to help small
At the same time, these hikes in commodity prices have farmers take advantage of price rises,” he said. Governments
created some short-term wins in the region. The trade should invest in new technology, training and financial
balance is substantially positive, but inflation could tip the incentives. It is time to rethink the productivity agenda,
balance and push lower-income households further into concluded John C. Compton, Chief Executive Officer,
poverty. This situation poses a conundrum: Latin American PepsiCo Americas Foods, PepsiCo, USA. “We are looking at
countries, rich in natural resources, should be benefiting from transformational changes in our production and plan to
price increases, but should governments be tackling the become net zero users of commodities such as energy,
issue of potentially crippling inflation? water and electricity,” he said. “We used to talk about reuse
and recycle, now we are talking about replenishing. We want
to put these inputs back into the environment.”

Merging Business and the Environment

Latin America is at the forefront of many of the global
debates over environmental issues such as climate
change, alternative fuels, deforestation and the impact
of urbanization. It is natural that businesses in the
region should now be addressing these concerns.

• “Environmental sustainability” is regarded as a
mainstream prerequisite for successful infrastructure
development. Even the war on the drug trade has a
“green” edge, as the rainforests are threatened by
encroaching coca producers.
• The biofuels debate is heating up, as food prices
mount. Once touted as a clean-energy panacea,
“Taking a regional perspective is very these renewables are now criticized for their use of
important because we have special large amounts of water and land that might
otherwise go to growing more food staples.
questions and solutions in Latin • Brazil is leading the way in developing a new
America and this is one place where generation of biofuels that may be more
we can exchange ideas and develop environmentally sound.
good perspectives for the future.” • With oil prices set to remain high, the demand for
biofuels will increase, spurring a diversification of
José Sergio Gabrielli de Azevedo, President and Chief sources and the development of better products.
Executive Officer, Petroleo Brasileiro Petrobras, Brazil; Co-Chair
Biofuels will not become a substitute for petroleum.
of the World Economic Forum on Latin America

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From left to right: Jaime Morales Carazo, Vice-President of Nicaragua; Elias Antonio Saca, President of El Salvador; Patrick Manning, Prime
Minister of Trinidad and Tobago; Susan L. Segal, President and Chief Executive Officer, Council of the Americas, USA; Manuel Zelaya Rosales,
Growth through Critical Investments • Infrastructure development will require enormous
outlays of capital. The needs are such that public-
Latin America needs to deploy its capital resources private partnerships are essential to raise sufficient
more wisely. To do so will require measures to capital. Attracting private investment, however, will
increase transparency and openness in labour and require reforms including measures to ensure a level
financial markets. The aim of such structural reforms playing field and a stable regulatory environment.
would be to increase the productivity of the region’s
Enhancing Innovation in Business and
• Business, government and civil society leaders Social Issues
again stressed the importance of better education,
identifying the need for values and skills-driven Instead of struggling to come up with new concepts
education systems as the top priority for the region. or fresh ideas for addressing the region’s economic
This means encouraging students to take more insecurity, Latin America should focus on
practical courses such as the hard sciences and to implementing on a larger scale some of the many
improve the quality of teaching. solutions that are leading to real changes at the local
• The dysfunctional effects of the informal sector on and national levels.
the larger economy must be addressed. These
extend beyond the loss of tax revenues and the • The good news that has buoyed confidence in Latin
unfair advantages to firms that do not play by the America is part of a continuum dating back
rules. Workers in the informal sector retire to a life of decades, running through a dramatic transition from
hardship. In light of these problems, there are a continent of corrupt military dictatorships to a
opportunities for financial institutions to provide new vibrant region where democracy reigns and free
services such as microfinancing to small trade is the norm.
enterprises. • There are harsh realities. Political unrest is growing
• The absence of working capital and high taxes in many countries. In some cases, there has been a
account for a significant proportion of failures backlash against opening markets and free trade.
among small and medium-sized enterprises, • Support for social entrepreneurship could become
suggesting that governments should examine tax an important way to promote the free market while
regimes to enhance the viability of SMEs and limit at the same time addressing poverty. Microfinancing
informal-sector growth. could also bolster efforts to address widening
• Regulatory reform is essential in many Latin income gaps. But better regulation, supervision and
American economies to enhance the access of monitoring of the sector are required.
SMEs to needed capital, to create more • To combat the problem of criminal gangs in some
transparency and competition, and to allow for more communities, innovative solutions such as work
competition in inefficient or low-productivity sectors. programmes have proven effective.

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Global Trends and Economic Shifts

From left to right: Moisés Naím, Editor-in-Chief, Foreign Policy Magazine, USA; Rafael Fernández de Castro,
Academic Dean, Autonomous Technological Institute of Mexico (ITAM), Mexico; Thomas A. Shannon, Assistant
Secretary, Bureau of Western Hemisphere Affairs, US Department of State, USA; José Miguel Insulza, Secretary-
General, Organization of American States (OAS), Washington DC; Fernando Araújo Perdomo, Minister of Foreign
Affairs of Colombia; Jim Kolbe, Senior Adviser, McLarty Associates, USA

As global trends of regional integration and market Figure 1: Growth in Latin American Trade
opening intensify and the economic centre of gravity
Intra-regional trade growing faster than trade with the US
shifts with increasing pace to the dynamic emerging
economies of Asia, the question is whether Latin
America is riding the wave or falling behind. In one 400
Latin America trade (100=2002)

session, Colombia’s Minister of Trade, Industry and 350

Tourism Luis Guillermo Plata, a World Economic 300

Forum Young Global Leader, noted that the Andean
Pact and the European Community were launched at Latin America
about the same time. Today, he observed, the Andean Total
Community of Nations, as the South American trade 150

bloc is now known, is a weak alliance, while the 100
2002 2003 2004 2005 2006
European Union has common passports and a * includes trade with Hong Kong and Macao

common currency used by a majority of its members. Source: IMF Direction of Trade Statistics

Recalling that Latin America has been described as a
“lost continent”, Plata asked participants: “What can
we do so potential trading partners and investors can Historically, of course, the determining geopolitical
find us again?” relationship for the region has been with the United
States. But some of America’s post-9/11 policies and
It may be worrisome that the issue of Latin America’s the ambivalence of many US legislators towards the
regional identity remains so vexing in this age of Bush administration’s strong support for free trade
globalization, even though Latin American economies and free-trade agreements with countries in the region
are more in sync than they have ever been, despite have created strains even though, as Peter Hakim,
political differences. “The last four years have been the President of Inter-American Dialogue, observed, “the
best [economically] since 1492,” quipped Moisés substantive [Bush] agenda has been pretty good” for
Naím, Editor-in-Chief of Foreign Policy Magazine. Latin America. Washington, acknowledged Thomas A.
Intraregional trade has grown (and in 2006 accounted Shannon Jr, Assistant Secretary of the Bureau of
for 20% of all trade; see Figure 1), yet, intraregional Western Hemisphere Affairs in the US State
friction has risen. “We are looking at blocs in Latin Department, has had to attend to the damage to its
America in a way we never did before,” he said. standing in the region. “Because of democratization,
“There are deep divisions. This will define a lot of what the opening of markets and globalization,” he
will happen” in the run-up to the next decade.

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“The situation of Latin America to deal “If I am asked to give advice [on trade
with what’s happening with the world and immigration] to the next [US]
economy has never been stronger.” president, I will say to stick with the
Bush agenda.”
Alejandro Baillères, Chief Executive Officer, Grupo Nacional
Provincial, Mexico; Co-Chair of the World Economic Forum on Peter Hakim, President, Inter-American Dialogue, USA
Latin America

reckoned, “Latin American countries have options they “The situation of Latin America to deal with what’s
didn’t have before. We are not the only ones around. happening with the world economy has never been
This is a competitive environment.” stronger,” said Alejandro Baillères, Chief Executive
Officer of Grupo Nacional Provincial of Mexico and a
Indeed, as Brazil and Chile have certainly shown, the Co-Chair of the World Economic Forum on Latin
emergence of China and India have served up America (see Figure 2). “This is a good opportunity to
enormous opportunities for Latin America across the showcase Latin America,” agreed fellow Co-Chair
Pacific and could lead to a surge in investment from William R. Rhodes, Chairman, President and Chief
Asia into the continent. This new partnership could Executive Officer, Citibank NA, Citi, USA. “Obviously,
help them weather this period of global economic Latin America is not as dependent on the US
stress as the US looks set to dip into recession. That economy as it used to be, say, a decade ago.”
some Latin American economies have to some extent
“decoupled” from the US is an indication that the There was certainly fresh confidence on display in the
region may have reached a new level of maturity in its session that brought together top leaders of Central
development. As Carmen Gisela Vergara, Minister of America. “Twenty years ago, Central America was at
Commerce and Industry of Panama, explained, some war,” said Elias Antonio Saca, the President of El
countries such as her own are only beginning to see Salvador. “Now much has changed. Central America
the value of opening up to the global market. Despite acts as a bloc. We have set ideologies aside and we
misgivings within the local business community, are agreeing on issues such as a customs union. We
Panama signed a number of agreements in an effort are gradually implementing the European Community
to boost job creation and investment. Last year, the model. It took Europe 50 years to do it. We are
economy grew by more than 11%. implementing it quite quickly.” Added Jaime Morales
Carazo, Vice-President of Nicaragua, who pointed out
that he had been a leader of the Contra forces in his

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country but agreed to join the administration of President of Honduras: “The world economy is being
Sandinista leader Daniel Ortega Saavedra: “We now tested and is at risk. International organizations need
favour dialogue and agreement rather than to develop urgent measures. We are not asking for
intransigence and exclusion. We are freeing ourselves donations but short-term lines of credit for food and
from our dependence on the past.” alternative, renewable and clean energy. Either
globalization is a trick – or it is an opportunity.”
Figure 2: Latin America's Economic Volatility

Region has shifted from low economic growth and high volatility, to high growth and low volatility


Latin America GDP growth
Percentage points


Standard deviation*

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F

* Standard deviation of GDP growth rates for 18 Latin American countries

Source: IMF (2007)

Refreshingly, the Central American leaders were
candid about the storm clouds they now see on the
horizon – the double threat of climbing food and oil “Obviously, Latin America is not as
prices. “This is a perfect storm,” warned Saca. “We’re dependent on the US economy as it
on the right path but how long can we withstand the used to be, say, a decade ago.”
situation? We have to feed our people and
commodities are becoming scarce. This scandalous William R. Rhodes, Chairman, President and Chief Executive
storm might become a hurricane that could upset not Officer, Citibank NA, Citi, USA; Co-Chair of the World Economic
only our economies but also the stability of our Forum on Latin America
countries.” Added Manuel Zelaya Rosales, the

11 | World Economic Forum on Latin America
From left to right: Antonio Bonchristiano, Co-Chief Executive Officer, GP Investimentos, Brazil; Daniel S. Och, Chairman and Chief Executive
Officer, Och-Ziff Capital Management Group, USA; Hutham S. Olayan, President and Chief Executive Officer, Olayan America Corporation, USA;
Felipe Larraín Bascuñán, Professor of Economics, Catholic University of Chile; William R. Rhodes, Chairman, President and Chief Executive
Officer, Citibank NA, Citi, USA, and Co-Chair of the World Economic Forum on Latin America

That is the question that confronts all of Latin America
today as its economies gaze into that globalization
mirror and decide whether to go through the looking-
glass and take a plunge into what looks to be a
promising pool of opportunities but could result in
being something far less inviting. Consider Mexican
President Felipe Calderón’s predicament as he
assesses how to navigate his country through the
downturn in its NAFTA partner to the north. “Our
correlation with the US economy can turn from being
a great advantage to becoming a great disadvantage,”
he accepted. “When the US catches a cold, Mexico
“Because of democratization, the
gets pneumonia. My role as president now is to figure
out what we will get when the US catches opening of markets and globalization,
pneumonia.” Latin American countries have options
they didn’t have before. We are not the
The next several months of economic volatility will
only ones around. This is a competitive
likely be tough for Mexico and the rest of Latin
America, but it is critical for the region not to get lost environment.”
once again but to look forward together, and for each
country to decide what it must do to readjust, Thomas A. Shannon Jr, Assistant Secretary, Bureau of
restructure and renew itself so that the next decade is Western Hemisphere Affairs, US Department of State, USA
a promising one. Concluded Calderón: “The key is for
Latin America to decide how to speed up growth and
to grow with harmony and fairness.”

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Asia and Latin America

“If China keeps on growing, Latin “China’s insertion in the global
America will do well.” economy is an undisputed reality for
academics, business people and
Ricardo Hausmann, Director, Center for International
Development, and Professor of the Practice of Economic
policy-makers today. Latin America
Development, John F. Kennedy School of Government, Harvard should benefit from this wake-up call,
University, USA seizing the financing opportunity
brought about by China’s rise.”
The discussion of Latin America’s relations with Asia
focused on the implications of China and India’s rise at Javier Santiso, Director and Chief Development Economist,
the same time that Mexico and Brazil have themselves Organisation for Economic Co-operation and Development
entered into the consciousness of investors and (OECD), Paris
corporate global strategists. Attention was also paid to
the success some countries, notably Brazil, Chile and
Colombia, have had in forging strong trading links But learning has to come by doing. The presence of
across the Pacific. Yet the talk was still mainly senior Chinese business leaders in Cancún, including
armchair analysis about tremendous opportunities that Guo Shuqing, Chairman of China Construction Bank,
must be grasped rather than about inspiring success the second largest state-owned Chinese commercial
stories and exciting initiatives already under way. bank, and a Co-Chair of the World Economic Forum
“Latin America and India have about a fourth of the on Latin America, was evidence of China’s
world’s population, but only about 2% of its commitment to deepen ties. China’s FDI in Latin
commerce,” Humberto Ribeiro, Executive Vice- America is currently about US$ 20 billion but could
President, Politec, Brazil, remarked. Added Rodolfo increase to US$ 110 billion in ten years, said Yang
Alborelli, Managing Director, Head, LAR, and Chief Kaisheng, Vice-Chairman of the Industrial and
Executive Officer of Standard Chartered Bank in Commercial Bank of China (ICBC), the largest state
Argentina: “What’s needed now is a learning process commercial bank, in one session. “We are here
on both sides.” because of Latin America’s economic development
and social progress,” Guo said at a press conference.
With the Chinese economy expanding rapidly to the

13 | World Economic Forum on Latin America
point of overheating and China looking to invest more to expand it to include certain service sectors by early
abroad to provide an outlet for excess liquidity, Latin next year. Santiago launched a preferential trade pact
America is a natural partner for the Chinese as they with India in 2006 and proposed turning that into an
address the mounting challenges of food and energy FTA during the recent visit of Indian President Pratibha
security and rising inflation, he explained. Patil to Chile (see Figure 2). These are encouraging
signs that some Latin American political and business
leaders want closer commercial connections with
Figure 1: Exports to China Asia.

Latin America's exports of fuels and mining products
to China up nearly tenfold in six years

China's imports from Latin America (US$, billions)

CAGR: 28%

25 Agricultural
20 CAGR: 24%

15 Fuels and
mining products
10 CAGR: 46%


2000 2001 2002 2003 2004 2005 2006

Source: WTO

For now, Asia-Latin America relations remain based on
exports from West to East of raw materials, “We are here because of Latin
manufactured products heading in the other direction America’s economic development and
(see Figure 1). Brazil is one country that has taken
social progress.”
pole position in the race to connect with the Chinese
market, establishing what Beijing’s leaders call a
“strategic partnership” in trade on a heavy flow of iron Guo Shuqing, Chairman, China Construction Bank, People's
ore and soybeans to China. Chile and China signed a Republic of China; Co-Chair of the World Economic Forum on
free-trade agreement (FTA) in 2005, agreeing in April Latin America

14 | World Economic Forum on Latin America
The Latin America Question

More than 200,000 people around the world joined the The best videos submitted to the site were screened in the
discussions at the World Economic Forum on Latin America closing session of the World Economic Forum on Latin
through video debates hosted on YouTube. Viewers sent in America. Watch answers to the Latin America Question in
their responses to the Latin America Question: “What key English (, Spanish
action do you think countries, companies or individuals ( and Portuguese
should take to make Latin America a better place in 2008?” ( Watch plenary
sessions on the Forum’s channel on YouTube at
The presidents of Guatemala, Costa Rica and the Prime
Minister of Trinidad and Tobago were among 70 participants
who also added their voice to the open dialogue about the The Latin America Question builds on the Davos Question
future of the region. “The interaction via YouTube’s video launched for the World Economic Forum Annual Meeting
platform offered us a unique possibility to open our debates 2008 in Davos, which has been watched by over 8 million
to a global audience,” said Emilio Lozoya Austin, Head of people on YouTube.
Latin America and Global Leadership Fellow at the World
Economic Forum.

But there remains lingering unease. Mexico, for Figure 2: Exports to India
example, tends to view China’s rise with concern, as
Chile now accounts for nearly one-third of Latin American exports to India
investment is lured away from manufacturing plants
just south of the US border. Yet Chinese automakers
India imports from Latin America (US$, millions)

are eyeing opportunities to make cars in Mexico for 6,000

export to the US and other markets. Ironically, as Guo 5,000

pointed out, “Mexico is relatively open but many of the 4,000 Mexico
other countries [in Latin America] are not.” He
observed that the region seemed to be relatively more Chile

globalized before the 20th Century than it is now. Argentina

“Latin America was very globalized and changed 1,000
China’s economy,” he reckoned. 0
2003 2004 2005 2006

There is of course another concern on Latin American Source: Government of India, Ministry of Commerce & Industry, Department of Commerce

minds as they weigh the implications of closer ties
with Asia, particularly China. It would perhaps be too
easy to fall into a tempting dependency relationship, But the slowdown in the US and the global economy
with the continent’s resource-rich economies relying could pose risks. Some Latin American countries,
heavily on trading raw materials to feed the hungry such as Chile whose exports match China’s import
Chinese giant. China needs to keep growing at a high requirements, will perform well in the short term, while
rate to maintain social stability and create necessary those whose exports compete with China’s, such as
jobs. “If China keeps on growing, Latin America will do Mexico, may run into some trouble, Hausmann
well,” said Ricardo Hausmann, Director of the Center warned. Huang Haizhou, Managing Director of China
for International Development and Professor of the International Capital Corporation (Hong Kong),
Practice of Economic Development at Harvard wondered “whether Chinese demand will be enough
University’s John F. Kennedy School of Government. to support commodity prices” and keep Latin
American economies buoyant during this global
economic slump.

15 | World Economic Forum on Latin America
From left to right: Wang Jinzhen, Vice-Chairman, China Council for the Promotion of International Trade (CCPIT), People's
Republic of China; Juan Quirós, Vice-President, Fiesp, Brazil; Daniel Servitje, Chief Executive Officer, Grupo Bimbo,
Mexico; Daniel J. Brutto, President, UPS International, UPS, USA

The critical question, however, is not whether China’s
high demand for commodities keeps Latin America’s
economies humming. The key issue is how Latin
American economies each come to terms with China’s
long-term economic rise. The stress of the global
economic slowdown could prove a catalytic test. The
hard times may prompt those economies that are
more challenged by China’s emergence to pursue
valuable and necessary restructuring, putting them in
a better position in the long run to compete with
neighbours who may weather the storm but could
lapse into complacency as a consequence.

As Daniel Servitje, Chief Executive Officer of Grupo
Bimbo of Mexico, pointed out, the challenge for Latin
American countries is to get into the “fast lane” to Asia
as Chile and Colombia have managed to do.
Governments should raise awareness of the
opportunities that China and India hold and not dwell
on perceived threats. The rise of China and India, as
well as the other Asian economies, should make Latin
American economies want to become better and
more competitive and not to take cover. “We are used
to looking at the national league, not the World Cup,”
Servitje concluded. But now “we must overcome our

16 | World Economic Forum on Latin America
Merging Business and the Environment

“Biofuels are not going to be a “Looking ahead to 2030, according to
substitute for petroleum – not at the IADB data, aggregate energy demand
amount that would be needed in the in Latin America will increase by 75%
next 50 years.” and electricity generation capacity will
need to increase by 144%. Are we
José Sergio Gabrielli de Azevedo, President and Chief going to be able to meet this
Executive Officer, Petroleo Brasileiro Petrobras, Brazil; Co-Chair
of the World Economic Forum on Latin America

José Miguel Insulza, Secretary-General, Organization of
Latin America finds itself at the forefront of many of American States (OAS), Washington DC
the global debates over environmental issues like
climate change, alternative energy, deforestation and
the multiple challenges facing megacities. Once limited
to the dichotomy of development vs conservation, the At this World Economic Forum on Latin America, the
discussion is becoming more complex, subtle and newfound mainstream status of the environment was
sophisticated. With advances in greenhouse gas evident in the way it popped up in places that would
(GHG) emission reductions, carbon credits, biofuels, have seemed odd just a few years ago. Until recently,
ecotourism and certification of origin, to name a few any debate over infrastructure development would
examples, business people are beginning to devise have either ignored the environment or lambasted
ways to make money from green products and greens as obstructionists. In Cancún, “environmental
practices. And many ecologists are beginning to sustainability” became a consensus choice as a
accept and even advocate market-based solutions to prerequisite for successful infrastructure development.
environmental problems. Regarding climate change The war on drugs also received a green makeover.
initiatives towards a robust post-2012 regime, The rain forest is threatened, not only by the illegal
according to participants' votes, business would most logging, but also by the depredations of coca
like to be involved in: a) cutting direct GHG emissions; producers, said Alvaro Uribe Velez, President of
b) investing in R&D on future technologies; c) raising Colombia. As a result, the nation’s efforts to halt the
awareness among employees and consumers; and d) drug trade have an environmental as well as a social
looking to build political support for stronger efforts. facet, he said.

17 | World Economic Forum on Latin America
Nowhere were the more nuanced deliberations more States, Mexico, Central America and other parts of
apparent than in the session on biofuels. Once touted the Americas (see Figure 1). Technological barriers are
as a clean and renewable panacea, then derided as a lower than generally recognized, said Luiz Fernando
villain, stealing tortillas from the poor and land from the Furlan, Chairman of the Board, GALF Empreendimentos,
rainforests, biofuels received a level-headed hearing at Brazil. Brazilian gasoline refineries use ethanol as an
the meeting. The discussion delved into complexities additive in the nation’s petrol, to the tune of 22%, and
like water usage – suggesting that consideration be even imported cars run well. Brazilian-made cars have
given to whether biomass crops need large amounts flex-fuel engines which allow them to use 100%
of water, whether natural rainfall is sufficient in places ethanol as fuel.
chosen for cultivation and, if irrigation is needed, in an
analysis of the energy expended in pumping. As the so-called first generation of fuels struggles to
attain a critical mass of distribution, second generation
fuels are already being developed. They include butanol,
Figure 1: World’s Largest Biofuels Producers
which has a higher energy density than ethanol and
Brazil and Colombia both among the world's top-10 producers of biodiesel and fuel ethanol does not absorb water, thus reducing corrosion on car
engines. Another promising branch of new research can
be found in cellulose enzyme technology that produces
ethanol or butanol from bagasse, the heavy pulp left
China Spain

over after sugar has been extracted from cane.

Canada Douglas Albrecht, President, Celulosa Argentina,
US predicted that oil prices will remain high, which will
further boost the demand for biofuels. But José Sergio
Share of top-10 countries' biofuels* production, 2006
Gabrielli de Azevedo, President and Chief Executive
Officer, Petroleo Brasileiro Petrobras, Brazil, a Co-
* Includes biodiesel and fuel ethanol
Chair of the World Economic Forum on Latin America,
Source: "Renewables 2007: Global Status Report", Ren21
urged caution in the short term. “Biofuels are not
going to be a substitute for petroleum – not at the
With a programme dating to the 1970s and nearly amount that would be needed in the next 50 years,” he
ideal conditions in terms of climate and land said. “But they will play a more important role. There will
availability, Brazil became the world leader for the first be a diversification of sources. There are limitations
generation of biofuels, using ethanol refined from now. The second and third generation technologies
sugar. Colombia was another early adopter, and will be important, but the third generation technology
similar incentives are being implemented in the United probably won’t come in less than five years.”

18 | World Economic Forum on Latin America
Solving the Energy
Puzzle through

World Economic Forum
in partnership with
Cambridge Energy Research Associates

Solving the Energy Puzzle

Tapping the full potential of Mexico’s oil and gas resources the growing energy dilemma facing the world: how to deliver
hinges on overhauling the controls governing their extraction. secure, affordable, low carbon energy to a global population
A controversial energy reform bill presented by President that is expected to grow from 6.4 billion today to more than
Felipe Calderón to parliament is a big step in this direction. 8 billion by 2030.
The proposals aim to give Mexico’s state-owned oil
company, Pemex, greater freedom in operating, budgetary The World Economic Forum’s report, Solving the Energy
and investment decisions, as well as greater freedom to Puzzle through Innovation, which addresses this question
work with third parties. Without reform, the state monopoly is head on, formed the basis of the discussion.
constrained to operate alone and Mexico may well forgo
considerable economic opportunities and face declining oil High energy prices combined with concerns about energy
production. security and climate change are stimulating the most
widespread drive for innovation the energy sector has ever
Mexico lags behind other oil-producing countries like Norway seen. Investment in renewable energy and energy efficiency
and Brazil that have reformed their upstream sector, progress exceeded US$ 110 billion in 2007. However impressive the
Pemex and Calderón could draw from in the process of investment in clean technology may be, it is only a fraction of
defining Mexico’s “winning” model. “Without privatizing annual investments in energy. Therein lies both a tremendous
Pemex, the reform grants it access to state-of-the-art challenge and a tremendous market opportunity. Innovative
technology and complementary investment to multiply its companies will capitalize on these opportunities. How many
execution capacity, as other national oil companies have of them will come from Latin America?
already done,” Calderón warned.

Stimulating cross-learnings was high on the agenda of
several private and public energy sessions at the World
Economic Forum on Latin America. Participants expanded
their discussion to look at the role of innovation to help solve

19 | World Economic Forum on Latin America
Growth through Critical Investments

“This is an opportunity to exchange “What do we need to compete with
ideas with interested people from Latin China? Productivity. And that will only
America and all over the world to see come with structural reforms.”
how we can help the region to develop.
We see a lot of potential for people to Alejandro Baillères, Chief Executive Officer, Grupo Nacional
come and invest and get good returns.” Provincial, Mexico; Co-Chair of the World Economic Forum on
Latin America
José Antonio Fernández Carbajal, Chairman and Chief
Executive Officer, FEMSA, Mexico; Co-Chair of the World
Economic Forum on Latin America Such mundane proposals run counter to the
predominate “big idea” syndrome in the region,
according to which messianic leaders have historically
With a few exceptions, notably infrastructure, Latin taken it upon themselves to pursue populist and
America doesn’t need to throw more money at its ideologically-loaded solutions with enormous negative
problems. Instead it needs to free up sources of consequences on some of the nations and their
capital and invest more wisely. In addition to the now people. Against that backdrop, a healthy dose of
perennial call for better education at the World political realism is refreshing. “It isn’t a question of
Economic Forum on Latin America, participants what would be the ideal reform for Petroleos
advocated reforms designed to increase transparency Mexicanos [Pemex] or labour legislation, but what
and openness in labour and financial markets. They would be the next possible step that you can
defended tax and regulatory changes to decrease the realistically take,” pointed out Baillères.
incentives for small and medium sized enterprises
(SMEs) to take refuge in the informal sector – For starters, the business, government and civil
legendary for its low productivity. society leaders in Cancún repeated the now
commonplace mantra of better education, which trails
“What do we need to compete with China?” was the OECD countries for instance (see Figure 1). “It is the
rhetorical question posed by Alejandro Baillères, Chief number one issue,” said Oscar Arias Sánchez,
Executive Officer, Grupo Nacional Provincial, Mexico, a President of Costa Rica, noting the low proportion of
Co-Chair of the World Economic Forum on Latin teenagers who go on to university. “If we don’t
America. His answer: “Productivity. And that will only educate people, it will be very difficult to have
come with structural reforms.” progress.” He added: “The quality and amount of
education we have does not allow us to escape from
the feudalism where a lot of Latin Americans still live.”

20 | World Economic Forum on Latin America
Figure 1: Educational Performance Building Cities
Latin America trails behind OECD countries in math and reading skills

600 Participants explored the complex challenges facing
the growing urban areas in the region, which include
Assessment of 15-year-olds' performance, 2006

three of the world’s megacities: Buenos Aires, Mexico
500 City and São Paulo. They broke into six working
groups to develop recommendations for mechanisms
and initiatives that promote urban development reform
and environmentally, socially and economically


sustainable patterns of settlement:

Argentina Colombia Brazil Mexico Uruguay Chile OECD
• Establish an institutional technical body independent
of elected political officials that has the authority and
resources to create long-term plans (10 years and
Source: OECD (2007)
more) and policies for urban development
• Establish strong legislative frameworks, which are
key to guide and monitor public and private sector
The once generic discussion of education seemed
collaboration and investment in urban projects
more focused this time around. There was consensus • Develop public policies that modify per capita
on the need to build a “values and skills-driven consumption of water and other resources through
educational system”. In practical terms, this translated market mechanisms with the aim to educate citizens
into specific calls to encourage university students to as to the importance of conservation efforts
take more practical courses and for public schools to • Maintain essential networks and services. Such
reward good teaching. The lack of students majoring maintenance requires coordination and cooperation
in the hard sciences hinders economic growth in among all federal, state and city authorities
Mexico, said Julio A. de Quesada, President, Consejo • Explore new and creative ways to slow immigration to
Ejecutivo de Empresas Globales (CEEG), Mexico. He the urban areas. This will inevitably require significant
investment in and attention to rural populations
added: “We have too many bankers and lawyers and
• Explore the feasibility of establishing small-scale
not enough engineers.” (See Figure 2.) Baillères cited
networks or “cells” of citizens in city neighbourhoods
merit pay for teachers as a potentially achievable goal that would take on the responsibility of maintaining
that would help improve the quality of education. water, transportation, recycling and energy systems
using alternative, sustainable methods where possible
• Instil civic values and an understanding of
sustainability and the lifestyle changes it may require
through public education and especially the use of
the media

21 | World Economic Forum on Latin America
Figure 2: Engineering Graduates Figure 3: Old-age Dependency Ratios in Largest Latin American Countries

Latin America produces more engineers than the United States Burden of ageing populations to be greatest in Chile and Mexico


Number of engineering graduates, 2004 (thousands)

Old-age dependency ratio (population over

65 as percentage of people age 15-64)
300 30


200 20


100 10
Rest of 5

China European Latin South United
Peru Venezuela Colombia Argentina Brazil Mexico Chile
Union America Korea States

Note: Latin America includes 15 nations in South and Central America for which data are available, most recent year

Source: NSF Science and Engineering Indicators 2008 Source: United Nations (2007)

Several sessions touched on the deleterious effects of A study conducted of his bank’s clients revealed that
the informal sector on the larger economy, and they two factors – the absence of working capital and high
extend far beyond the oft-decried loss of tax revenues taxes – account for 40% of SME failures, reported
and unfair competition for firms that play by the rules. Ricardo Villela Marino, Chief Executive Officer, Itaú
For instance, the working poor often do not enjoy Latin America, Brazil. Microfinancing is designed to
pension benefits because they either work for enterprises help address the first problem, but entrepreneurs are
that pay no tax or benefits or work for legal companies often ineligible for any bank loans because they take
but negotiate not to pay pension contributions, said their firms into the informal sector to evade the tax
Pamela Cox, Vice-President, Latin America and the burden. “Governments should lower taxes on SMEs to
Caribbean, World Bank, Washington DC. This translates reduce the incentive for those companies to go into
not only into personal hardship when people retire, but informality,” said Villela Marino. Joaquim Levy,
reduces the consumer base among seniors. Chile and Secretary of Finance, State of Rio de Janeiro, Brazil,
Mexico are forecast to carry the largest burden of argued that state officials can reduce informality by
ageing populations in the region (see Figure 3). simplifying tax systems. Simplification can jump start a
Informality also inhibits the growing efforts by virtuous cycle to bring more working poor into the
dedicated banks and divisions of larger financial pension system and boost tax revenues.
institutions to provide microfinancing to small companies.
Regulatory reform of the capital markets could also
help SMEs access much needed cash, offered Manuel
J. Balbontin, Founder and President, Compass Group,
USA. “Capital market reforms are not rocket science,”
he noted. “What we need are different mechanisms so
that we can build a highway between the large pools
of capital in the region and SMEs.”

Many sessions highlighted the need for regulatory
changes aimed at creating more transparency and
competition. Roberto Teixeira da Costa, Member of
the Board, Sul America, Brazil, noted that although
Brazil is a regional leader in many aspects of capital
markets, the country shares at least one important
challenge with its neighbours – unpredictability.
“Unpredictability is the name of the game in Latin
America,” he said. “We have been working towards
“While current levels of annual more transparency, which is important for domestic and
investment in [Latin America and foreign investors. Most important is good governance.”
Caribbean] infrastructure are around
In host country Mexico, the most notable deregulation
2.5% of GDP, it is estimated that the
proposal on the table is President Felipe Calderón’s
region needs to invest 4-6% of GDP for proposed liberalization of the public monopoly in the
the next 20 years to achieve demand petroleum sector. Eduardo Sojo Garza-Aldape,
growth and maintain existing services.” Secretary of the Economy of Mexico, outlined a less
controversial but no less ambitious effort the
Luis A. Moreno, President, Inter-American Development Bank, administration is pursuing in partnership with the
Washington DC Organisation for Economic Co-operation and

22 | World Economic Forum on Latin America
“You need the participation of the state Figure 4: Latin America's Competitiveness in Logistics
but it is a strategic role so that all can Only Argentina is among the world's 50 top countries in terms of
the ease and affordability of arranging international shipments

benefit from the market.” 125
Country rank on international
shipments (of 150 countries)

Eduardo Sojo Garza-Aldape, Secretary of the Economy of 94

Mexico 75
63 66
50 52 53 54

Development that will analyse the Mexican economy 25
26 28

sector by sector to define policies to improve
competitiveness and productivity. Already the








Czech Republic

Costa Rica

government has made piecemeal but significant
changes in port regulations and the liquid natural gas
market, he pointed out. “The country has moved Source: "Connecting to compete: Trade logistics in the global economy", World Bank (2007)

forward with reforms, but one aspect has been
overlooked – microeconomic reforms,” he said.
“These would mean moves to create more Participants discussed the potential for public-private
competition and deregulation.” partnerships and what is needed to attract private
investment for infrastructure development. Ideas
Most of the above-mentioned proposals can be included: (1) using Mexico’s ambitious infrastructure
implemented without significant outlays of public or programme, and its expertise in crafting concession
private money. The exception to that rule is agreements, as a model; (2) creating social legitimacy
infrastructure development (see Figure 4). For many for infrastructure development by avoiding collateral
observers, infrastructure is the lifeblood of damage, reducing cost overruns, accepting the need
competitiveness. The problem of crumbling and for transparency and insisting on environmental
insufficient infrastructure has been at the top of all sustainability; (3) encouraging governments to provide
regional business agendas for several years. stable regulatory environments for investors; and (4)
Governments have taken note and started devoting pushing companies to practise corporate social
significant efforts to boost private investment and are responsibility, for instance by adhering to labour laws
pledging more public funds. However, Latin America and using local suppliers when feasible.
represents only about 3% of global infrastructure
demand. This means investment has started to
increase, but not at the rate needed to close the gap
between needs and investment.

23 | World Economic Forum on Latin America
Enhancing Innovation in Business
and Social Issues

“If there is a lack of security, people “If we don’t educate people, it will be
don’t invest. We have decided to get rid very difficult to have progress. The
of terrorism, this scourge of 40 years – quality and amount of education we
and we have to do it.” have does not allow us to escape from
the feudalism where a lot of Latin
Alvaro Uribe Velez, President of Colombia Americans still live.”

Oscar Arias Sánchez, President of Costa Rica

Latin America doesn’t need a Next Big Thing but society/government level and the micro level within
rather should focus on replicating, supporting and firms; and (4) the chronic problem of bad quality
implementing all the little ideas that have been education must be tackled.
percolating to make real changes on the local and
national levels. “For the first time we may have access The upbeat nature of the meeting stemmed partly
to solutions for most of our problems of economic from the near euphoria over the region’s recent
insecurity,” said Martin Burt, Founder and Chief macroeconomic performance, which has been about
Executive Officer, Fundación Paraguaya, and a Social as good as it has ever been since the dawn of
Entrepreneur. systematic statistical analysis. Paul Rice, President
and Chief Executive Officer, TransFair, USA, a Social
Burt’s comment reflected the sense of optimism that Entrepreneur, reminded participants that today’s good
pervaded the World Economic Forum on Latin news is part of a continuum dating back decades: 30
America. This optimism engendered confidence that years ago, brutal and corrupt military dictatorships
the region can finally address some of its long- lorded over much of the region, armed conflict was
standing and deeply rooted problems. Participants commonplace and politicians customarily meddled in
addressed a broad range of issues related to markets. Today the landscape has improved
economic inclusion, income distribution and social considerably, he noted. Throughout most of the
welfare, and several key themes emerged: (1) the region, democracy reigns and press freedom has
profit motive is part of the solution rather than part of been established, free trade is the norm, civil society is
the problem; (2) companies, governments and civil stronger, the middle class is bigger and environmental
society organizations must work together; (3) consciousness has taken hold.
institution building is key, both at the macro

24 | World Economic Forum on Latin America
Yet amid all that good news lie some harsh realities. “The world economy is being tested
Political unrest, involving sometimes violent street and is at risk. We are not asking for
protests, is growing in many countries. Murder rates
donations but short-term lines of credit
are higher than other parts of the world (see Figure 1).
It is surprising, noted Moisés Naím, Editor-in-Chief, for food and energy. Either
Foreign Policy Magazine, USA, “how good the globalization is a trick – or it is an
economy has been in Latin America and how bad the opportunity.”
politics have been. If the politics have been bad when
the economy has been good, it is interesting to imagine Manuel Zelaya Rosales, President of Honduras
– if you think there will be a slowdown – what the
politics will be like when the economy is bad.” Added
Rice, “We have a lot to celebrate, but the trickle down Rather than reverting to the old and what he called
approach does not work,” as social problems and ineffective approaches of aid and government
poverty stubbornly refuse to go away. He commented, intervention, Rice suggested support of social
“there has been a backlash against free trade, the rise entrepreneurs as the standard bearer for a new-style
of so-called socialism and increasing social unrest. I anti-poverty campaign. “Social entrepreneurship exists
suggest that time is short. Many of the advances of in every community,” he said. “There is a lack of
the last 20-30 years could be reversed.” critical ingredients but not a lack of will.” Key elements
of the approach would include: (1) improved access to
Figure 1: Homicide Rates
markets, including those for value-added products
and niche markets like organic foodstuffs; (2) better
Murder rates in many Latin American countries high compared to other parts of the world
access to capital for small and medium enterprises
US 6
Philippines 8
that have progressed beyond the micro-financing
Thailand 8 stage; and (3) increased capacity building services,
Uganda 9
Latvia 9
including helping small firms develop organizational
Sri Lanka 10 and managerial skills and create value-added
Mexico 13
Kazakhstan 17
Russia 20
Guatemala 26
El Salvador 32 Microfinancing is of course still useful for
Venezuela 33
entrepreneurs at early levels of development. And in
Jamaica 34
South Africa 48 Latin America it is shedding an image as a novel form
0 10 20 30 40 50
Murders per 100,000 population (most recent year)
of assistance to become a service offered by
dedicated banks and divisions of larger financial
Source: CTS
institutions. Microfinance institutions not only provide

25 | World Economic Forum on Latin America
loans to the poor, but they offer savings accounts to To me it sounds like discrimination. It is the same kind
customers that regular banks won’t touch. The of exclusion and discriminatory practices that have
minimum deposit at Mexico’s Banco Azteca, part of kept people in poverty.”
the Grupo Salinas, is five dollars, thus providing a
reasonable and more secure opportunity for people Other innovative best practices received an airing in
who would otherwise stuff cash under the mattress, Cancún. For instance, the CEO of a large rum distillery
said Ricardo B. Salinas Pliego, Chairman, Grupo in one of the most violent states in Venezuela
Salinas, Mexico. Many banks also give their recounted his company’s experience with gangs
customers debit cards, thus further integrating them which continually assaulted employees in
into the mainstream of society. neighbouring communities. His company devised an
“admittedly risky programme” of providing work to
As the segment grows, regulators are beginning to violent gang members. To their surprise, scores of
examine its practices – especially the interest rates it gang members presented themselves for training and
charges, which are far higher than those levied by work. The company eventually brokered a peace
traditional banks for conventional customers. Given between rival gangs and, in a relatively short time, the
the idiosyncratic nature of its business and cost crime rate in the county dropped 90%. “We all know
structure, micro-bankers argue that regulators should the importance of family but we didn’t understand the
treat them differently from traditional institutions. “It fact that gangs are families, providing the identity,
isn’t apples and oranges,” said Salinas. “It is apples sense of belonging and discipline when society fails to
and pineapples, way more different.” Added provide these needs.”
Christopher Rodrigues, Executive Chairman,
International Personal Finance, United Kingdom: “Bad
regulation should be avoided at all cost. But we
defend supervision. Good supervision drives bad
practices out of the market.” When critics raise ethical
questions about higher interest rates for the poor,
noted Carlos Danel, Co-Chief Executive Officer, Banco
Compartamos, Mexico, a Young Global Leader, “The
question they are really raising is not about interest
rates but whether it is ethical to profit from the poor.

26 | World Economic Forum on Latin America
Education: The Cornerstone of Latin America’s Future

Business, government and civil society leaders identified In a vote, participants identified the most important
the need to construct values and skills-driven education initiatives to be implemented in the next 20 months to
systems as the top priority for Latin America to achieve bridge this gap and make the next decade more
sustainable development. “It is the number one issue,” promising for academic institutions:
said Oscar Arias Sánchez, the President of Costa Rica, • Complement technical skills with problem solving and
noting the low proportion of teenagers who go on to attitude skills as subjects – 35%
university. “If we don’t educate people, it will be very • Encourage the joint design of curriculum planning by
difficult to have progress.” academia and business – 20%
• Design partnerships with companies for on-the-job
The “entry level skills gap” in education was a topic of training as part of the curriculum – 20%
in-depth discussion in Cancún. Educators, labour leaders • Brand new schools to attract top students – 10%
and government ministers are struggling with the huge • Partner with major corporations to bridge the skills
– and widening – gap between the need for technicians gap – 10%
and engineers and the availability of suitable new • Support faculty/teachers spending time in
graduates. Demographics are working against bridging companies – 5%
this gap: engineers are ageing and retiring while students
are choosing more “glamorous” careers such as law. The most important initiatives to be implemented in the
next 20 months to make the next decade more
From the business perspective, the “perfect engineer” promising for business include:
must understand local and international standards and • Become more involved in basic education to promote
codes, be equipped with hands-on experience, the quality of education – 31.8%
understand the balance between the commercial • Compensate in order to motivate professionals and
realities of the private sector and the public good, as well book job satisfaction at the workplace – 18.2%
as have a well-rounded education in the softer subjects. • Motivate executives to spend more time in
From the academic perspective, business must become academia – 18.2%
creatively involved if institutions are to turn out graduates • Develop training programmes as a means to reduce
with suitable entry-level skills. Participants debated costs on human resources turnover – 13.6%
whether today’s shortcomings stem from the basic • Encourage meritocracy through initiatives – 9.1%
education system, and agreed that a lack of learning • Make engineering more glamorous for young
skills is pervasive across the region. Employees’ capacity professionals – 4.6%
to learn and to solve problems is key if companies – • Encourage recent engineering graduate students’
and Latin America – are to boost competitiveness. repatriation – 4.6%

27 | World Economic Forum on Latin America

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

Strategic Partners

The Boston Consulting Group
Cisco Systems
Goldman Sachs
Infosys Technologies
Kudelski Group
Merck & Co.
Merrill Lynch
Zurich Financial Services

Regional Partners

Banco Hipotecario
Cambridge Energy Research Associates (CERA)

Meeting Supporters

Iberia Group

The World Economic Forum wishes to thank the Government of Mexico for serving as host country
to the third World Economic Forum on Latin America, and in particular ProMexico, the Mexican
agency for export and foreign investment promotion.

The World Economic Forum also thanks Canal Once, Mexico, in collaboration with ProMexico, the
host broadcasters of this event, and The Coca-Cola Company for providing beverages.

28 | World Economic Forum on Latin America
29 | World Economic Forum on Latin America

Emilio Lozoya Austin is Head of Latin America and a Global Leadership Fellow at the World
Economic Forum. The World Economic Forum on Latin America was under his direct

Julio Estrada is Associate Director, Latin America. Jacques Marcovitch is Professor, University of
São Paulo, Brazil, and Senior Adviser at the World Economic Forum. Paula Verholen is Senior
Community Relations Manager, Latin America. Antonio Human is Community Relations
Manager, Latin and North America. Rosanna Mastrogiacomo is Senior Event Manager, and was
the meeting Coordinator.

Report Writers
Alejandro Reyes
William Hinchberger
Samantha Tonkin, Senior Media Manager at the World Economic Forum, worked with them to
produce this report.

Editing and Production
Kamal Kimaoui, Associate Director, Production and Design
Fabienne Stassen Fleming, Senior Editor

Sergio Ochoa

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

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

30 | World Economic Forum on Latin America
This publication is also available in electronic form on the World Economic Forum’s website at the following

World Economic Forum on Latin America Web report: (HTML)

The electronic version of this report allows access to a richer level of content from the meeting, including
photographs and session summaries.

The report is also available as a PDF:

Other specific information on the World Economic Forum on Latin America in Cancún, Mexico,
on 15 and 16 April 2008, can be found at the following links:

31 | World Economic Forum on Latin America
The World Economic Forum is an independent
international organization committed to improving
the state of the world by engaging leaders in
partnerships to shape global, regional and
industry agendas.

Incorporated as a foundation in 1971, and based
in Geneva, Switzerland, the World Economic
Forum is impartial and not-for-profit; it is tied to
no political, partisan or national interests.