Enrique García Rodríguez, Executive President, CAF development bank of Latin America: Interview

Interview: Enrique García Rodríguez

What can Latin America learn about economic integration from the EU’s history?

ENRIQUE GARCÍA RODRÍGUEZ: The project of European integration offers important lessons for Latin America. Europe has made a huge political effort for years, a continuity that is one factor in its success. By contrast, Latin America’s efforts toward integration, which have been going on since the late 1950s, have not been fully sustained. The EU has managed to establish strong supranational institutions that can effectively resolve differences among its members. It has historically recognised asymmetries and imbalances, and this has helped them adopt specific measures to correct them. Europe also invites popular participation to support its decisions as it continues integration. One of the paramount lessons is the symbiotic relationship between institutional and economic bodies: one cannot move without the other.

In Latin America, regional integration is at a turning point. Its countries’ priorities, economic and political, have significant differences. There are also different visions for how to integrate and conduct bilateral negotiations, and thoughtful difficulties with multilateral negotiations. Latin America must be pragmatic in its treatment of asymmetries, an issue that has not yet been addressed in a sufficient manner.

Weaknesses in physical infrastructure also inhibit integration. The region suffers logistical difficulties at border crossings and limited connectivity in electricity and telecommunications. One of CAF’s missions is to strengthen regional integration and sustainable development of this kind. In the past 10 years we have approved more than $8bn for around 64 projects in South American physical integration, reaching a total investment of over $26bn for things like roads, railways, telecommunications, energy, ports and airports. CAF has also been working on strategic programmes to promote integration. These aim to generate the knowledge and expertise to analyse infrastructure sectors, improve the planning of investments and strengthen public institutions responsible for managing infrastructure.

Would a blitz on vocational education help boost foreign direct investment (FDI)?

GARCÍA: Companies have to adapt their production to absorb new technologies, while differentiating and diversifying their products and services. This requires a properly trained workforce. An efficient system of vocational training can thus enhance productivity. Latin American countries should improve vocational education by public-private partnerships (PPPs), and through programmes aligned with business demands and changing global standards. The region has a big shortage of skilled labour, due to a mismatch between the educational offer and the skills required by the productive sector. Almost 37% of companies in the region say that one of the main obstacles to expansion is the lack of manpower with proper training, as well as a lack of innovation. The World Economic Forum’s competitiveness index ranks the region very low due to poor education. Attracting FDI with high value-added would be more successful if companies were sure of finding workers with adequate technical skills.

Can PPPs help kickstart infrastructure projects?

GARCÍA: CAF recognises the importance of promoting innovative schemes of public-private cooperation as a source of advice, as well as of multilateral financing for infrastructure. Hence, we promote the idea of building public projects with private involvement. Some Latin American countries – Brazil, Chile, Colombia and Peru are examples – have done so successfully for several years, enabling good progress in building efficient regulatory and institutional frameworks.

Does CAF see much potential in Peru’s agriculture?

GARCÍA: CAF supports the development of large-scale irrigation using the best technology. Examples are the Chavimohic Project, Olmos and Majes Siguas, totalling more than 200,000 acres, and with great potential for exports. Thanks to location, climate and water sources, these areas will help Peru expand into foreign markets.

What can Latin America learn about economic integration from the EU’s history?

GARCÍA: The project of European integration offers important lessons for Latin America. Europe has made a huge political effort for years, a continuity that is one factor in its success. By contrast, Latin America’s efforts toward integration, which have been going on since the late 1950s, have not been fully sustained. The EU has managed to establish strong supranational institutions that can effectively resolve differences among its members. It has historically recognised asymmetries and imbalances, and this has helped them adopt specific measures to correct them. Europe also invites popular participation to support its decisions as it continues integration. One of the paramount lessons is the symbiotic relationship between institutional and economic bodies: one cannot move without the other.

In Latin America, regional integration is at a turning point. Its countries’ priorities, economic and political, have significant differences. There are also different visions for how to integrate and conduct bilateral negotiations, and thoughtful difficulties with multilateral negotiations. Latin America must be pragmatic in its treatment of asymmetries, an issue that has not yet been addressed in a sufficient manner.

Weaknesses in physical infrastructure also inhibit integration. The region suffers logistical difficulties at border crossings and limited connectivity in electricity and telecommunications. One of CAF’s missions is to strengthen regional integration and sustainable development of this kind. In the past 10 years we have approved more than $8bn for around 64 projects in South American physical integration, reaching a total investment of over $26bn for things like roads, railways, telecommunications, energy, ports and airports. CAF has also been working on strategic programmes to promote integration. These aim to generate the knowledge and expertise to analyse infrastructure sectors, improve the planning of investments and strengthen public institutions responsible for managing infrastructure.

Would a blitz on vocational education help boost foreign direct investment (FDI)?

GARCÍA: Companies have to adapt their production to absorb new technologies, while differentiating and diversifying their products and services. This requires a properly trained workforce. An efficient system of vocational training can thus enhance productivity. Latin American countries should improve vocational education by public-private partnerships (PPPs), and through programmes aligned with business demands and changing global standards. The region has a big shortage of skilled labour, due to a mismatch between the educational offer and the skills required by the productive sector. Almost 37% of companies in the region say that one of the main obstacles to expansion is the lack of manpower with proper training, as well as a lack of innovation. The World Economic Forum’s competitiveness index ranks the region very low due to poor education. Attracting FDI with high value-added would be more successful if companies were sure of finding workers with adequate technical skills.

Can PPPs help kickstart infrastructure projects?

GARCÍA: CAF recognises the importance of promoting innovative schemes of public-private cooperation as a source of advice, as well as of multilateral financing for infrastructure. Hence, we promote the idea of building public projects with private involvement. Some Latin American countries – Brazil, Chile, Colombia and Peru are examples – have done so successfully for several years, enabling good progress in building efficient regulatory and institutional frameworks.

Does CAF see much potential in Peru’s agriculture?

GARCÍA: CAF supports the development of large-scale irrigation using the best technology. Examples are the Chavimohic Project, Olmos and Majes Siguas, totalling more than 200,000 acres, and with great potential for exports. Thanks to location, climate and water sources, these areas will help Peru expand into foreign markets.