OBG talks to Enrique García Rodríguez, Executive President, CAF development bank of Latin America

Interview: Enrique García Rodríguez

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

ENRIQUE GARCÍA RODRIGUEZ: Europe has made a great political effort over the years. This continuity is one of the factors in the success of the EU’s integration, compared with Latin America whose own efforts since the late 1950s have not been fully sustained. The EU managed to establish strong supranational institutions that can resolve differences among its members. There has also been a historical recognition of the asymmetries and imbalances that exist, which has lead to the adoption of specific measures to try to correct these. Regional integration in Latin America is at an important turning point. There are significant differences in economic and political priorities, as well as disparities with regards to integration mechanisms and bilateral negotiations. Likewise, there are difficulties in making progress on multilateral negotiations. Another issue where Latin America must adopt a pragmatic approach is in the treatment of asymmetries, which has not yet been fully addressed. Weaknesses in the physical infrastructure affect integration, and the region suffers logistical difficulties at border crossings and from limited electrical and telecommunications interconnection. In this context, over the past decade we have approved more than $8bn of funding to implement 64 physical integration projects, with total investment of more than $26bn, including roads, railways, telecommunications, energy, ports and airports. Additionally, CAF has been working on the implementation of interrelated strategic programmes to promote regional integration; generate knowledge and expertise for the analysis of infrastructure sectors; improve the planning and preparation of investments; and strengthen public institutions responsible for infrastructure management.

Would greater focus on vocational education help increase foreign direct investment (FDI)?

GARCÍA: Companies have to adapt their production processes while differentiating and diversifying their products and services to absorb new technologies. This requires a trained workforce. An efficient system of technical and vocational training can have a positive impact on productivity. Latin American countries should improve the quality of vocational education through strategic partnerships between the public and private sectors, thereby creating programmes aligned with business demands and new global standards.

The region has a shortage of skilled labour, primarily due to a mismatch between the skills required by the productive sector and those offered by educational institutions. Almost 37% of companies in the region say that the lack of manpower with proper training, together with the lack of innovation, is one of the main obstacles to expansion. The World Economic Forum’s Competitiveness Index highlights low levels of competitiveness in the region due to poor quality education. Attracting FDI with high added value would be more successful if workers with adequate technical skills could be assured.

In what way has Colombia benefitted from the high levels of investment by CAF in recent years?

GARCÍA:Between 2009 and 2012 CAF approved $6.9bn for Colombian projects, an average of $1.73bn a year, and in 2013 Colombia secured a sum of $1.56bn. The main beneficiaries have been infrastructure, energy and finance; however, we have also funded operations for microfinance. Infrastructure investment has focused on transport, in particular roads, as well as ports, logistics and energy. The fourth generation of the road concessions programme identified 40 projects costing nearly $25bn, which CAF strongly supported by investing in the National Fund for Project Development.

In addition, we have launched an infrastructure fund for principal debt, a first in the region, with the aim of channelling institutional resources to Colombia. We also support the expansion of local banks through strategic investments and microfinance. Lastly, CAF has a set of financial tools to support individual grants.