Political Risk Latin America Blog @PolRiskLatam

Innovation: The Next Challenge

Posted in News and Articles, Political Risk by politicalrisklatam on November 17, 2010

by Jerry Haar for Latin Business Chronicle, November 16th, 2010.

Competitiveness requires more than sound macro policies and a good business environment.

With the recent release of the World Bank’s Doing Business 2011 report, Latin America and the Caribbean have much to cheer about with more advances than declines in key categories of conducting business. Mexico and Peru scored highest—first and second place, respectively. For Mexico, the achievement was a much needed shot in the arm, in light of the fact that most recent shots have been exchanges between drug cartels and the cartels and police, with many civilians being caught in the crossfire. In the case of Peru, its notable accomplishment is testimony to the government’s hard-nosed recognition that high commodity prices (minerals, in this case) may well boost GDP to close to double-digits, but this feat is irrelevant to the reality of doing business in that country on a day-to-day basis.

The Doing Business reports are a more useful barometer for business people and a practical guide for policymakers than macroeconomic assessments and projections of fiscal and monetary policy, interest rates, trade balances, and the like. For Doing Business focuses on the electrical circuitry and plumbing of actually doing business.

Nevertheless, before Mexican government officials crack open the bottles of tequila and their Peruvian counterparts pour themselves large glasses of pisco sours to celebrate, they need to be mindful of the fact that in the world’s increasingly globalized and competitive, knowledge-based economy, the ease by which a working-class Lima resident can open a nail salon or a multinational mining company can gain a permit for expanding its copper extraction operations are necessary but insufficient measures of business competitiveness. In the 21st century, sound macroeconomic polices and a hospitable business environment must be enjoined by innovation—processes, products, and services. In that regard, Latin America and the Caribbean lag badly. (continue reading… )


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