Three Vital Challenges: Violence, Education and Productivity. Interview with the World Bank’s Vice President for Latin America and the Caribbean

The figures are strikingly clear: out of the seven regions of the world, Latin America stands out as the most violent. “Per capita homicides in Latin Americans are five times higher than in the U.S., ten times more than Asia, making it an objectively violent region,” said Carlos Felipe Jaramillo, Vice President for the Latin America and the Caribbean Region of the World Bank.

The Bank’s research has revealed that the costs associated with crime and violence in the region amount to a staggering 8% of GDP per year.

“We are fully aware of this; and it is not just a law enforcement issue. It is also a developmental issue. It impacts people, investment, and growth. We need to do more,” Jaramillo emphasized. He further claimed that the recent violent incidents in Ecuador does little to attract local and international investment.

Why haven’t more efforts been made? “One of the reasons is that it is very difficult. We have tried a various strategies over the last 20 years. It is very difficult to find practical solutions that work.”

Nevertheless, there is a new development. “I’ve seen, especially in recent months, a convergence among us in the multilateral agencies. We know that we really have to try harder.” Jaramillo has already initiated discussions with Inter-American Development Bank and CAF, with plans for the three institutions to launch a joint project aimed at better understanding the issue and proposing better solutions.

It is not often that these three multilaterals unite forces. “We come together when there are some really tough problems. This certainly qualifies as one.”

Education

On par with this critical issue, there is one problem is not considered in opinion polls: education. “ I would wish that countries would focus more on, and make the necessary changes in education,” Jaramillo stressed. “We’ve just analyzed the results of the latest PISA tests and they are very sad for Latin America and the Caribbean. In math, 75% of 15-year-olds don’t meet the basic competencies and 50% on reading standards.”

The ramifications of these findings are profound, impacting lifetime household income and economic development.  “With this kind of poor education, how can these young people compete for today’s and future jobs? How can investors hire well qualified staff? Instead they find people who are barely competent in these very basic skills.”

The Vice President’s recommendation is clear: countries must invest more, and more effectively, in education. “That is my dream.”

Productivity: a bleak outlook

“I´m sad to say, I don’t see too many countries pushing hard on an agenda, a critical and pending agenda of productivity improvements. There are a few things here and there, but nothing terribly promising. I don’t foresee any change,” remarked Jaramillo.

Overall, he said, “countries are not doing enough domestically to generate productivity increases needed for internal growth, especially when the external environment is relatively weak.”

The statistics confirm his concerns about a poor economic performance in the region. The Bank is currently updating its 2024 economic outlook for the region. “Overall, we are expecting very little improvement compared to last year.” In 2023 regional GDP growth was 2.2%, and the expert believes there will not be a significant change in the figure.

Domestic factors remain stagnant, he noted. “The external environment in some respects is a little better: the US economy is a little bit better and China probably is a little bit worse.”

He is not overly optimistic about how the international scenario will affect Latin America and the Caribbean. “The region, for better or worse, continues to depend mainly on commodity exports. While growth in China, other Asian countries and Europe remains lackluster, commodity prices will continue to be soft.”

Nearshoring is not boosting growth. The potential opportunity to attract investment has not materialized, except in some cases in Mexico, Costa Rica, and a few other places. “These are small amounts. It is a bit disappointing.”

Two factors influence the result. “First, the push hasn’t been that strong. We don’t see many firms actively looking to re-localize.”

 Second, the countries still have structures that are not particularly attractive to foreign investors. The reasons are the same as they have been in the past. “The frameworks for investing still have big gaps.”

Markets are heavily protected, there isn’t enough competition and openings for new, large investors, Jaramillo noted. Human capital remains a weakness in the region. “There’s not enough investment to enhance the skills and education of the labor force.”

Furthermore investments in infrastructure are progressing at a snail’s pace, he claimed. “They certainly are not enough to make a significant change.”

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