World Economic Forum on Latin America

The Power of a Positive Regional Agenda

Santiago de Chile, 25-26 April 2007

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Contents

Page 2
Preface

Page 3
Summary: The Power of a Positive Regional Agenda

Page 6
World Trends and Issues

Page 10
Changing Perspectives and Priorities in Latin America

Page 14
Understanding the Mindset of Latin American Policy-makers and
Business Leaders

Page 18
Achieving Equitable Income Distribution in Latin America

Page 22
China and Latin America

Page 26
Acknowledgements
Preface

Emilio Lozoya
Associate Director,
Global Leadership Fellow,
Head of Latin America

Latin America’s current historically high levels of electoral democracy and political stability, coupled with its recent
economic success, is changing mindsets in addition to inter- and intraregional trade and investment flows. This year’s
theme, The Power of a Positive Regional Agenda, highlighted the need to acknowledge and consolidate recent regional
successes, as well as to re-evaluate strategic priorities and working assumptions as the region enters an era of
newfound opportunities and emerging risks.

The World Economic Forum’s regional activities are designed to look at the past in order to deepen our understanding
of history, but also to look forward and establish priorities for the future. Viewing the past, our members agreed on their
relative satisfaction with the improved regional macroeconomic stability, democratic progress and poverty reduction
indicators, although not with levels of inequality. As regards the future, an agenda or common denominator as a priority
for the medium term was achieved by building up a Santiago Consensus. This Consensus should help shape a clear
and positive regional agenda in order to boost economic growth with more equitable income distribution.

The region is growing faster than in the past, but not as fast as other emerging markets, and clearly not fast enough to
tackle its dramatic socio-economic imbalances. Most countries have benefited from positive international trends, such
as lower interest rates, a very benign liquidity environment and historically-high commodity prices. Higher productivity
rates and therefore more economic growth will mainly derive from innovation and investments in human capital in the
next few decades. Therefore, the current positive trend will only be sustainable socio-politically if the Latin American
leadership is able to craft effective strategies to create more quality jobs, manage social tensions and establish clear
long-term plans with national consensus across the political spectrum.

No single institution can be expected to both anticipate and address the region’s evolving agenda. Therefore, the
programme of the World Economic Forum on Latin America was designed to generate insight and guide action in order
to improve the alignment of the region’s industrial, political, social and economic agendas. Moreover, the programme
was organized under five thematic pillars to help participants make the most of the opportunity to shape the regional
agenda. At the core were sessions aimed at understanding the impact of world trends on the region, the economic
influence of China on Latin America and ensuing opportunities, and boosting infrastructure and energy investments in
priority areas. Other sessions focused on climate change and its opportunities for Latin American countries, and
workshops engaged in understanding the shifts in power within the region and the changing perspectives of the newly
elected leaders. Discussions aimed to improve the investment climate, the productivity and thus the competitiveness of
the region’s economies through the sharing of lessons learned.

Recent data on investment flows and regional investment plans shared by Forum member companies in Santiago point
to increased regional integration led by the business sector. This positive trend will slow, however, if the various regional
stakeholders do not act rapidly to increase physical integration through infrastructure investments and if they do not
work wisely on a pragmatic political integration plan that can help the region act in a coordinated manner and influence
the global agenda, thus enhancing the prospect of improving the quality of life of the region’s population.

2 | World Economic Forum on Latin America

Summary: The Power of a Positive
Regional Agenda

More than 400 business, government and civil society environmental responsibility, investment in innovation,
leaders gathered in Santiago for the World Economic the creation of efficient tax systems and public
Forum on Latin America. The recent economic growth spending procedures, and infrastructure development.
that the region has experienced – over 5% on average This winning strategy, concluded Richard Samans,
in the past three years – and its increasing political
Managing Director, Centre for Public-Private
maturity have offered Latin American countries the
Partnerships at the World Economic Forum,
opportunity to pursue real reform at a time when the
risks they face appear manageable. A major challenge represents “a more deliberate and multifaceted effort
is to prepare the continent’s economies to withstand to achieve higher growth and equity”.
the shocks that have previously been their undoing.
“The current benign international economic trend,
This will require creating the conditions to encourage
coupled with the improved regional macroeconomic
new investment and participation by the private sector
situation, offer a very important occasion to carry out
and inspire policies aimed at achieving equitable
the second-generation reforms that were agreed upon
income distribution. In particular, increased investment
as priorities in the Santiago Consensus. It is clearly
in infrastructure, human capital and R&D, as well as
easier to carry out these public policies with the
accelerated institutional reforms, are needed.
support of the private sector and civil society when
the accounts are balanced or even in surplus,” said
“Globalization is creating winners and losers,” said
Emilio Lozoya, Head of Latin America at the World
Jean-Pierre Rosso, Chairman, Centre for Global
Economic Forum. The opportunity offered by the
Industries at the World Economic Forum, referring to
momentum for a positive agenda of action must be
the emergence of dynamic global growth companies.
seized.
But that assessment equally applies to countries and
regions. The question is whether Latin America is
The Santiago meeting was organized around five sub-
prepared to take the steps to ensure that its
themes: “World Trends and Issues”, “Changing
economies and its enterprises are ready to compete in
Perspectives and Priorities in Latin America”,
the global economy – and win.
“Understanding the Mindset of Latin American Policy-
makers and Business Leaders”, “Achieving Equitable
Continuing on from work done at last year’s gathering
Income Distribution in Latin America”, and “China and
in São Paulo, participants aimed to demonstrate “the Latin America”.
power of a positive regional agenda”, the theme of the
meeting in Chile. By the end, they had shaped the
Santiago Consensus, a list of priorities for change in
Latin America. They include a focus on education,

3 | World Economic Forum on Latin America

From left to right: Martín P. Redrado, President of the Central Bank of Argentina; Andrés Velasco, Minister of
Finance of Chile; Pamela Cox, Vice-President, Latin America and the Caribbean, World Bank, Washington DC;
José C. Grubisich, Chief Executive Officer, Braskem, Brazil, and Co-Chair of the World Economic Forum on Latin
America; John Lipsky, First Deputy Managing Director, International Monetary Fund (IMF), Washington DC
World Trends and Issues
Latin America is experiencing an unprecedented
period of strong economic growth relative to the past
20 years and stable political development. Economic
growth has been bolstered by the region’s growing
trade relationship with Asia, particularly China, while
political institutions have been strengthened by a
series of democratic elections across the continent.
• There remain real risks to Latin America’s prosperity
and stability, including the potential for a hard
landing in China or an economic slump in the US.
As it gets more deeply integrated into the global
economy, Latin America may also become more
vulnerable to shocks from outside the region.
• High petroleum prices and volatility in the market
present tough challenges to oil-consuming countries
and substantial windfalls for energy producers.
• Such environmental risks as climate change could
be turned into an opportunity rather than remain a
threat to Latin America.
• While the private sector must take a greater role in
the economy, the government must take efforts to
pursue policy reforms that will ensure that Latin
American economies can weather the shocks that
have previously been their undoing.
4 | World Economic Forum on Latin America
Changing Perspectives and Priorities in
Latin America
The emergence of the Santiago Consensus indicates
how perspectives and priorities are changing in Latin
America. The new priorities for the region are
education, innovation and institutional reform.
• The only viable path for the region is towards
prosperity with equity. The focus must be on greater
investment and stronger growth as well as on
reducing poverty.
• The environment must be a priority for sustainable
growth as well as a business opportunity for the
region.
• Tax reform and sound public spending are crucial to
stimulating growth and productivity in the region.
• Private investment is fundamental to addressing
deficiencies in infrastructure in the continent.
• Governments must aim to break their economies
out from the boom-bust commodity price cycles
that have marked Latin America’s past
development.
Understanding the Mindset of Latin
American Policy-makers and Business
Leaders
The populism of Latin America’s past is giving way to
a more clear-headed leadership style marked by
pragmatism and innovation. The changing mindset in
the region is reflected in shifting views on the
environment and corruption.
• In contrast to the infallible strongmen of the past,
Latin American leaders are more willing to admit
problems and mistakes and to take a realistic
approach to solving them.
 From left to right: Alejandro Jara, Deputy Director-General, World Trade Organization (WTO), Geneva;
Andronico Luksic Craig, Vice-Chairman, Banco de Chile, and Co-Chair of the World Economic Forum on
Latin America; Alberto Padilla, Senior Business Anchor, CNN en Español, USA; Zhang Shoulian,
President, China Minmetals Non-ferrous Metals, People's Republic of China, and Co-Chair of the World
Economic Forum on Latin America; and Luiz Fernando Furlan, Minister of Development, Industry and
Foreign Trade of Brazil (2003-2007)

• In the area of infrastructure development, Chile has China and Latin America
demonstrated that a pragmatic strategy can yield
results. The deepening of trade and investment ties between
• Forward-looking Latin American business leaders China and Latin America has turned the two sides
are driving positive changes in environmental policy. from distant friends to strategic partners with a range
• The old image of Latin America as a corrupt society of common interests.
is being refuted by an increasing number of success • For a real partnership to evolve, China and Latin
stories that provide anecdotal evidence that the America will have to develop a more textured
situation is improving. relationship based on more than commodities and
raw materials trading.
Achieving Equitable Income Distribution in • Latin American business must find ways to exploit
Latin America the opportunities offered by China’s economic rise.
Economies in the region must also takes steps to
The top priority of the Santiago Consensus, education boost their comparative advantages to allow them
emerged as the chief means to achieve equitable to compete in a global economy in which China and
income distribution in Latin America. India have become key players.
• Deficiencies and disparities in education are the root • China’s emergence should inspire Latin American
of social inequality and, as a consequence, of economies and companies to pursue critical
political risk. reforms that will strengthen their ability to withstand
• High-quality education is a necessary precondition the pressures of globalization.
for innovation.
• Throwing money at the problem is not a sufficient
solution. Instead, investment in education is
necessary to improve the quality of schools.
Business should be encouraged to play a role in
educational reform and development.
• To improve the quality of education requires, better
curricula, effective benchmarking and assessment,
the creation of stimulating environments for learning,
the professionalism of teachers, and strong
participation of parents and the wider community to
ensure that schools are properly funded and
students are inspired to learn.

5 | World Economic Forum on Latin America

World Trends and Issues

“ I remain optimistic about what this region

can accomplish and I believe that we have
the people, resources and institutions
“ Economies of the region have been improving
“
and expanding, pulling many people out of
poverty.
existing now to address the big problems it
Alejandro Jara, Deputy Director-General, World Trade
faces but it is a question of working together.
So an agenda focusing on dialogue and
“ Organization (WTO), Geneva

cooperation is going to be essential.

On the political front, Latin American institutions look
Thomas A. Shannon Jr, Assistant Secretary, Bureau of
stronger than they did just five years ago. Despite
Western Hemisphere Affairs, US Department of State, headlines trumpeting a new left-wing nationalist wave,
Washington DC in more than a dozen elections in the region over the
past year, populist candidates did not sweep into
office as had been predicted. While the two main
As the global economy has continued its best candidates disputed the results of presidential polls in
performance in a generation, Latin America has been Mexico and corruption scandals shook the campaign
doing its part. The region is expected to grow by up in Brazil, both countries – the two biggest economies
to 5% in 2007-8, the sixth year of expansion. In the of the region – emerged with their commitment to
past four years, GDP per capita has increased by democracy strengthened.
16%. The continent’s GDP is nearly the same as
China’s, although its 550 million population is half that This favourable environment inspired many
of the Asian giant’s. Its steady growth has seen its participants at the World Economic Forum on Latin
share of global GDP growth increase nine percent America to hail the region’s progress. “We can look at
since 2002 (see Figure 1). Goldilocks is alive and well Latin America with a positive perspective,” declared
in Latin America. José Miguel Insulza, Secretary-General of the
Organization of American States (OAS) in Washington,
DC. “Democracy is working in most territories and the
Figure 1: Latin America's Steady Role in Driving Global Growth
economy is growing. In comparison with other regions
10%
and the past, the region is growing more than it has in
the past 30 years.”
Latin America & Caribbean share

8
of global GDP growth

-2
2000 2001 2002 2003 2004 2005 2006 2007F 2008F

Source: IMF; PricewaterhouseCoopers analysis

6 | World Economic Forum on Latin America

“ There is a broad consensus amongst leaders
of government and the private sector about
the path to grow the economy while “
providing greater openness for everyone to
participate in that prosperity.
Andronico Luksic Craig, Vice-Chairman, Banco de Chile;
Co-Chair of the World Economic Forum on Latin America
Yet there were certainly voices in Santiago that
warned of the risks that could spoil the “just-right”
outlook. The closer economic ties between Latin
America and Asia, particularly China, that have been
forged in recent years mean that a hard landing of the
red-hot Chinese economy could have a major
negative impact on the region. A slump in the US
could have a similar effect. Because its economies
have become better integrated with the international
economy, the region has benefited from the spread of
global growth but is also more vulnerable. Latin
America's commodities-driven growth wave could
slow down abruptly. “The business cycle is not dead,”
cautioned Felipe Larraín Bascuñán, Professor of
Economics, Catholic University of Chile. Expansions
do not last forever.
“ It is not sufficient to bring growth back to our
economies. We should focus on how to bring
“
about a stable macroeconomic position and
combine growth and investment to reduce
poverty.
José C. Grubisich, Chief Executive Officer, Braskem, Brazil;
Co-Chair of the World Economic Forum on Latin America
Figure 2: Latin American Energy Imports
Energy supplies are not evenly dispersed across the region
Net imports, 2004
(million tonnes of oil equivalent)
Net energy importer (>10 Mtoe)
Mexico
Net energy importer (<10 Mtoe)
Net energy exporter (>10 Mtoe)
Net energy exporter (<10 Mtoe)
Colombia
Brazil
Chile
Argentina
Source: IEA
The energy sector in particular presents both rewards
and risks. The growth in demand from China and India
has in part driven oil prices up, resulting in higher
costs for many economies – notably net energy
importers (see Figure 2) – but substantial windfalls to
petroleum producers such as Venezuela. The rising
7 | World Economic Forum on Latin America
“ Every country needs to find its own way, but
we also need to take a look around the world
at what works in countries that are successful.
More interregional collaboration and
networking would help that.
Beatriz Nofal, Secretary of State; President, Agencia
Nacional de Desarrollo de Inversiones (ProsperAr), Argentina
demand for biofuels has been a benefit to those
countries such as Brazil that have moved ahead in the
development of alternatives to oil (see Figure 3).
Figure 3: Renewable Energy in Latin America
Brazil ranked 12 among 123 nations around the world in terms of renewable energy use
Renewable Energy Index (REI)
7.5–10
5.0–7.5
2.5–5.0
Mexico
0–2.5
No data
Note: Higher scores indicate higher relative levels of renewable energy consumption in 2001.
Source: Maplecroft
But as in fast-growing China, perhaps the biggest risk
to Latin American stability and prosperity remains the
tensions and stresses that result from the inequalities
in the region. While inequality in the region has
decreased slightly over the past 17 years (see Figure
4), Goldilocks has to share more of the rich porridge.
“There is broad consensus among leaders of
government and the private sector about the path to
grow the economy while providing greater openness
8 | World Economic Forum on Latin America
“
for everyone to participate in that prosperity,” said
meeting Co-Chair Andronico Luksic Craig, Vice-
Chairman, Banco de Chile. The Santiago consensus
spelled out that essential recipe for sustainability and
confronting the challenges of globalization: investment
in education, innovation and infrastructure matched
with a strong commitment to reform burdensome tax
systems and redress environmental misdeeds. “It is
not sufficient to bring growth back to our economies,”
said José C. Grubisich, Chief Executive Officer,
Colombia
Braskem, Brazil, and Co-Chair of the World Economic
Brazil
Forum on Latin America. “We should focus on how to
bring about a stable macroeconomic position and
Chile combine growth and investment to reduce poverty.”
Argentina
The private sector will inevitably have to play a major
role in pushing forward the Santiago Consensus. But
for the private sector to come to the fore will require
the public sector to create the right environment and
conditions to allow it. The key is governance. “The
issue for Latin America is not the diagnosis but rather
it is a problem of action and management,” Luiz
Fernando Furlan, Brazil’s former Minister of
Development, Industry and Foreign Trade, told
participants. A priority for policy-makers is to address
the volatility that has typified the economic
development of the region, as well as its politics. The
main objective of reforms, said Martín P. Redrado,
President of the Central Bank of Argentina, must be to

World Economic Forum joins forces with
Inter-American Investment Corporation to
fight corruption in Latin America
Combating corruption on the continent came under the
spotlight at the World Economic Forum on Latin
ensure that Latin America can weather shocks to its
financial system and achieve fiscal order and
macroeconomic stability. “This is one of the biggest
challenges – how to create permanent public policies
that will make all cycles transitory and how to mitigate
the volatility that we have suffered in past years.”
Figure 4: Inequality Across the Region Is Down Slightly Since 1990
0.65

Countries in which inequality increased

America. In a bid to bolster the fight, the World Brazil

0.60
Economic Forum’s Partnering Against Corruption Honduras
Colombia
Gini coefficient, 2003/2005

Initiative (PACI) and the Inter-American Investment 0.55

Latin America (weighted ave.)
Chile faster than average
Corporation (IIC) signed a Memorandum of Argentina
Mexico GDP growth

Ecuador

Understanding aimed at countering corruption and 0.50

Paraguay
Venezuela
El Salvador
Panama
slower than average
GDP growth

bribery. The agreement will encourage corporations to Costa Rica

take a “zero-tolerance” stand on corruption and to 0.45 Uruguay

implement effective anti-corruption programmes in the Countries in which inequality decreased

0.40
region. The joint activities will concentrate on Latin 0.40 0.45 0.50 0.55 0.60 0.65

Gini coefficient, 1990

America and the Caribbean.
Source: Economic Commission for Latin America and the Caribbean, World Bank

IIC Board Chairman, Luis Alberto Moreno, President of

the Inter-American Development Bank, signed the
Memorandum of Understanding with World Economic
Forum Managing Director, Richard Samans, a Board
member of the PACI, on the first day of the World
Economic Forum on Latin America.
The agreement will lead to the development of a PACI
framework and tools tailored for supply chain entities of
multinational corporations and particularly for small and
medium-sized enterprises. The two parties also intend to
raise awareness on the issue in the region and engage
many more companies in the active fight against
corruption. In addition, the IIC is in the process of
revising its internal policies on anti-fraud and corruption,
and intends to do so in order to be consistent with the
Principles for Countering Bribery developed by PACI.
Latin America’s great fortune is that it is experiencing a
sustained period of economic growth. “These good
economic results are a starting point for reducing
volatility in order to make the region more attractive for
investors,” concluded Argentinean State Secretary
Beatriz Nofal, President, Agencia Nacional de
Desarrollo de Inversiones (ProsperAr). The question is
whether the region can move quickly on the priorities
outlined in the Santiago Consensus and master
globalization rather than succumb to its pressures.

www.weforum.org/paci

9 | World Economic Forum on Latin America

Changing Perspectives and Priorities in
Latin America
“
“ Chile has achieved high growth rates but
income distribution remains a large problem.
Ricardo Lagos Escobar, President, Fundación
Democracia y Desarrollo, Chile; President of Chile
(2000-2006)
It would make a great campaign platform for
some ambitious politician: better schools,
cleaner air and water, equitable taxes, more
public works and advances in science and
technology.
These themes form the core of the Santiago
Consensus, the result of a survey designed for
participants during the 2007 edition of the World
Economic Forum on Latin America.
Coincidentally or not, the list of priorities in large
part reflects the region’s most glaring
weaknesses according to The Global
Competitiveness Report 2006-2007. Latin
America ranks near the bottom in such key
areas as the quality of institutions and
investment in research and development. “There
are many challenges in the region in order to
improve our competitiveness in the world, but
the priorities for the region must be innovation,
education and institutions,” said Felipe Larraín
Bascuñán of Catholic University of Chile. “The
report shows significant deficiencies; what we
need to do is find solutions in these three key
areas.”
10 | World Economic Forum on Latin America
“ There are many challenges in the region in
order to improve our competitiveness in the
world, but the priorities for the region must
“
be innovation, education and institutions.
Felipe Larraín Bascuñán, Professor of Economics,
Catholic University of Chile
The Washington Consensus emerged in the
1990s as a free market recipe for stability and
growth for countries ridden by debt,
hyperinflation and worse. The formula included
privatization, trade liberalization and fiscal
discipline. Most countries of Latin America
adopted at least part of the programme, and
most improved their macroeconomic numbers
significantly as a result.
However, the Washington Consensus was not
designed to address the region’s other grave
problems – such as poverty, inequality and
quality of life for the majority of citizens. “Chile
has achieved high growth rates but income
distribution remains a large problem,” said
Ricardo Lagos Escobar, President, Fundación
Democracia y Desarrollo, Chile.
The Santiago Consensus aims to take up where
the Washington Consensus left off. The top
priority, education, is addressed in a separate
section of this report (see pages 18-20). This
essay will outline the thinking that emerged from
the meeting on the other key issues.
 “
“ Climate change is good business. We can
transform this into a business opportunity.
Julio Moura, Chief Executive Officer and Chairman of the
Board, GrupoNueva, Chile; Vice-President, World Business
Council for Sustainable Development (WBCSD), Switzerland
In a session that focused on the Santiago
Consensus, Pamela Cox, Vice-President, Latin
America and the Caribbean, World Bank,
Washington DC, expressed surprise at the
choice of the environment as the number two
priority. “Not that it isn’t important, but you
wouldn’t expect to see that in a meeting of
mostly business people,” she said.
But in parallel discussions in a session entitled
“Business Strategies in Climate Change”, Julio
Moura, Chief Executive Officer and Chairman of
the Board, GrupoNueva, Chile, and Vice-
President, World Business Council for
Sustainable Development (WBCSD), Switzerland,
noted that, “We can transform this into a
business opportunity.” Outlining some of the
steps his own company is taking, such as joining
the Chicago Climate Exchange and investing in
biomass energy, he concluded, “Climate change
is good business.” Early evidence includes
Brazil’s global leadership on biofuels and the use
of the carbon credit mechanism by many
companies. Added Olav Skalmeraas, President,
Norsk Hydro Brasil, Brazil, whose company has
“ With globalization, companies must modernize
in order to compete, and this includes improving
performance on the environmental front.
Laggards will be penalized by insurance
companies, banks and investors that perceive
them as risky. This will require hefty
investments, but if companies don’t invest they
will lose competitiveness, be faced with higher
costs of financing and suffer damage to their
“
reputations.
Karen Poniachik, Minister of Mining of Chile
invested heavily in alternative energy, “I think that
Latin America has a great opportunity in this
area.” It’s an investment that is already paying off
with the region’s share of global carbon
emissions already falling (see Figure 1).
Figure 1: Latin America's Carbon Emissions
Regional share of world emissions falling
4.3%
South and Central America share of
world carbon dioxide emissions
4.2
4.1
4.0
3.9
3.8
3.7
3.6
2000 2001 2002 2003 2004
Source: Energy Information Administration
11 | World Economic Forum on Latin America
Panellists of the update session on China's development and
challenges
Taxes are a more obvious choice. Business
people love to gripe about them. But in Latin
America, they really do have a point. The
informal economy, defined as activity that does
not generate tax revenues, accounts for nearly
half of GDP in the region. Not only does this put
those who play by the rules at a competitive
disadvantage, but informality also generates
greater income inequality, reduced worker
training and lower R&D investments.
As half of economic actors escape scot-free,
many of the region’s governments lean extra
hard on those who do file returns. This problem
is particularly acute in Brazil, where the tax load
reaches Scandinavian levels of nearly 40% of
GDP – without corresponding benefits in public
services. Luiz Fernando Furlan, Minister of
Development, Industry and Foreign Trade of
Brazil (2003-2007), remarked that taxes are a
major impediment to growth and productivity.
“We have a tax burden which belongs in the first
world,” he said.
Infrastructure development also ranked high on
the list of priorities in the Santiago Consensus.
There seemed to be agreement among
participants that private investment is
fundamental to growth in this area. “When
resources are scarce, the public sector should
invest only where the private sector is unable or
unwilling,” said L. Enrique García, President and
Chief Executive Officer, Corporación Andina de
12 | World Economic Forum on Latin America
Vitor Hallack, Chairman, Camargo Correa, Brazil, and L. Enrique
García, President and Chief Executive Officer, Corporación Andina
de Fomento (CAF), Venezuela
Fomento (CAF), Venezuela. Many participants
called upon elected leaders to create a long-
term vision for infrastructure development that
would include a clear definition of the roles of the
public and private sectors. “Companies have
stepped up to the extent that governments have
allowed them to,” stated Vitor Hallack,
Chairman, Camargo Correa, Brazil. “If there were
a long-term vision, there would be greater
possibilities.”
In the latest Global Competitiveness Report, only
Brazil and Chile scored respectable grades for
efforts to spark innovation. Just 2.5% of R&D
spending worldwide takes place in South
America. Andrés Velasco, Minister of Finance of
Chile, argued that Latin America must break out
from the boom-bust commodity price cycle by
finding new sources of growth, productivity and
stability. “The challenge for us is to grow
regardless of the cycles” and the key is
innovation, he said. Noted Horst Paulmann,
Chairman, Cencosud, Chile, “The success of our
companies is due to innovation. Education and
training are therefore important.”
Some high profile figures notwithstanding, none
of the above will come as much of a surprise to
Latin American leaders or students of the region.
“The issue for Latin America is not the diagnosis
but rather one of action and management,” said
Furlan. “We know what to do and need to get
down to it before we lose momentum.”
 The Santiago Consensus
Percentage of Participants that selected the topic as one of their top 10 priorities
1. Macroeconomic management, fiscal discipline and counter-cyclical responses
Balanced budgets and counter-cyclical policy 40%
Efficient tax collection and transparency in spending 60%
Strengthening of Institutions 56%
2. The role of the state and the private sector
More investment in education with a focus on quality 90%
Targeted poverty reduction and minimal social safety nets 46%
Access to housing through schemes that support demand 6%
Coordinated and focus efforts to fight against crime and corruption 56%
Investment in and Profesionalization of the Civil Service 25%
3. Financial System
Strengthen banking regulation and adherence to international financial 12%
Promote greater central bank independence 29%
Greater liberalization of cross-border capital transactions 15%
Expand for SMEs access to Financial Services 38%
Improve creditor rights and credit bureaus 8%
Risk mitigation instruments to help SMEs access long-term finance 17%
4. Infrastructure and Energy
Greater Regional cooperation on energy 19%
Increase Private and Public Investment in Infrastructure 60%
Regional infrastructure promotion and dispute resolution 17%
5. Competitiveness
Labour and Capital Productivity enhancing reforms 54%
Stricter enforcement of Corporate Governance Laws 25%
6. The Labour Market
Reducing informality and promoting decent work 21%
Increase the Supply of skilled labour 33%
A balanced improvement in Flexibility of Labour market 46%
7. Innovation
Governments and Business Increase R&D investments 63%
More stringent protection of intellectual property 19%
8. International Trade
Greater encouragement and promotion of Free Trade 37%
9. Environmental Sustainability
Environmental sustainability policies 65%

World Economic Forum on Latin America reaches

the “Santiago Consensus”

Participants at the World Economic Forum on Latin America
agreed on five top priorities for the region – an action
programme for achieving and sustaining higher productivity
and growth with equity. They include education, the
environment, R&D investment, efficient taxes and
infrastructure.
The so-called Washington Consensus – the set of policy
prescriptions promoted in the 1990s to support the
restructuring of crisis-hit economies – proved to be a set of
necessary albeit insufficient conditions to achieve sound and
equitable growth. However, with the region’s countries
growing by over 5% on average in the past three years and
the incidence of poverty falling below 40%, a new set of
common priorities is needed to guide the relevant
stakeholders. The Santiago Consensus is thus aimed at
taking Latin America to that next level.
“The familiar agenda of structural reforms to boost
productivity is still essential,” John Lipsky, First Deputy
Managing Director, International Monetary Fund (IMF),
Washington DC, told meeting participants. He added that it
is also important to achieve a measure of macroeconomic
stability and to open up markets to trade. Chile is the best
example of a country that has combined all three factors to
achieve the highest per capita income growth in the region in
the past 25 years.
Infrastructure is the key priority, said meeting co-chair José
Grubisich, Chief Executive Officer, Braskem, Brazil. If Latin
America is to secure its place in the global supply chain, it
must invest in upgrading its infrastructure. “If we want to be
successful, we need to make it easier to move capital and
products to and from the region and inside the region,” he
stressed.
More generally, the priority has to be to boost investment.
“The question is how we may be able to invest more,” said
Andrés Velasco, Minister of Finance of Chile. “We have to
have good sound projects. And we can agree that a major
priority is to reduce the costs of investment.” This means
reforming capital markets, ensuring that the banking system
is sound, bringing interest rates down, and promoting
innovation and venture capital. All of this will then drive new
growth. “If we accept the idea that growing means to
innovate, then to innovate means to be daring and to do
something different,” Velasco said.
www.weforum.org/latinamerica

13 | World Economic Forum on Latin America

Understanding the Mindset of Latin American
Policy-makers and Business Leaders
“
“ Democracy is strong and stable. Stability is
what the people require.
Luiz Inacio Lula da Silva, President of Brazil
The modern political history of Latin America could
easily be written as one of regional populism.
Sometimes elected, sometimes rising to power by
force, strongmen like Getúlio Vargas, Fidel Castro,
Augusto Pinochet and Omar Torrijos managed to
personalize power and policy-making. Some, like Juan
Peron, created legacies of personal “ismos” – as in
the term “peronismo,” which describes a movement
that survives more than three decades after the
Argentinean politician’s death.
Populism is of course far from dead, but in recent
years a more clear-headed leadership style has begun
to emerge and even prosper. Rather than fall back on
dogma, the new brand of leader understands that the
world is not a simple place and thus eschews
simplistic formulae. He or she favours pragmatic yet
innovative solutions to those persnickety old
problems. Perhaps best exemplified by the bold urban
reformers Enrique Peñalosa, former mayor of Bogotá,
and Jaime Lerner, former governor of Paraná and ex-
mayor of Cutitiba, this exclusive club includes national
figures like Chilean President Michelle Bachelet and
her predecessors of the post-Pinochet era.
This new way of thinking served as a foundation for
the debates during the World Economic Forum on
Latin America in Santiago.
14 | World Economic Forum on Latin America
“ The first thing you have to do is admit that
there’s a problem. Then you can confront it.
“
Jorge A. Uribe Echavarria, Partner and Director, DeLima
Marsh, Colombia; Minister of National Defence of Colombia
(2003-05)
For starters, refreshingly, nobody professed to have all
the answers. On the contrary. Talking about crime,
Eugenio Burzaco, Founder, Fundación Fundar Justicia
y Seguridad, Argentina, a Young Global Leader said,
“There is no single solution. There must be integrated
policies.” Likewise, on education, Jeffrey Puryear,
Vice-President, Social Policy, Inter-American Dialogue,
USA, remarked, “There are no magical solutions to
this problem; it’s more than just buying better
technologies – action is needed in a variety of areas.”
Also refreshing, in contrast to the infallibility of the
strongmen, was the willingness to recognize problems
and admit mistakes as part of a process of problem
resolution. Addressing the region’s inability to ride the
current global economic wave to more investment in
infrastructure, Vitor Hallack of Camargo Correa, noted,
“It is too bad that we Brazilians and Latin Americans
have not capitalized on this opportunity as well as we
could have.” Recalling his country’s much touted anti-
drug campaign, Jorge A. Uribe Echavarría, Partner
and Director, DeLima Marsh, Colombia, and Minister
of National Defence of Colombia (2003-05), said, “The
first thing you have to do is admit that there’s a
problem. Then you can confront it.”
 Susan L. Segal, President and Chief Executive
Officer, Council of the Americas, in the session
entitled "2007 Update: Global Risks and
Regional Response Strategies"

In the crucial area of infrastructure development, Chile
has taken the lead in developing a new approach.
“Since there are clear rules, Chilean and foreign
businesspeople are willing to accept risk,” said Ramón
Aboítiz, Chairman and Chief Executive Officer, Sigdo
Koppers, Chile. Regulations and contract terms have
remained firm, agreed Francisca Castro, Concession
Coordinator, Ministry of Public Works, Chile. “It is
important to have clear rules and that they be
respected,” she said. “This explains why Chile has
been successful.”
But most countries lag behind, leaving the
modernization of the state as the key step needed to
induce greater investment in infrastructure in Latin
America. This would encompass a change in mindset
from “government to state”, as some put it, thus
ensuring stable rules for investors as politicians come
and go. It would also include efforts to combat
corruption and improve both public administration and
education. “There is a long way to go with
modernization of the state,” said Luis E. Frisoni,
Senior Partner, South America,
PricewaterhouseCoopers, Brazil. “The state has to
stick to its core business and do it more efficiently.”
Another area where innovative pragmatists are gaining
ground is environmental policy. Under the
developmentalist model of the 20th century, “pro-
environment” meant “anti-business”. But at the
Santiago meeting, forward-looking business leaders
broke that philosophical stalemate. “I am convinced as
a businessman that global warming is real,” said Julio
Moura of GrupoNueva. “In Chile, we could say that
our carbon emissions are so small that it doesn’t
involve us, that others should take the initiative. But
the effects of global warming will not be distributed
proportionally. We can mitigate the effects if we act.”
Moura didn’t stop there. “Social responsibility is not
charity. It is not something you do after you’re
profitable,” he said. “Global warming has to be part of
the business strategy. It is an issue to be handled by
the CEO.”
If environmental responsibility is part of the new
thinking, corruption is not. The stereotype depicts
Latin American societies and cultures as inherently
corrupt (see Figure 1 for Transparency International’s
Corruption Perception Index for Latin America).

“ [To combat corruption,] companies must

make it clear that they have a zero-tolerance
policy and that it is part of their core values.
“
And they must state that publicly, so it will be
taken seriously.

John M. Beck, Chairman and Chief Executive Officer,

Aecon Group, Canada

15 | World Economic Forum on Latin America

The workshop on “Securing Latin America’s Energy Future” Hector Rangel Domene, Chairman, Grupo Financiero
BBVA Bancomer, Mexico, in the “Financial Drivers of
Growth” session

Conventional wisdom holds that without a bribe, you Zero tolerance also works on the government side,
can’t get a contract. But John M. Beck, Chairman and noted Uribe Echavarría. “In two years, nobody offered
Chief Executive Officer, Aecon Group, Canada, and me a single bribe,” he said. To guarantee transparency
Uribe Echavarría tell stories of Zero Tolerance for in one large purchase, he called in business leaders
corruption. And they tell success stories. and asked them to monitor the process and report
back with any scuttlebutt. The deal went off without a
Figure 1: Perceptions of Corruption in Latin America
hitch.

Mexico
Hardly flamboyant, innovative pragmatism might seem
to be at a disadvantage in marketing terms. But if its
Colombia
Corruption Perception Index (CPI) 2006
7.5–10
champions can deliver the goods, voters may indeed
5.0–7.5
2.5–5.0
follow – as they have for the last decade in Chile. “We
Brazil 0–2.5
No data
want to grow to be inclusive and be inclusive to
Chile
grow,” said Chilean President Bachelet.
Argentina

Note: Lower scores indicate higher perceptions of corruption

Source: Transparency International

“If our proposal is better, we will get the contract

without corruption,” said Beck. “Companies must
make it clear that they have a zero-tolerance policy
and that it is part of their core values. And they must
state that publicly, so it will be taken seriously.”

16 | World Economic Forum on Latin America

 “ From an investor’s perspective, the report
provides a customized toolkit for investment
decisions and location choices in Latin
Infrastructure Private Investment Attractiveness Index

Rank Country Score

America while it guides policy-makers in the
1 Chile 5.43
choice of the best policies to foster their 2 Brazil 4.40
national attractiveness for private investment 3 Colombia 4.33
“
in infrastructure and in prioritizing sectors
4
5
Peru
Mexico
4.23
4.04
and measures. 6 Uruguay 4.02
7 El Salvador 3.97
Julio Estrada, Research Projects Manager for Latin 8 Guatemala 3.64
America at the World Economic Forum 9 Argentina 3.41
10 Venezuela 3.37
11 Bolivia 3.34
12 Dominican Republic 3.33

Chile, Brazil and Colombia most attractive in

Latin America for private investment in
infrastructure

The World Economic Forum released a new index at the The study features the Infrastructure Private Investment
World Economic Forum on Latin America which measures Attractiveness Index (IPIAI), a customized, methodological
the attractiveness for private investment in infrastructure in tool gauging the institutions, factors and policies making it
the region. Chile, Brazil, Colombia and Peru ranked at the attractive for private investors to invest in infrastructure
top of the index with the most attractive environment, while projects. An assessment of infrastructure investment
Venezuela, Bolivia and the Dominican Republic came at the opportunities is also performed for each of the countries
bottom of the rankings. covered.

Covering 12 economies in Latin America and the Caribbean, The study is based on publicly available hard data as well as
the new study assesses the main drivers of private perception data. In particular, the authors used the results
investment in infrastructure projects for ports, airports, roads from the World Economic Forum’s Executive Opinion Survey
and electricity. Poor infrastructure was identified in the (EOS) and conducted a mini-survey among practitioners and
Santiago Consensus, as well as at the World Economic legal experts on government readiness to deal with and
Forum on Latin America in 2006 in São Paulo, as a major manage private investment projects. Data from the Centre
obstacle to the region’s ability to compete globally. It was d’Etudes Prospectives et d’Informations Internationales
also named as one of the priority areas in which the Forum (CEPII) and Latinobarómetro were also used.
needs to explore alternatives and catalyse actions to
overcome the current shortcomings. www.weforum.org/infrastructure

Global Competitiveness Ranking and Infrastructure Private Investment Attractiveness Ranking

1
Brazil Chile
3 Colombia
Peru
GCI 2006-2007 Rank

5 Mexico
Uruguay Benchmarking National
7 El Salvador
Guatemala
Attractiveness
9 Argentina for Private Investment in
Dominican Rep.
11 Venezuela Latin American Infrastructure
Bolivia
13

13 11 9 7 5 3 1
IIPIA Rank

Source: World Economic Forum

17 | World Economic Forum on Latin America

B
Achieving Equitable Income Distribution in
Latin America

“
“ The priority is to take a great leap to ensure
quality education for all.

Michelle Bachelet, President of Chile

Figure 1: Education and Prosperity in Latin America

$12,000
Citizens of wealthier economies tend to stay in school longer

Argentina

10,000
Chile
GDP per capita, 2004 (PPP, US$)

Costa Rica
Mexico
8,000
Uruguay
Brazil
6,000 Colombia
As a means for achieving equitable income distribution Venezuela
Panama

Peru
Suriname
across the continent, education loomed as the leading 4,000 Guatemala
Paraguay
Guyana
El Salvador

priority among participants in the World Economic Nicaragua

Honduras
Bolivia
2,000
Forum on Latin America. The topic popped up in the
most unexpected places – even in sessions with titles 0
7 8 9 10 11 12 13 14 15 16

like “Latin America’s Challenges and the World’s Years of schooling (2004 or most recent)

Shifting Power Equation.” In the Santiago Consensus Source: UN; IMF

shaped during the meeting, education was identified
as the top issue on which the region must focus.
President Michelle Bachelet of Chile told participants
that for her country and other Latin American nations
to reach a higher level of growth and productivity, “the
priority is to take a great leap to ensure quality
education for all.”
Panellists in the session on “Global Risks and
Regional Response Strategies” pinpointed the
deficiencies and disparities in education as the root of
social inequality and thus of political risk. “Political risk
and social inequality are one and the same,” said one
panellist (see Figure 1). “It will be impossible to cut
political risk if large parts of society do not feel
included.” Added another, “If we cannot ensure
children a better standard of education, we will not
just be facing a failed nation but a failed continent.”
Moreover, high-quality education is a necessary
precondition for innovation, a regional weakness
according to the Forum’s Global Competitiveness
Report. “You cannot achieve greater productivity
without innovation,” said Andrés Velasco, Minister of
Finance of Chile. “There is no magic recipe. In human
capital and education, we must move on from quantity
to quality.”
As the minister inferred, school attendance has
improved considerably in most countries in the last 15
years. Some have attained near universal enrolment.
In Brazil, for example, 97% of children between the
ages of 7 and 14 are on the rolls. And educational
budgets are increasing: in Argentina plans to boost
spending from 4% to 6% of GDP by 2010 – thus
matching the OECD figure of 5.9%. The Brazilian
government ranks as the world’s number one
purchaser of textbooks.

18 | World Economic Forum on Latin America

“ Education is an issue requiring urgency of
action. We need to organize education policy
so that it favours the multiplication of
“ “ “
There is no magic recipe. In human capital
and education, we must move on from
quantity to quality.
effective schools.
Andrés Velasco, Minister of Finance of Chile

José Weinstein, Manager, Education, Fundación Chile

Yet despite improved enrolment rates, test figures in
reading, math and science show educational
performance lags woefully behind the rest of the world
(see Figure 2). The Inter-American Dialogue “Report
Card on Latin American Education” gave the region a
“D,” or poor grade, for its test scores; the state of
schools in poor, rural and indigenous communities;
national standard setting; and efforts to improve
teacher quality. Studies have found that 60% of Latin
Americans – and at least half of all Chileans – cannot
understand what they read, according to Ernesto
Schiefelbein, University Professor, Fundación
Oportunidad (Luksic), Chile. In Brazil alone, some
841,000 teachers lack college degrees.
Figure 2: Enrolment Rates Related to Educational Performance
100%
World Bank figures show that the governments of
large Latin American countries are not channelling
additional funds into improving education (see Figure
3). And since throwing money at the problem is at
best an insufficient solution, many of the brainstorming
workshops during the meeting – including one
devoted exclusively to education – dedicated much
time to considering ideas for how to ensure a better
learning environment for Latin American students.
Among the proposals:
• improve the quality of school infrastructure
• build higher expectations for educational systems
among the general population to improve student
motivation and press politicians to act
• encourage businesses to help
• begin schooling at an early age
United States
• get parents to encourage their children to learn
South Korea

• boost teacher wages to attract and retain the best

90
Spain
people
Net enrolment at age 15

Chile
Thailand • use the Internet and cutting-edge technologies
80
Latin American countries1 • improve the performance evaluation of both
Argentina
Indonesia Uruguay
Other countries1
students and professors
70

Peru
• encourage the private and public sectors to work
Brazil

60
1
Latest available data: Argentina,
Chile, Peru from 2000; other
countries from 2003.
together to design curricula and address other
2
Average of math, reading, and
Mexico science scores.
problems
50
300 400 450 450 500 550 600
Low High
Performance2

Source: OECD

19 | World Economic Forum on Latin America

 Figure 3: Public Expenditures on Education in Large Latin American Economies

6%
Commitments rising in Mexico but falling in Argentina

Mexico
“ To achieve and sustain higher growth we
really need to address inequality issues and
“
Public spending as percentage of GDP

5%
Colombia build in social policies into the region.
Latin America & Caribbean
Brazil Chile
4%

Argentina
Pamela Cox, Vice-President, Latin America and the
3%
Caribbean, World Bank, Washington DC

2%
2000 2001 2002 2003

Source: World Bank, World Development Indicators

José Weinstein, Manager, Education, Fundación Chile,

said that there are five elements important to
improving the quality of education: a modern, well-
organized and effective implementation of school
curricula; high, demanding goals and a system of
measurement; an organized, stimulating climate for
learning; professionalism and teamwork among
teachers; and the strong participation of parents and
the general community to assure that schools are
well-funded and students are inspired to learn. “This is
an issue requiring urgency of action,” he added. “We
need to organize education policy so that it favours
the multiplication of effective schools.”

20 | World Economic Forum on Latin America

 COMMITTED TO
IMPROVING THE STATE
OF THE WORLD

Latin America@Risk

A Global Risk
Network Briefing

Latin America@Risk report identifies key risks to

the region’s continued rise

The Latin America@Risk report, released at the World
Economic Forum on Latin America meeting, emphasizes the
strength and robustness of Latin America’s economies, while
exploring the key economic, environmental, geopolitical and
societal issues that put that progress at risk. While all four of
these issues emerge from the broader global risk
environment, the regional manifestations present particular
challenges for governments, industry and civil society
throughout Latin America.
Likewise, while democracy and political stability remain at
historically high levels across the region, pockets of
populist/anti-globalist storm clouds threaten to spread
throughout the highly interdependent region. Meanwhile,
global climate change presents serious trade-offs for the
region – not least between the seizing of opportunities (e.g.
aggressive expansion of biofuel production) and the
management of life-sustaining resources (e.g. rainforest and
freshwater).

“Global risks play out uniquely in Latin America, but also
differently across the region, which is incredibly diverse,”
notes the Global Risk Network’s Gareth Shepherd, co-author
of the report. “But these four issues – social inequality,
political instability, economic vulnerability and climate change
– are on the radar of all of the region’s strategic thinkers.”
Perhaps the region’s greatest ongoing concerns are social
and economic inequalities – which remain the most
significant in the world. Political reform, the encouragement
of small and medium enterprises and, crucially, education,
remain the region’s best mitigators of inequality-driven
populist backlash.

The report argues that Latin American economies are much www.weforum.org/globalrisks
less vulnerable to sudden disruption than they have been in
past decades, thanks primarily to improved fiscal positions.
But with much incremental growth arising from commodity
exports, global risks such as a hard landing of the Chinese
economy or rising protectionism from the United States
create new challenges for the region. Fiscal discipline and
counter-cyclical policies must be strengthened to build the
region’s “margin of safety”.

21 | World Economic Forum on Latin America

China and Latin America
“ inflation in the US.
“
Cheap Chinese merchandise has done as
much as Alan Greenspan to keep down
Ricardo Claro Valdes, Chairman, Compania Sudamericana
de Vapores (CSAV), Chile
After the Asia-Pacific Economic Cooperation (APEC)
forum summits became annual events on the
diplomatic calendar more than a decade ago, visits by
Latin American leaders to Asia and Asian leaders to
Latin America became more frequent. Yet whenever a
Latin president turned up in Beijing or an Asian prime
minister headed to São Paulo, the getting together of
distant friends seemed more quaint happenstance
than a meeting of valued trading partners with
strategic mutual interests. But by 2004, when Chinese
President Hu Jintao spent two weeks touring
Argentina, Brazil and Chile before passing through
Cuba, that had changed. Both sides hailed Hu’s trip
as a milestone in three decades of Chinese relations
with South America. The reason: trade and investment
between China and the region had been climbing
sharply in recent years – and many South American
countries were reaping the benefits of China’s soaring
demand for commodities, still the backbone sector of
the continent’s economies. In 2005, Latin America
was the second largest recipient of Chinese FDI (see
Figure 1). And in 2006, trade between China and Latin
America rose to US$ 70.2 billion, up from about US$
10 billion in 2000 (see Figure 2).
22 | World Economic Forum on Latin America
Figure 1: China's Foreign Direct Investment
Investment in Latin America in 2005 was second only to Asia
6%
Europe
4%
Oceania
7%
North America
7%
Africa
60%
Asia
16%
Latin America
Source: Deutsche Bank
At this World Economic Forum on Latin America in
Santiago, it was therefore highly appropriate that a
number of sessions focused on China and the impact
of its zooming growth and widening geopolitical role
on Latin America. The region’s trade balance with
China has shifted from a deficit to a surplus in less
than five years. Participants from both sides of the
Pacific stressed that the relationship was no flash in
the pan of commodities but rather a match of
complements with coinciding interests and a long,
mutually beneficial future. “The trade and investment
relationship between Latin America and China is a
long-term strategic partnership,” said meeting Co-
Chair Zhang Shoulian, President of China Minmetals
Non-ferrous Metals.
Figure 2: Latin American Trade Destinations
Although trade with China and within the region are picking up, trade with the US still dominates
$1,200
1,000
Total trade (US$, billions)
800
600
400
200
0 of the boom-bust price cycles of raw materials. When
1999
Source: IMF Direction of World Trade Statistics
But for a real partnership to evolve, China and Latin
America will have to develop a more textured
relationship, certainly one based on more substance
than raw materials trade. Many in Latin America still
do not know or understand the China phenomenon.
Inasmuch as there is widespread scepticism about
globalization among Latin Americans, so is there
wariness – even fear – of a rising China. Believers
such as meeting Co-Chair Andronico Luksic Craig,
Vice-Chairman of Banco de Chile, took the
opportunity to rally the doubters. “Let’s dare, take
risks, step out,” Luksic urged participants. “We need
to understand and shake hands with our friends in
China. We need to learn and know China.”
At one level, Luksic was exhorting Latin American
business to seek out higher-value trade and
investment opportunities in China. This dovetailed with
the Chilean Finance Minister’s call for a transformation
of Latin America’s economies so they are not captive
15%
2005
Total (CAGR: 9.61%)
Other (CAGR: 13.57%)
“ China and Latin America are two faces of the
same coin. China represents an opportunity.
“
It is a wake-up call for Latin America to
3%
5%
Japan (CAGR: 9.59%)
China (CAGR: 38.85%)
pursue reforms.
14% EU (CAGR: 7.80%)
19% Intra-Latin America (CAGR: 13.01%)
Javier Santiso, Chief Economist and Deputy Director,
Organisation for Economic Co-operation and Development
(OECD), Paris
44% US (CAGR: 6.45%)
2005
the commodities party ends, Latin America has to be
prepared. Countries must not only exploit the
opportunities that China offers but must also prepare
themselves to exploit their comparative advantages to
compete in the global market against China, India and
other emerging economies. This is particularly true for
nations in Latin America that are not resource rich and
may not be benefiting directly from China’s hunger for
raw materials to fuel its 11% annual growth.
For countries to boost their competitiveness and
come up with the products and services that China
and the rest of fast-growing Asia need and will buy,
Latin American economies must pursue the key
prescriptions of the Santiago Consensus and invest
more in education, innovation and infrastructure.
Some in Latin America have pointed out that during
Hu’s visit in 2004, China had promised to invest in a
number of infrastructure projects. While China has
been busily financing and building infrastructure
across Africa, it has not been as active or munificent
23 | World Economic Forum on Latin America
“ To be a global champion, you need to have
the advantage not only at home but in all
markets. Do we have the leadership capacity
“
to do so? Our real assets are our people.

Ricardo Villela Marino, Chief Executive Officer, Itaú Latin

America, Brazil

in Latin America. The region should not sit and wait
for the bounty to come its way, but must move quickly
to address its competitive shortcomings such as the
lack of infrastructure, countered Javier Santiso, Chief
Economist and Deputy Director of the Organisation for
Economic Co-operation and Development (OECD).
“China and Latin America are two faces of the same
coin,” he reckoned. “China represents an opportunity.
It is a wake-up call for Latin America to pursue
reforms.”
That is a key proposition of globalization. Globally
competitive countries should motivate or even force
both partners and rivals to improve themselves and
become more productive and efficient. China’s current
advantage is its ability to produce quality products at
a reasonable price, but its own economic
transformation is slowly turning this giant Asian
economy into a formidable force in higher-value
sectors such as IT services and biotechnology that
require innovation, world-class infrastructure and the
rule of law to flourish. Latin America must follow suit.
Like many Chinese companies that are going global
after a period of reform or as a way to force
themselves to become more competitive and hence
better able to compete at home, Latin American
enterprises have to reinvent themselves too.
Concluded meeting Co-Chair José C. Grubisich, Chief
Executive Officer of Braskem, “Global companies are
looking to India and China which gives our local
companies the opportunity to restructure and to
prepare a strong platform to move into the
international market in a better shape.” That is
precisely how the rise of China is driving a powerful
positive agenda for Latin America.
Leadership talent for global growth
companies
To take on the world, high-growth companies need to
have the human resources to compete internationally.
Latin America’s skilled executives have become a major
competitive advantage for global growth, said José
Grubisich, Chief Executive Officer, Braskem, Brazil, and
Co-Chair of the World Economic Forum on Latin
America. Business leaders in emerging economies are
reshaping industrial sectors and creating new dynamics
in the global competitive landscape, panellists in a
session dedicated to emerging business giants agreed.
“We have been successful in building a group of
executives who are exposed to the international market.
One advantage is that they have been exposed to
volatile markets of high complexity, very big interference
from government, and inflation. This has created a group
of people ready to move into the international arena with
good multicultural experience ready to foster growth in
their companies,” Grubisich said.
According to Ricardo Villela Marino, Chief Executive
Officer, Itaú Latin America, Brazil: “To be a global
champion, you need to have the advantage not only at
home but in all markets. Do we have the leadership
capacity to do so? Our real assets are our people.”
“Globalization is creating winners and losers,” said Jean-
Pierre Rosso, Chairman, Centre for Global Industries,
World Economic Forum. “Some companies are taking
advantage of globalization by expanding to a global
scale.” Many of these global growth companies either
come from emerging economies such as China, India
and Brazil or are focusing on those markets.
The World Economic Forum will draw together the new
business champions at its Inaugural Annual Meeting of
the New Champions in Dalian, China, from 6-8
September.

www.weforum.org/newchampions
24 | World Economic Forum on Latin America
25 | World Economic Forum on Latin America
Acknowledgements

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

Accenture
Audi
Avaya
Cisco
HP
Kudelski Group
McKinsey & Company
Manpower
Microsoft Corporation
Nestlé
PricewaterhouseCoopers
Volkswagen

Regional Partners

Banco Hipotecario
Grupo Salinas

Meeting Supporters

Corporación Andina de Fomento (CAF)

Gerdau Group
Sigdo Koppers

Official Carrier

Iberia Group

The World Economic Forum additionally acknowledges herewith:

The Ministry of Finance of Chile
G-50 (Group of Fifty)
ICARE

The World Economic Forum also thanks The Coca-Cola Company, PepsiCo and Television Nacional de Chile
(TVN) for their support.

26 | World Economic Forum on Latin America

Contributors

Peter Torreele is Managing Director of the World Economic Forum. Emilio Lozoya is Associate Director,
Global Leadership Fellow, Head of Latin America, at the World Economic Forum. The World Economic
Forum on Latin America was under his direct responsibility.

Julio Estrada is Global Leadership Fellow, Latin America. Jacques Marcovitch is Professor, University of
São Paulo, Brazil, and Senior Adviser at the World Economic Forum. Paula Verholen is Community
Relations Manager, Latin America. Laura de Wolf is Senior Specialist, Events, 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 Principal, Production and Design
Fabienne Stassen Fleming, Senior Editor

Photographers
Jorge Rodríguez Pérez
Juan Ernesto Jaeger Campos
Juan Francisco Somalo Valor

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:
www.weforum.org/latinamerica/summaries2007

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

27 | 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.
(www.weforum.org)