ECLAC: INDUSTRIAL UPGRADING IS KEY TO LAC ECONOMIES' COMPETITIVENESS AND DEVELOPMENT

Santiago de Chile, May 15- Industrial development or upgrading and productive diversification are essential to maintain economies' competitiveness and promoting growth and development in Latin America and the Caribbean, stated high-level officials of ECLAC and the World Bank in Santiago, Chile.

Senior Vice President and Chief Economist of the World Bank Justin Yifu Lin delivered a conference entitled "China's Rise and Leaving the Middle-Income Trap in Latin America and the Caribbean Countries" at this United Nations regional commission. He was welcomed by Antonio Prado, Deputy Executive Secretary of ECLAC.

Both officials highlighted the importance of concepts such as structural change and technical progress in order to explain productivity gaps among countries and sectors.

In his opening address, Antonio Prado mentioned coincidences identified between ECLAC's school of thought and the proposals exposed by Vice President of the World Bank in his book New Structural Economics. Some of these coincidences are acknowledging the need for a better regulation and a greater State intervention in economies, as well as identifying international integration guided by the principle of comparative advantages.

"ECLAC has insisted on adopting a strategy based on dynamic international integration, technical progress, productivity, as well as growing employment and increasing real wages in open economies. ECLAC did not traditionally consider diversification to be at odds with international trade, but rather a way of achieving a more dynamic integration based on intra-industry trade. The activities of Asian countries have been moving exactly toward diversification in order to achieve increasing relevance in world trade," explained Prado.

In such a virtuous development process, productivity and employment grow simultaneously without implying untenable pressures on the external sector, added the Deputy Executive Secretary of ECLAC. "In this manner, a development model has been configured in the region, in which no country has succeeded in combining solid employment growth with an increased productivity in the long term," he expressed.

"At the core of the new strategy proposed both by neo-structuralists and ECLAC lies the State's action. It is not anymore about having a larger State or a greater market, but rather choosing to have a better State and a more efficient and equal market," commented Prado.

In his presentation, Justin Yifu Lin elaborated on the reasons why Latin American countries have fallen into a middle-income trap, mainly caused by their unability to continue the industrial upgrading and diversification process.

The Chief Economist of the World Bank also listed the opportunities and challenges raised by China's economic rise - a country that will maintain a growth of 8% during the next 20 years, acoording to his estimates.

"To avoid further deindustrialization arising from the competitive pressures of the rise of China, broaden the base for economic growth and create the basis for further sustained reduction in unemployment and poverty and improvements in income inequality, Latin American countries's priority needs to be industrial upgrading and diversification," declared Lin.

Furthermore, Lin detailed his proposal on a "new structural economics (NSE)" focused on industrial development based on upgrading a country's endowment that allows for a sustained industrial upgrading, increasing income and poverty reduction.

"A proactive industrial policy targeted to specific sectors -as suggested by this NSE that has been applied in some East Asian countries- could facilitate the necessary industrial upgrading," concluded the economist.

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