Latin America: Finding the formula for economic success in the classroom

October 6, 2011

SANTO DOMINGO, October 6, 2011 – Students across the Dominican Republic are becoming increasing apt at solving a formula that seems to encapsulate economic success for individuals and countries as well.

Such formula boils down to: education+innovation=competitiveness.

It is being taught across many schools, universities and technical institutions in the country as public and private sectors recognize that the region lags in competitiveness, and that it is the only way for individuals and societies to prosper in an increasingly global and volatile world.

On the day a regional gathering on competitiveness gets in full swing, hundreds of government and business leaders will reflect on how to make that formula more easily available to people in the region as the only sensible response to maintain a sustainable development path. The 5th Competitiveness Forum of the Americas is addressing the region’s education gap –not so much access to but quality of education-- which remains Latin America’s largest challenge to achieve long-term prosperity.

Study after study indicate that while emerging Asian economies can sustain an annual growth rate of 6-9 percent without overheating, in most of LAC the projected long-term non-inflationary growth rates don’t exceed the 5 percent mark. In order to maintain high growth and inclusive rates the region must address its education, infrastructure and innovation gaps.

However, education is the most important factor in determining the degree of competitiveness of an economy said World Bank Managing Director, Sri Mulyani Indrawati, while addressing the forum.

She went on to say that education in the region is a success story in terms of access: all students finish elementary school and enrolment rates are nearing 90 percent, with higher education enrolment almost doubling in the last decade, Indrawati said. But with more widespread access to education, its quality has now become a tall order, she noted. “Student achievement in the region is not on a par with similar income countries,”said Indrawati while noting that the best performing Latin American countries in the 64-country PISA exam is Chile which comes in the 43rd place.
Latin America: trying to find the formula for economic success in the classroom LAC countries are not resting on their laurels, though, and have been trying to improve education quality by introducing changes, some of them cutting-edge, to curricula. To make schools competitive the Dominican Republic has enlisted the real-life experience of private sector companies whose CEOs, managers, and regular employees have been injecting their own first-hand job market experience into outdated teaching content and methods, says education consultant Aida Consuelo Hernandez.

A good example of this is the close involvement of a regional construction company in a leading tech institute in Santo Domingo. Hernandez says that since pipe maker INCA provided its input into Politecnico Loyola’s curriculum and made capital investments, the institute students are becoming more employable and are making more money than graduates from similar schools.

“That’s an excellent example of social responsibility by business,” said the education expert who also heads the EDUCA Foundation. Hernandez noted that although significant, these are small steps in the grand scheme of things. “A more coordinated linkage between universities and private sector is needed,” she said.

Innovation Gap

Going back to the competitiveness formula, the innovation part of the equation is also lacking in the region. Research and Development (R&D), the foundation of innovation, is lagging behind in Latin America, in contrast with the rest of the world.

The region spends 1% of GPD in R&D, much less than the global average –for example, Israel spends 4.5% of GDP whereas Finland spends 3.5%. Especially critical is the negligible R&D investments in the services industry which represents around 70% of economic activity and the basis for high-growth rates, said Indrawati. “The region’s services sector shows very little in the way of productivity and innovation in comparison with other middle income regions,” she noted. Indrawati reminded the forum that the region’s Achilles heel continues to be infrastructure, the final bridge to cross to reach full-fledge competitiveness. Infrastructure investment in Latin America is much less than in other emerging regions, she said.

In the last two decades road systems in the region have been built at a much slower rate than in East Asia. Power capacity, another key infrastructure investment, is 50 percent lower than in Asian Tiger countries.

Dominican students may be increasing apt at solving a formula of economic success, but the next step will depend on their ability to access quality education in order to ensure they are learning the right skills for the jobs of tomorrow.

As part of her visit, Sri Mulyani Indrawati also met with Dominican President Leonel Fernandez to discuss the Bank's ongoing support to his government's development agenda.