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FEATURE STORY November 2, 2020

Viewing an old problem through a new lens: How to promote territorial development in Latin America


Imagen aérea de Buenos Aires

A comprehensive and coordinated development of cities and regions is crucial for the post-pandemic recovery.

Long before the outbreak of COVID-19, access to study or work opportunities and public services was a problem in Latin America and the Caribbean. Many people had to relocate to study or find work because the dense populations in the few large cities in the region limited their possibilities. It’s also a global problem. Just 1.5% of the planet is home to half of the almost 8 billion global population.

Other than its impact on public health, the pandemic has exposed the gap in infrastructure and services between areas, causing different economic and social impacts depending on where people live.

"In a pandemic, actions to achieve a recovery have the potential to support immediate needs as well as to address the challenges to achieve integrated, coordinated, and sustainable territorial development, improving people's quality of life," said Nancy Lozano Gracia, an urban development specialist at the World Bank.

With other experts, Lozano Gracia recently presented a report on territorial development in Argentina. In the following interview, she discusses the opportunities and challenges that Argentina and the rest of the region face to guarantee universal access to quality health and public services as well as education and employment opportunities no matter where people live.

Question: What is territorial development and why is it important for Latin America and the Caribbean?

Lozano Gracia: Territorial development is a perspective that begins with an analysis of where social and economic relations occur. Economic activity, people, jobs, and living standards are often not evenly distributed across a country. All the countries of Latin America and the Caribbean have profound regional differences. It is crucial to understand the main challenges and benefits of each territory to be able to identify the opportunities for growth, development, and poverty reduction.

A vision based on territorial development can help reduce territorial gaps and contribute to promoting economic activity in countries. It is using a geographical lens to analyze the opportunities and challenges of a country, and thus to identify the policies necessary to support economic growth and improve the standard of living of its citizens. This lens helps prioritize actions based on the needs of each area and facilitates coordination between different sectors and actors.

Question: What are the keys ideas behind the territorial approach?

Lozano Gracia: The ultimate goal of a territorial development policy is that people have access to services, education, health, and job opportunities regardless of where they live. This was our objective for the Argentina study, for example.

To structure the research, we analyzed the challenges based on three pillars: scale, specialization, and convergence. Scale because people and businesses are often concentrated in a few locations, which shows that proximity is valuable. Specialization because when places are better connected, they can specialize in what they produce best or diversify and innovate, allowing the benefits of concentration to spread across territories. Convergence because the geographical concentration of people and businesses in some places can be used to improve living conditions in all territories.

Question: What were the findings of the study?

Lozano Gracia: In Argentina, as in other Latin American countries, population and economic activity are concentrated in a few places. This is also seen in high-income countries, but the difference is that the quality of life is the same no matter what region you live in. There is scale, there is specialization, and there is convergence in quality of life.

In Argentina, there is concentration but no scale. Business density is low compared with other countries in the region. While in Mexico there are 34 enterprises for every 1,000 inhabitants, in Argentina there are only 13, and in northern Argentina, the number falls to just six. At the same time, most are microenterprises without growth potential. Between 2008 and 2015, 40% of microenterprises closed, and of those that remained active, 57% were still microenterprises after five years.

We also found a low level of specialization at both the provincial and city levels given the poor quality or absence of hard and soft connectivity in certain parts of Argentina. According to the Logistics Performance Index (LPI), an interactive benchmarking tool that helps countries identify the challenges and opportunities in their trade logistics performance, in 2018 Argentina ranked 61, behind Chile (34), Mexico (51), and Brazil (56).

Finally, our diagnosis shows that Argentina has taken important steps toward convergence in first-level indicators, such as access to water. However, important gaps persist in second-level indicators, such as the quality of secondary education or wastewater connection.

Question: Which countries in the region have worked to build a territorial development program?

Lozano Gracia: Colombia is a good example in the region. Territorial development is the common thread of the country’s most recent national development plan, establishing clear objectives for each region. It has also sought to promote the development of Colombian cities, integrating the municipalities in territorial planning and extending the benefits far beyond the urban border.

Brazil has also made great strides toward territorial development. For example, the government developed a national information system for regional development, which monitors the evolution of the regions and evaluates the results of the policies implemented, thereby enabling modifications to be incorporated. In 2019, the different efforts gave rise to the National Regional Development Policy, which aims to create new economic opportunities and improve the quality of life in all territories.

Question: Thinking about after the pandemic, what opportunities do you see in implementing this approach?

Lozano Gracia: The pandemic further uncovered the territorial gaps. The responses to the health and economic crises have varied across regions; some had a more limited capacity to defend themselves and react to the challenges of COVID-19, making  a recovery more difficult. Two central priorities for a post-pandemic recovery are achieving convergence in the quality of life throughout all territories and supporting economic development.

In the case of Argentina, this urgency can motivate the country to act in three main areas: strengthening its institutions, building capacities, and aligning the budget around these challenges. By creating institutions sensitive to territorial differences, strengthening subnational capacities, and establishing continuous funding, Argentina could close the quality-of-life gaps between territories while supporting the productive growth of economic hubs.