Challenges for the knowledge economy in Latin America

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Many argue that the XXIst century has already embarked humanity on the journey towards the 4th industrial revolution

knowledge economy

Remote controlled rats, computers that are more precise than physicians in the diagnosis of diseases, algorithms that determine if, and when, a couple will get divorced, among many others, make up the reality of today’s society. All these amazing and new technologies are not good or bad, per se, but they are certainly not neutral nor will they ever be.

In fact, the people, information, and infrastructure that, for the most part, develop and market these new technologies conform what is known as the knowledge economy. Knowledge economies are based on intellectual capital and in the most developed industrialized nations these greatly contribute to the total GDP.

From a Latin-American standpoint, what are the challenges that the region faces in terms of a functioning knowledge economy? The situation is not encouraging and the challenges are both internal and external. Forecasts predict that by 2050, the region will only make up 7% of the global economy, meaning that if these predictions are true, its participation in the pay-offs will be pretty much insignificant. Why is that?

Externally, there is high pressure from developed nations and global corporations to discourage the development of knowledge economies in Latin America. The region provides raw materials and cheap labor and the World Trade Organization regulations and free trade agreements clearly establish rules that favor multinational corporations over developing nations in terms of the property of information and knowledge. Word Intellectual Property Organization (WIPO) data reveals that between 1980 and 2015, the international percentage of new patents awarded to Latin-American applicants was less than 1 %.

Internally, the situation varies according to each nation within Latin America. Most governments do admit that there is an overdependence on primary sector economics. However, the public policies that are applied to solve that problem vary quite drastically. Some countries, like Bolivia and Ecuador, for example, consider that state control over natural resources and state enterprises will make a change in the production matrix making it much more viable.

Other countries in the region, consider that private capital will be in charge of changing the productive matrix by way of trickledown economics. If international experience is held as a reference, it should be noted that strong state intervention has been a common factor in the development of knowledge economies in both the West and in the far East.

One of the most interesting examples of knowledge economy policy in Latin America is Yachay, a city literally named “City of Knowledge”. The construction of this metropolitan took place during the Correa administration; its goal was to create synergy between “the academy, the public sector, and the private sector”. Yachay is Ecuador’s first completely planed urban center. It is also eco-friendly and sustainable. Yachay Technological University has hired top human talent from around the world to research and teach. This higher education institution is a public university that seeks to create business opportunities out of the investigation results its scientists produce.

Aside from initiatives like Yachay, not many nationally relevant success stories and tangible results can be seen in the region. If the region does not get its act together in its development efforts, few and sporadic results will take place in any other aspects. This is the lesson of previous and successful experiences in today’s knowledge economies, state intervention, and oversight has so far been necessary for development to take place anywhere in the world.

LatinAmerican Post | Nicolas Villaes
Copy edited by Susana Cicchetto

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