The OECD, European Commission, CAF and ECLAC Advocate for a New Vision for Productive Development Policies in Latin America and the Caribbean

The Economic Commission for Latin America and the Caribbean (ECLAC), along with the Organisation for Economic Co-operation and Development (OECD), the European Commission and the CAF-Development Bank of Latin America and the Caribbean will present a new edition of their joint report Latin American Economic Outlook 2025 (LEO 2025), entitled "Promoting and Financing Production Transformation."

The publication examines the structural challenges that the region faces for moving towards more productive, sustainable and inclusive development, and it poses the need for countries and territories to scale up and improve their productive development policies (PDPs) based on a new vision enabling them to bring about a productive transformation and thereby address the challenge of stagnant, and even declining, productivity.

According to this new vision, these policies must include horizontal and vertical efforts to spur production transformation; they can involve any sector of the economy, but entail prioritizing strategic sectors; they are mainly understood as collaborative efforts between multiple stakeholders from the public and private sectors, academia and civil society, which means that governance is critical; they entail significant work at the subnational level; and they promote the work of strategic agendas on priority sectors, drawing oncluster initiatives and other forms of productive articulation.

Regarding the presentation of this report, ECLAC's Executive Secretary, José Manuel Salazar-Xirinachs, emphasized that "strengthening productive development policies is even more vital for the region's countries given the new realities of the international economy and geopolitics, because the fundamental characteristic of this new stage in global geoeconomics is the existence of competition and rivalry between the major powers, precisely around leadership in specific technologies and industries. Without these policies, the region will remain caught in a trap of low capacity for growth and transformation, which has serious consequences not only for economic growth, but also for the region's social, labor and human development situation."

The document indicates that Latin America and the Caribbean is not starting from scratch in terms of productive development efforts: numerous countries - including Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Mexico and Uruguay - have been implementing this type of policy. However, it notes that there are significant opportunities for improvement. For example, on average, the region's countries allocate just 0.5% of GDP to productive development policies, versus 3% in the OECD countries, while tax exemptions are equivalent to 4% of GDP, which reduces fiscal space for innovation.

"Ambitious reforms are needed to boost labour productivity, tackle high levels of informality and grow value-added export industries in Latin America and the Caribbean," OECD Secretary-General Mathias Cormann said. "By deepening regional connectivity, encouraging the development of regional capital markets, building skills and increasing domestic resource mobilisation, policymakers can unlock new investments for strong, sustainable and inclusive growth."

In addition to proposing an entire series of recommendations for scaling up and improving productive development policies in the region, the report also addresses the ways in which these agendas for productive transformation could be financed. Specifically, the LEO 2025 highlights the growth of green, social and sustainable bonds, which amounted to $164.4 billion dollars as of 2024, or 27% of the total issued in the region, versus 9% in 2020. It also points up Foreign Direct Investment equivalent to 2.8% of GDP, focused on renewable energy, digital infrastructure and technological industries, among other sectors.

The report calls for mobilizing more public and private investment, strengthening development banks and expanding innovative financial instruments to drive the production transformation the region needs.

The document also asserts that productive development policies can serve as the basis for collaboration between countries, both inside and outside the region. In particular, it stresses the need to bolster bi-regional cooperation between Latin America and the Caribbean and the European Union, under the Global Gateway Investment Agenda, as a way to promote technology transfer, sustainable finance and the strengthening of local production capacities.

In this regard, the Executive President of the CAF-Development Bank of Latin America, Sergio Díaz-Granados, stated that "Latin America and the Caribbean is a reliable, like-minded and economically complementary partner. The region offers precisely what Europe most needs. Meanwhile, the European Union has the capital, the technology and the know-how to promote the development of bi-regional, high value-added production chains."

The European Commissioner for International Partnerships, Jozef Sikela, emphasized that "Latin America and the Caribbean have a strong potential to drive sustainable, digital and inclusive growth, but unlocking it requires investment, innovation and stronger regional cooperation. Through the EU-LAC Global Gateway Investment Agenda, we are joining forces with the region to deliver quality investments that deliver concrete benefits to people across both our regions."

Launch at the Business Forum of the CELAC-EU Summit

The LEO 2025 report will be presented next Monday, November 10 in Santa Marta, Colombia, during the Business Forum of the Summit of Heads of State of Latin America, the Caribbean and the European Union (CELAC-EU).

This event will bring together government leaders, international organizations, development banks and representatives of the private sector to discuss strategies aimed at furthering investment, sustainability and productive innovation in the region.

About the report

The LEO 2025 is a joint publication by ECLAC, the OECD Development Centre, the European Commission and CAF. Since 2007, this series has analyzed Latin America and the Caribbean's main development challenges and has promoted political and economic dialogue with Europe.

Its 2025 edition offers a road map for promoting and financing production transformation, by articulating national and subnational productive development policies, sustainable finance, institutional capacities and international cooperation with a long-term vision and a territorial approach.