Executive Summary

The pace of Latin American economic growth will be the slowest in the past five years. According to forecasts, the region’s economy will grow by 1.0-1.5% in 2014 (compared with 2.5% in 2013 and 2.9% in 2012), before recovering slightly in 2015 to 2.0-2.5%. External factors contribute to this slowdown, including lower commodity prices, mainly due to the economic slowdown in the People’s Republic of China, as well as the rising cost of external financing and more restrained capital inflow prospects. Although growth levels vary from one country to another, partly because of different economic management strategies, these projections signal the end of a ten-year period during which Latin America has seen higher growth than the OECD average.

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Chapter 1. Education, skills and innovation for a more dynamic, inclusive Latin America

This chapter provides an overview of macroeconomic trends in Latin America and analyses the role of education, skills and innovation for development by looking at the current situation in the region and identifying the main challenges and opportunities in those areas.

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Chapter 2. Latin American macroeconomic outlook

Latin America has moved away from the high rates of economic growth seen during the 2000s and towards more moderate rates of a range of 1.5-3%. Clearly it is good news that the region was able to deal with deteriorating external conditions without experiencing any crises. However, continuous downward revisions to medium term growth projections could be a symptom of potential output growth being less robust than expected, which could present a risk to recent social achievements. This chapter assesses Latin America’s growth prospects in a more challenging international environment and explores how vulnerable the region is to further blows to the international environment in the short term. It also analyses the historical impact of resource booms (from commodities and capital flows) on the trend and cyclical components of economic performance. The chapter ends with some proposals on economic policy in the short term, and especially in the long term. The region must take ambitious strides to raise productivity and continue to bring down inequality and poverty. To do so, it must improve the skills of current and future workers through traditional education and technical and vocational education and training, a subject that ties in with the rest of this report.

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Chapter 3. Skills in Latin America and the Caribbean amid shifting wealth

This chapter analyses the influence of shifting wealth on skills and production development in Latin America. It proposes that an inadequate supply of skills (in terms of quantity and quality) explains their limited role in the Latin American development model. This situation has left the vast majority of countries in the region caught in the middle-income trap, which is particularly difficult to escape in the current context, in which shifting wealth is making it difficult to identify and acquire the necessary skills. More than in any other emerging region, Latin American companies are not seeing their demand for skills being met. This contrasts with the drop in returns to education in the region, reflecting the complexity of acquiring the skills needed in such a dynamic economic environment. The chapter also analyses the distribution of workers according to their level of skills and highlights the potential role of technical and vocational training in increasing the impact of training on employment.

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Chapter 4. Education and skills for inclusive growth in Latin America

This chapter offers a recent overview of education systems in Latin America and their capacity to achieve inclusive growth. It begins by describing the achievements made in investment and enrolment rates at the various levels of education and identifying some of the challenges that lie ahead for the region. It then looks at changes in performance, especially in secondary education, and the school related and social factors behind those changes. The chapter looks at inequality patterns in the education systems related to socio-economic income, geographical location and gender. There is also a discussion of recent changes to education policies in the region, with an overview of the experiences of OECD countries in implementing such policies. The chapter concludes by making policy recommendations based on this analysis.

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Chapter 5. Innovation for development in Latin America

Latin America has significantly improved its macroeconomic stability and some aspects of its population’s well-being. However, greater efforts are needed to raise productivity levels, create good quality jobs and reduce the size of the informal economy. Policies therefore need to be geared towards making the production system more diverse and more sophisticated. This chapter analyses the relationship between skills development and innovation processes in the production system, focusing on the impact of the stock of skills on long-term productivity and growth. Various indicators are used to measure the knowledge intensity of the production structure and to estimate the knowledge-based capital of the economy. The chapter also discusses certain indicators of the contribution made by foreign direct investment to skills development. Finally, looking at certain case studies, it discusses the relationship between skills, innovation and productivity increases at the firm level.

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