UNESCO SCIENCE REPORT

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UNESCO SCIENCE REPORT In Venezuela, the collapse of the Brent crude price since mid-2014 has complicated an already difficult political situation but the economy is still performing vigorously. Argentina, meanwhile, is facing a debt crisis that has pitched it against private creditors in the USA; it showed almost zero growth in 2014 and this indicator may slip further in 2015. The combination of numerous administrative barriers and successive fiscal and monetary policies designed to stimulate household and business spending have engaged both Argentina and Venezuela in a spiral of high inflation levels and low foreign reserves. On the political front, there has been some turbulence. A corruption scandal involving the Brazilian oil company Petrobras has taken a political turn (see Chapter 8). In Guatemala, President Pérez Molina resigned in September 2015 to face charges of fraud after months of street protests; such a development would have been inconceivable a few decades ago, suggesting that the rule of law has gained traction in Guatemala. The normalization of bilateral relations with the USA in 2015 should give Cuban science a considerable boost. Meanwhile, political tensions persist in Venezuela, the only country in the region to have seen its scientific publications decline between 2005 and 2014 (by 28%). Political stability, the absence of violence, government effectiveness and the control of corruption are all vital to achieve long-term development goals and improve a country’s scientific and technological performance. However, only Chile, Costa Rica and Uruguay currently have positive values for all of these governance indicators. Colombia, Figure 7.2: Relation between governance indicators and scientific productivity in Latin America, 2013 2.0 300 articles per million inhabitants 1.5 Chile 50 articles per million inhabitants Note: The size of the bubble is proportionate to the number of articles per million inhabitants in 2013. Horizontal and vertical axis values should be read from the centre of each bubble. 1.0 Government ef fectiveness (2013) Colombia Mexico 0.5 0.0 -2.0 -1.5 -1.0 -0.5 0.5 1.0 1.5 2.0 Peru Guatemala Panama Brazil Bolivia -0.5 Ecuador Honduras El Salvador Dominican Republic Costa Rica Argentina Cuba Uruguay Paraguay Nicaragua -1.0 Venezuela -1.5 -2.0 Political stability/absence of violence (2013) Source: author, based on World Bank’s Worldwide Governance Indicators; United Nations Statistics Division; and Thomson Reuters’ Science Citation Index Extended 176
Latin America Mexico and Panama can boast of government effectiveness but not of political stability, owing to internal conflicts. Argentina, Cuba and the Dominican Republic all have positive values for political stability but are less effective when it comes to policy implementation. The remainder of countries have negative values for both indicators. It is interesting to note the high correlation between good governance and scientific productivity (Figure 7.2). A regional union modelled on the EU At the regional level, one of the most momentous developments in recent years has been the creation of the Union of South American Nations (UNASUR). The treaty was approved in May 2008 and entered into force in March 2011; the South American Council of Science, Technology and Innovation (COSUCTI) was established a year later within UNASUR to foster scientific co-operation. The new regional body is modelled on the European Union (EU) and, thus, embraces the principle of the freedom of movement of people, goods, capital and services. UNASUR’s 12 members 2 have plans to establish a common currency and parliament (in Cochabamba, Bolivia) and are discussing the idea of standardizing university degrees. UNASUR’s headquarters are located in Quito (Ecuador) and its Bank of the South in Caracas (Venezuela). Rather than creating other new institutions, UNASUR plans to rely on existing trade blocs like the Common Market for the South (MERCOSUR) and the Andean Community. High-tech exports drive growth in very few countries The sectorial distribution of FDI in Latin America follows a very distinct pattern. In 2014, 18% of the region’s technology-oriented FDI focused on low-tech projects, 22% on medium–low, 56% on medium–high and only 4% on high-tech projects. Investment in high technology tends to be destined for Brazil and Mexico, where much of it is captured by the automotive sector. At the other extreme, this type of technology accounts for less than 40% of FDI flows to Colombia, Panama and Peru. In Bolivia, the commodities sector receives the lion’s share, especially the mining industry. In Central America and the Dominican Republic, where nonrenewable natural resources are scarce and investment in maquiladoras 3 is not very capital-intensive, most investment goes to the services sector, which in the case of the Dominican Republic includes a competitive tourism sector. Ecuador, Colombia and especially Brazil have a more balanced distribution of FDI (ECLAC, 2015b). 2. Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela 3. A maquiladora is an export-processing zone where factories are exonerated from custom duties to enable them to assemble and transform goods using imported components, many of which are then re-exported. The majority of Latin American economies specialize in low technology, however, not only in terms of the content of their manufactured goods but also insofar as firms investing in an industry tend to operate at a considerable distance from the technological frontier. In addition to involving more innovation, the production and export of medium- or hightech goods requires a higher level of physical and human capital than low-tech products or those based on natural resources. In recent decades, the region has experienced mixed fortunes in incorporating technology into its exports. Mexico and, to a lesser extent, Central America, have achieved a radical transformation from commodities to medium- and high-tech manufactured products, thanks to special import regimes and export-oriented manufacturing. By contrast, the technological content of South American exports has not changed. This is because, on the whole, Latin America specializes in primary production. Only in Costa Rica and, to a lesser degree, Mexico, do certain high-tech exports drive economic growth to an extent comparable with developing European economies (Figure 7.3). Moreover, there has been a decline in the hightech component of manufactured exports from Mexico (and Brazil) since 2000. In Costa Rica, the large share of high-tech exports can be explained by the arrival of Intel, Hewlett– Packard and IBM in the late 1990s; this drove high-tech goods to a peak of 63% of manufactured exports before their share stabilized at around 45%, according to the UNESCO Science Report 2010. In April 2014, Intel announced that it would be relocating its microchip assembly plant in Costa Rica to Malaysia. Intel is estimated to have brought in 11% of net FDI inflows in 2000–2012 and represented 20% of Costa Rican exports in recent years. The cost to Costa Rica of the closure of Intel’s production facility has been estimated at 0.3–0.4% of GDP over a 12-month period. The closure may reflect the highly competitive market for microchip assembly or the declining demand for personal computers worldwide. Although Intel wound up its assembly operations in Costa Rica with the loss of 1 500 jobs in 2014, it also added about 250 high-value jobs to the company’s R&D group based in Costa Rica (Moran, 2014). Meanwhile, Hewlett Packard announced in 2013 that it would be moving 400 jobs in ICT services from its Costa Rican operations to Bangalore in India but that it would be remaining in Costa Rica. A recent comparison with Southeast Asia has shown that the unfavourable conditions for trade in Latin America, such as time-consuming administrative procedures for exports, have discouraged export-intensive firms in the region from deeply integrating global supply chains (Ueki, 2015). Trade costs are also negatively affecting the development of internationally competitive manufacturing industries in Latin America. Chapter 7 177
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UNESCO SCIENCE REPORT Towards 2030
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Published in 2015 by the United Nat
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Report team Director of the Publica
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UNESCO SCIENCE REPORT A closer look
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