Q&A: LatAm Should Not Be Complacent When it Comes to Innovation

We caught up with Juan Carlos Navarro from IDB to find out where Latam stands in its innovation policies, and what would need to change to catch up with the developed world.

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Juan Carlos Navarro has been Principal Technical Leader of Science and Technology at the Inter-American Development Bank (IDB) for more than nine years. During his tenure, he has led many of IDB’s lending projects in areas such as innovation policy, business climate reforms, science and technology policy, human capital development, and cluster and value chain development.

Navarro is part of IDB’s competitiveness and innovation division, which is dedicated to improving conditions for innovation to flourish, while also creating an economic impact in Latin America and the Caribbean. We caught up with him to find out where the region stands in its innovation policies, and what would need to change to catch up with the developed world.

Nearshore Americas: What have been the most stand-out findings from your recent research in Latin America and the Caribbean?

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Juan Carlos Navarro: “A lot of new thinking about innovation is related to design thinking and creativity in the innovation process.”

Juan Carlos Navarro: In writing our new book, Innovation Policy in Latin America and the Caribbean: New Pathways, we found that most countries have acquired some of the basics of having an innovation policy. One of the chapters deals with innovation in the natural resources industries. Most of the economies in Latin America are focused on agriculture or mining. These were traditionally low-tech industries that were not associated with cutting-edge innovation. However, our research shows that an important change has taken place in these sectors’ technologies and business models.

Several Latin American countries now approach these traditional sectors in a whole new way. In the case of agriculture, there have been advances in biotechnology and links to information technology. For mining, this has to do with new business models and advances in nano-technology, for example. New businesses are appearing, which are far more focused on using knowledge as an important element of their productivity. You could make the argument that technological upgrades in Latin America are coming through the natural resource industries. This might seem counter-intuitive, as technological leapfrogging usually comes through manufacturing, but something different is happening here.

We also explored social innovation, which is very fashionable these days. This reflects the experience of the IDB’s Innovation Lab (I-LAB), which applies innovation thinking, such as the crowd-sourcing of ideas and resources, to topics such as social inclusion and fighting poverty. This is the representation of how innovation is about more than sophisticated companies and scientists and how common citizens can receive benefits from innovation.

Which LAC countries are currently leading the pack in terms of innovation policies?

It’s hard to point at particular examples. Common sense would tell you that some Latin American economies are stronger, more diversified, with better research institutions and more innovative companies. This would be the case with Mexico, Brazil, Argentina, Chile, Uruguay, and Colombia. Those are the countries where you will find the public and private sectors with the best capabilities for innovation. Having said that, they are far from where they should be. Indicators will tell you these countries should not be complacent, but they have the conditions to progress if resources are directed in the right way.

Other countries are catching up very rapidly. Peru, for instance, had almost zero innovation around a decade ago after a period of political and economic crisis. In ten years, they have moved forward very quickly and will catch up with everyone else very soon. The same situation can be seen in Costa Rica, which is in a relatively good condition.

What methods should be employed by countries lagging behind to improve their position in terms of innovation?

There is a clear issue concerning the amount of resources being invested. There is a huge difference between the amount of resources being directed to innovation in any advanced economy compared with any Latin American or Caribbean country. This is true of both private and public investment.

The idea that knowledge is a key part of productivity and competitiveness is not widespread. It is not yet in the mainstream of either sector. Decision-makers in the region will say they are pro-innovation but they will not necessarily follow that with decisions to invest in innovation. They see other things as higher priorities or as faster ways to reach their objectives. Investing in innovation is being overlooked. Despite progress in the last ten years, these countries are far from where they should be.

In the same vein, how does innovation tie into human capital and productivity?

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That is another important shortcoming in Latin America. There is a limited supply of the human capital needed for innovation to flourish. There is a shortage of scientists or technicians, but beyond that, innovation is a system. This system incorporates many moving pieces in the public sector, private sector, academia, laws and regulations, financial markets, and trade, among others. However, human capital is lagging behind in all of these areas.

If you want improvements in intellectual property law, you need lawyers who understand intellectual property. Another area is technological transfers, the ability to turn ideas into products with market value. This is a very complex skill and such human capital is very scarce in Latin America. There is an acute shortage of qualified personnel to move forward.

The IDB works extensively to find mechanisms for the development and acquisition of the human talent needed to drive innovation. You can always provide scholarships to train people but much of this tacit knowledge can only be transmitted in person. That means sending people to where innovation is happening, wherever that may be. We are very active in bringing foreign nationals to countries to spread particular knowledge.

A number of reforms in the region have been focused on boosting innovation. What is your opinion on the effectiveness of these reforms? Are they working?

It would be difficult for me to generalize. Latin America has about two decades of economic reforms concerning the business climate. These have been making it easier for companies to operate, reducing the time needed to open a company or get a permit, generally reducing red tape and improving international trade. However, countries are not necessarily putting in place the conditions for innovation to flourish. That is why we talk about the innovation climate alongside the business climate. Countries need reforms that are directly aimed at encouraging the private sector to become more engaged in knowledge utilization. That is the difference, involving the right human capital, intellectual property regime and public policies to support businesses. The idea of innovation has to be explicitly pushed.

Many countries are moving in this direction. In the case of Argentina, for example, a recent change of government saw the entire cabinet being replaced, except for one member, the Minister of Science, Technology and Productive Innovation (Dr. Lino Barañao). That is the product of strong work under the previous administration which was recognized and continued by the new government. The decision to provide this continuity speaks for the fact that Argentina has been undertaking a series of progressive innovation policies.

A very similar example happened in Peru where a new administration just came in. The country has no ministry of science, technology and innovation but there are important public entities which run programs in this area. The new government confirmed the leadership of these two agencies, CONCYTEC, which focuses on public research and development, and Innovate, which looks after driving innovation in the private sector. The teams in both agencies were preserved and their work did not step for one day during the transition. We found that very encouraging.

What are the main trends and innovation developments that IDB will be investigating in the near future?

A lot of things are happening. One issue which has received increasing attention is the creative economy. A lot of new thinking about innovation is related to design thinking and creativity in the innovation process. We are starting to explore and research issues about the creative economy, as it relates to innovation. We may launch pilot projects in several countries to see what could be done on a larger scale. It is an area with huge potential.

More generally, the bank is aware that a huge technological change is taking place with the digital revolution, whether to do with Big Data, 3D printing, and virtual reality, and the sharing economy among others. These aspects are transforming manufacturing and social relations. We know this is coming to Latin America. We have started a line of research on what this revolution will affect Latin America and what implications it will have for the economy and the population. Public policies have to adapt to get the most out of this.

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