INT-0675

Instituto Latinoamericano y del Caribe (-

lLI'ALyiLIT¿

(UOJi;-)-

NACIONES UNIDAS-CEPAL-PNUD GOBIERNOS DE A M E f L

Latin American and Caribbean Institute for Economic and Social Planning
UNITED NATIONS-ECLAC-UNDP

L M I N AMERICAN AND CARIBBEAN GOVERNMENTS

Institut Latino-Américain et des Caraibes de Planification Economique et Sociale
NATIONS UNIES-CEPALC PNUD GOUVERNEMENTS DE L AMERIQUE LATINE ET DES CARAIBES

RLA/86/029
ifarch 1989
CARIBBEAN WDRKSHOP ON ECONOMIC MANAGEMENT,
PUBLIC SECTOR INVESTMENT PROGRAi^UNG, EXTERRAL
TEaiNICAL COOPERATION AND FOREIGN AID

Montevideo, Uruguay, 5-10 May 1989

-^vt

ILPES:

EXTERNAL INSERTION, DEVELOPMENT
AND PLANNING

Summary presented by Juan Martin

Proyecto PNUD/ILPES:

"Elaboración y Difusión de Nuavas Técnicas en la Planificación y Programación de Políticas Públicas"

Project URIDP/ILPES:

"Elaboration and Dissemination of N e w Techniques in Public Policy Planning and Programming"

Projet PNUD/ILPES:

"Elaboration et Diffusion de Nouvslles Techniques pour la Planification et Programmation des Politiques Publiques"

E d i f i c i o N a c i o n e s U n i d a s / C a s i l l a 1 5 6 7 - V i t a c u r a / T e l e x C h i l e : 2 4 0 0 7 7 / Oir. C a b l e g r á f i c a : U N A T I O N S / S a n t i a g o - C h i l e / T e l . ( 5 6 2 ) - 4 8 5 0 6 1

A.

1.

INTRODUCTION

The balance of the eighties allows for different interpretations.

One,

already very common, is that they have been lost from the point of view of
development and, above all, of its per capita expression:
return to standards lived ten years ago or more.

there has been a

Another, less common but

more transcendent, is that the economic, social, political and cultural
dynamics of the last years, when projected towards the future, show that
Latin America and the Caribbean have jeopardized more than the next decade.
This idea permeates the entire document, which is dedicated to examining the
possibilities of the region becoming more dynamically reinserted into the
world of tomorrow.
2.

Policies deliberated for the reordering of external relations may help to
reduce current vulnerability, but will unlikely be sufficient to eliminate
it.

In truth, the manner in which the region interacts with the exterior

explains part of its problems - Including some very serious ones - nnd
conditions others.

Nevertheless, it would be simplistic to explain its

vicissitudes only in terms of external insertion.

On the other hand, the

very concept of region needs to be viewed in relative terms, due to its
increasing heterogeneity.
3.

During

the eighties

the region's

population grew by 16.1%.

output

increased by

11.6% while its

However, the deviation about the means should

substitute nearly all averages.

Demographic heterogeneity increased:

97%

of the population today is concentrated in almost half of the countrie.s
(20), the remaining 3% in the rest (14 countries and 4 associate states).
Working age population varies from country to country, from almost 50% to
close to 65%.

Life expectancy ranges from 52 to 72 years,

of urbanization varies from 27% to 85%.

T i porcnntngo
le

Illiteracy rates go from 5% to 60%

depending on the country.
4.

Likewise, economic and social differences have increased.
capita

income

domestic

(1986) is 16 times the lowest, while

product

(GDP) is 96 times the lowest.

The highest per

the highest gross

Only

three countries

generate 77% of the value added by regional manufacturing (1985).

In terms

of income distribution, the top 10% of the population absorbs from 30% to
over 50% of national income, depending on the country; the bottom 20% in all
cases receives between 2% and 4% of national income.

These few distribution

indicators give us an idea of the extent to which averages can distort
economic and social analyses of Latin America and the Caribbean at the end
of this decade.
5.

From 1980 onward, the region gave signs of enormous instrumental creativity,
alternating policies of varying degrees of orthodoxy.

Moderate reactivation

impetus were followed by greater imbalance; then, efforts at austherity
aggravated unemployment and accentuated social tensions.

In the area of

macrovariables, three ended up with irreparable damage:

investment and

expenditure in science and technology
social expenditure
opportunities

for

(Sc&T), and certain categories of

(education and health).
reinsertion by

In a globalized world, the

Latin America

and

the

Caribbean are

restricted today and will continue to be so in the years to come, as a
consequence of this basic fact:

short term decisions forget that each

yesterday contained definitive conditionining factors for the future.
B.

5.

It

is

known

TIIE REGION'S PRESENCE IN THE EXTERNAL CONTEXT

that

in post

World

War

production, markets and culture deepened.

II

the

internationalization

of

Some of its peculiarities are

noteworthy: concentration of capital in those enterprises undergoing said
process was intensified; their specific company policies were also designed
to be international in scope; consequently, a sizable part of what is commonly termed "international division of work"
companies.

occurs today inside certain

Little by little there occurred a new and as yet little-studied

articulation of the three conventional spheres of capital:

productive,

commercial and financial, and more recently, between them and a fourth one
which has begun to be called "intellectual capital".
7.

Thus a strategic change was witnessed in world economy dynamics, which put
an end to the secular paradigm of industrialization based on stable models

of manufactures and on mass production.

In this new context it became

essential to associate real productivity and competitiveness, with being a
sine qua non condition for penetrating
Simultaneously,

another

process

of

and consolidating new markets.

restructuring

of

the

international

scenario was witnessed, not completely, independent of the previous one,
which gave rise to new blocs of association among countries.
In this new and shifting power field one must identify opportunities for
participation by Latin America and the Caribbean.

Concurrently, the new

polynuclear nature of the world should favour said opportunities. Herein
lies the demand for fine-tuning between diplomacy and development policies
geared towards reinsertion.

9.

Since at least three decades ago, the different flows of external resources
have also been undergoing important changes.

Up until the end of the

seventies, the region received close to 2% of GDP from abroad for Net Transfer of Resources.

During the eighties, it remitted close to 4% of GDP.

The

"minus 6%" difference is doubly significant: it expla ins the systematic
reduction in per capita income and also explains the drop in investment
which will affect the near future.
10.

This backdrop already reflects a progressive loss of regional influence in
terms of multilateral development policy.
remote roots.

Once again, the problem has

Exactly 20 years ago, the "Latin American Consensus of Viña

del Mar" recognized the need to mobilize greater support for the region, "in
particular from countries having greater weight in world decisions".

Five

years later, multilateral aid participation directed at governments of the
region had already dropped 2/3, and the main bilateral aid in almost 9/10.
As of 1980, Latin America and the Caribbean suffered with the "graduation",
which reduced their priority in the distribution of Official Development
Aid.

This aggravated

previous

years

had

the availability of external

already

started

operations of a commercial nature.
state

that

the

region's

current

to

be

resources which in

provided

through

banking

For all these reasons It is possible to
external

presence

falls

below

the

requirements of its population, the virtual potentiality of its human and
natural resources and its right to historical fulfillment.
C.

CONTEMPORARY DEVELOPMENT HINDERS REINSERTION

13. The possibility of Latin America and the Caribbean finding fulfillment in
the world of tomorrow implies a turn in perspective regarding the past.
Contemporary development is best understood on the basis of certain distinguishable but closely intertwined phenomena:
dominated by technological purpose;

knowledge is accumulated,

then, it permits the acceleration of

productive and organizational innovation; which is why we witness today a
proliferation of formal and informal specialization in the work area, which
contributes to the generation of great complexity in structure and social
interaction; which, in turn, creates new tensions in terms of governability
and ability to govern.
1.
12.

Information Inputs and Accelerated Innovation

For some time now companies and governments of advanced industrial economies
have modified

their expenditure

in science and

pragmatic in broadening and reorienting it.
technology

and

technology

destined

to

technology, being more

Knowledge destined to become

become

product

markets, both underwent increases in relative growth rate
other types of knowledge and technology.
prepared for a new production paradigm:

and

to

broaden

with respect to

In this way the touchstone was

knowledge and technology converted

to "information" would penetrate and dominate modern production relations.
As a new critical input, knowledge converted to "information units" changes
the proportion to which all other inputs are used and, little by little,
introduces a factor of obsolescence in previous techniques of productive
organization and entrepreneurial management.
13.

Productive capital is partially freed from Its physical and financial roots
and

takes

intellectual
infinitum;

the

form

capital

of

"intellectual

shifts,

the

capital".

frontiers

of

The

accumulation

technological

the latter is concentrated in political geography.

power

of
ad

Thus, high

technology

is directed

from its birth:

first it inaugurates, then it

diffuses the new technological and productive standard.
implies a cost in foreign exchange;

To conquer it

to resist it a cost in historic

marginalization and to become submerged in it a cost in sovreignty.

One

would have to assimilate it in a selective manner. This summarizes some of
the concrete challenges of this decade's end.
19.

This acceleration of innovation has been made possible only through prior
growth in Sc&T and R&D expenditure.

In -this sense the region as a whole is

incapacitated to proceed with an immediate restructuring of its productive
apparatus, independently of the specific problems in financing it.

During

the recent past, four spheres of capital "dashed to pieces" the opportunities for restructuring and making the region's economy more dynamic:

the

rise in international interest rate (financial); acceleration of innovations
using new and costly technology (productive);
ioration in terms of trade (commercial);
knowledge

and

historical

in R&D

expenditure

protectionism and a deter-

and domestic delays in mastering

(intellectual

capital).

coincidence which weakened regional opportunities

A

strange

for future

development.
2.

Work and the Informal Sector:
Fractionation and Proliferation

15.

Contemporary economy produces "multivariation"

in the division of work.

Advances in the field of telecommunications, semiconductors, industrial and
office automation, thus play a triple role in the creation of new work
specialties:

directly within each one of its own branches;

having an

impact on the capital goods Industry; and, less directly, through the
diffusion of these goods

in other industries and in the production of

services.

useful

It would be

to point out

that

the

"specialities'

explosion" is not necessarily limited to the productive apparatus of each
country, be it developed or not.

The flexibility which the new technolog-

ical and productive standard sponsors at an international scale, opens up
new possibilities for developing countries. Active external
critically

depends

on

the

innovative

and negotiating

reinsertion

capacity

of the

entrepreneurs of the region, backed up by efficient promotion of the State,
which

will

also be

responsible

for

correcting

or

compensating equity

distortions, which productive modernization may provoke.
16.

The multiplying of the informal sector is another facet of this third
phenomenon - accelerated broadening of the work spectrum - in a mixture of
expansion and greater diversity.

Current policy on the informal sector is

not sufficient in light of this new dimension of the problem.
today dominates production and innovation leads markets;

Knowledge

within this frame-

work, there exists an added risk for Latin America and the Caribbean:

that

"growth without employment" will amass those citizens which are less qualified, at the base of its social pyramid, as if they were superfluous.
3.
17.

Complex Society and the Crisis of Governabllity

In the world today no national society is exempt from the attributes of
complexity.

Of course the fractionating of formal and informal work is

accompanied by a broader spectrum of income distribution, of values and
social expectations, which make the behaviour of the various actors more
unpredictable.

In the external domain, a deepening interdependence is

witnessed, which is a central phenomenon of contemporary societal complexity.

In terms of time, its "open entity" nature

is intelligible as a major

indetermination of the future.
18. Vulnerability and uncertainty

- those two undisassociatable traits of a

complex developing society - always demand vigilance and the protection of
certain basic domestic balance.

At the level of inequality in force in

Latin America and the Caribbean, said balance cannot depend exclusively on
the market;
exercises.

neither can it be born from rigid intertemporal planning
Complexity reduces the efficacy of all partial balance;

on the

other hand, uncertainty does away with almost all normative efforts at
disciplining the future.
19. Vulnerability emerges as a kind of fingerprint of complex phenomena, all
similar but each one very unique.

As the concept is used here, external

insertion is almost equivalent to inderdependence; from this perspective,
reinsertion policies

are

a special

case

in the

management

of modern

complexity.
20.

To culminate, a fifth phenomenon is presented:
society reduces Its governability;
reduces the capacity to govern;

the vulnerability of current

accelerated economic and social change

and thus, the gap grows between the need

for government and the capacity to govern.

This gap is observed not only in

modern states, but also in any large social organization which has the
configuration of a complex system.
21. The decrease in governability in a developing society today, is explained by
a great many elements, among these: the fractioning of social structure
which implies extreme differentiation of aspirations;

innovation concen-

trates power, then social heterogeneity also widens from this point of view;
and the innovative stance clashes with inertia throughout the breadth of
each society.

Likewise, there are serious additional difficulties which

undermine the capacity to govern, such as:

information available on society

is becoming increasingly insufficient in terms of that which is necessary
for adequate

decision-making;

within and without national boundaries,

financial matters have acquired greater relative autonomy in the face of
commercial

and

productive

matters;

and

the

new

strategic

role

of

intellectual capital.
22.

The conclusion is that inefficiency can penetrate into the
the governing function.

performance of

Contradictorily, in the international ambit there

are various high efficiency foci which promote the new technnological standard, impulse modernity and accelerate history.

Reinsertion policies should

not ignore the real availability of the capacity to govern in the region.
There are strong indications that it is decreasing because ungovernability
is consuming it from below and management inefficiency is eroding it from
above.
power.

Nevertheless, greater capacity to govern is not resolved with more
The

multiplication

of

social

interdependence among its conflicts.

agents

also

generates

greater

D. TIIE PATIIS TO REINSERTION GO THROUGH GREATER PRODUCTIVITY
23.

The debate on the region's development in the eighties has centered, to a
large

extent,

on

export

oriented

international specialization.

policies

and

on

the

quality

of

The external debt has forced exports to take

on prerogative as a function of critical demand for foreign exchange needed
to service it.

Recent commercial evolution shows the heterogenous behaviour

of products traded on international markets.

The value of regional exports

increased at a yearly average of 1.7%, equivalent to less than a third of
the corresponding world value.

Between 1984 and 1988, the region exported

100 in volume to receive 74 in value, while industrial countries exported
100 and received 124.
24.

In effect, it is convenient to differentiate between competitiveness/price
and structural competitiveness which pays greater attention to the evolution
of world demand, to mastery
technology

and

to

over

technological

information and research

development.

in applied

Competitiveness/price

is

relevant in concurrent markets and with scarce differentiation of products.
However, the current trade struggle gives prerogative to competitiveness in
innovation, economies of distance and to the quality of entrepreneurial
management.

For all these reasons, consensus is expanded on the basis of

the existence of solid ties between incorporation of technical progress,
industrial

dynamism,

increases

in

productivity

and

authentic

compet-

itiveness.

From this perspective, the technological lagging of Latin Amer-

ica and the Caribbean is serious.
25.

The

possibility

produces

of competitive

an active process

reinsertion may

of domestic

be

strengthened

articulation

and

if it

international

negotiation, with complementary economies being generated between public and
private action.
and

for

"Negotiation diplomacy" will be essential both for exports

effective

import

substitution".

The

articulation

between

enterprises and the State has been a key factor, in all successful cases of
external reinsertion, in matters as diverse as: the opening up of external
markets;

public

and

private

investment

programmes;

development

of

information and applied technology; basic infrastructure; and negotiation

and regulation of foreign investment.

In any case, all these measures

together are eluded in a vision focused on the short term.

On the other

hand, there is a role to be played by regional integration in the boosting
of

joint

and

complementary

specialization

projects

and

productive

modernization, which will allow for the capture of international markets.
26.

Within the nucleus of greater authentic competitiveness lies the increase of
real

productivity.

For

the

period

1950-1980,

the

yearly

average

productivity of work in the region grew to more than 4% only in one country;
in OECD countries, it is possible to detect periods of over a decade where
this annual growth remained between 6% and 10%.

In all, the eighties

incorporated a decisive component to the region's external vulnerability:
the

deterioration

of

investment

and

productivity,

which

reduces

the

possibility of a more solid commercial reinsertion in future decades.
E.
27.

INSERTION PROBLEMS AND THE FISCAL CRISIS OF THE STATE

The experience of the region in recent years has shown a reduction in the
degree

of governments'

policy.

It

autonomy

is urgent

to

for

regain

designing
past

and

levels

implementing public

of

investment,

expenditure and formation of new intellectual capital.

social

In truth, the debt

has stopped being only a problem of financing of international payments;
its servicing has become a dilemma in the utilization of own savings between
payment of the debt and domestic allocation.

It is also worth examining

the interaction between external adjustment, fiscal crisis and inflation
levels.

The main point is that the external debt in almost its entirety was

absorbed by the State: over 80% of the total debt became public or public
guaranteed.
28.

Without

a

imbalance;

doubt,

the

region

made

bold

efforts

to

contain

budgetary

various of its troubles came about as a result of the perverse

relation between public accounts and the external sector;

among these, the

volatility of expectations due to external and domestic uncertainty; the
intertwining of different spheres of financing; and the incongruencies in
temporal horizons for handling public imbalance.

The

three groups of

10

factors indicated ended up producing in some cases, a contradiction in the
history of budgets:

this instrument which was designed to be produced "ex-

ante", sometimes ended up being determined "ex-post".
29.

Gross domestic investment experienced sustained decline between 1980 and
1985 at an average yearly rate of 8.5%.

To this contributed the decline in

public investment, the permanent variable of adjustment to reduce programmable

government

domestic

spending and

financing.

Private

to draw

it closer

investment,

for

to availability of

its part, also declined.

Domestic financial markets were dominated by a short term rationality, with
scarce

availability

of medium

and

long

terra financing.

The drop in

investment was also accompanied by deterioration in its quality.

As a

result, per capita gross domestic product in the region dropped by minus
6.6% between 1981 and 1988; once again the average hides a very broad
spectrum of variation.

During the eighties, handling the link between

external restriction and the fiscal situation depleted the better part of
public energy regional reserves.
as an administrative

apparatus

The State was weakened in its two roles:
and as political

representative of the

nation.
F.
30.

TRENDS IN PLANNING, REINSERTION AND DEVELOPMENT

During the nineties, two topics will gain importance in the theoretical and
technical agenda of those responsible for planning, be they in or outside
the State:
and,

in

the control of highly dynamic and little determined processes

connection

organizations.

with

this,

the

pluriannual

management

of

complex

Necessary changes do not imply abandoning the traditional

functions which NPA's currently perform.

For the purposes of this document,

it is useful to identify two areas of new activity related to external
reinsertion policies:

one, more or less directly supportive of them; the

other, of development of certain tasks which are parallel and complementary,
for supporting government in those areas of economic and social development
which

do

not

reinsertion.

benefit

directly

from

the

effort

of

dynamic

external

Of course it is fitting to bear in mind certain peculiarities

of the region mentioned before.

Likewise, when mentioning the NPAs role

433

regarding "policies of external dynamic reinsertion", it is known that the
range of possibilities varies throughout the region.
1.
31.

NPA Support for External Reinsertion Policies

To mention said policies as a central theme does not mean an automatic
alignment with the thesis of modernization "at all costs".
certain:

One thing is

productive segments which desire to conquer and maintain dynamic

ground in future world economy will have to selectively incorporate the new
technological standard.

On the other hand, modernization of one or other

productive branch aimed at the domestic market, will imply incorporation of
technological innovation which will certainly be affected by the mode of
external insertion of each country.
impulses

Likewise, there will be modernization

- more cultural in nature, but which affect the formation of

expectations and social needs or the profile of aggregate demand - which do
not

depend

on

how

the

national- will

of

insertion

is

posed;

internationalized communications diffuse them over and beyond economic or
political map boundaries.

The tasks which NPA's may assume are oriented in

at least five directions.
a)
b)
c)
d)
v)

2.

32.

Support for the formation of intellectual capital.
Exploration of long term strategic scenarios.
Stabilization and control of basic balances.
Follow-up of technological trends,
Support of direct Diplomacy.

Other Functions Related to External Reinsertion

Globalized world economy makes all proposals for national self-sufficiency
unfeasible;

nevertheless, in extremely rare cases the dynamic achieved

through sustained external reinsertion will be enough to correct accumulated
deficits of employment, equity, organization and social participation and of
safeguarding

the region's cultural heritage.

In this order of ideas,

certain complementary functions could be assumed by the NPAs to help gover-

12

runents offset the unfavourable effects of insertion modes chosen or to
effect

activities

oriented

to

the

socio-economic

integration

of

each

country.
a)
b)
c)
d)
e)

3.

33.

Search for productive articulation and complementarity.
Follow-up of the impacts of external reinsertion.
Decentralization of governmental activity.
Optimization of installed technological capacity.
Follow-up and orientation of anti-cyclical actions.

Planning: and the Capacity to Govern

It is worth insisting that planning in the near future will have little to
do with planning concepts, methods, techniques and procedures practiced in
the past.
the start;

The complexity of current society weakens rigid plans right from
the acceleration of development invalidates them a few months

prior to their eventual implementation, and growing uncertainty pulverizes
good intentions as to regulation of the future.

All this is especially

significant for the purposes of generating deliberate external reinsertion
policies.

It has already been mentioned that these may only be concentrated

over the medium and long terms, over and above episodic successes, subject
to situations of high vulnerability.

Coordinated long term policies imply a

technical effort whose improved designation continues to be planning;

but

in this case the planning of policies destined to produce effects in an
external world characterized by a polarized power structure and by the
existence of multiple instances of regulations.

34.

Given the acceleration of change and the growing complexity of societies of
the region, the capacity to govern, considered over the medium and long

13
term, has two fundamental aspects, one structural and the other dynamic.
The structural aspect resides in the consolidation of institutionalized
negotiation mechanisms and in normative strength among the main actors which
have to incide in key aspects of development.

The aim is to establish

negotiation mechanisms as a function of new, very concrete objectives:
greater

productivity,

selective

and

dynamic

specialization,

timely and

competitive external Insertion, redistribution mechanisms which are less
assistance oriented and which foster greater participation in less modern
sectors,

technical

training

in strategic

areas,

greater resources for

research and technological development, selective subsidy policies, etc.
These mechanisms of negotiation should have the sufficient legitimacy to
inspire a high degree of respectability and inviolability, which would allow
them to become stabilized and truly operative.

35.

The dynamic aspect, for its part, is based on the juggling of trade-offs
between economic, social and political costs of medium term decisions.

It

involves "knowing", that is half rational and half intuitive, which would
allow a weighing of costs from both sides.

This is a dynamic aspect of the

capacity to govern because the acceleration of change and the complexity of
modern society, force continuous "reaccoramodation moves" of the intertemporal gap (between the short and medium terms) and where each move often
implies a reordering of the gameboard, which requires the capacity for
rearticulating tactics and strategies on the move.

36.

The

structural

and

dynamic

complementary in this approach.

3spGcts

of

th
zs

c3p3city

to

govern

SITG

Only when one relies on a solid structure

14
of negotiation mechanics, can trade-off dynamics be synergistic and not
entropic.

In the order of ideas presented here, planning is not tho n i o y i
iLnii

of market and it is nourished by "greater attention paid to the future".
National planning in the next decade will increasingly coincide with the
task of acting deliberately in multiorganizational social processes, in
shared power situations and with little-known horizons of change.

Technic-

ally there will be an approaching to corporate strategic planning already
practiced in the most dynamic nuclei of the contemporary world.

Insofar as

substance is concerned, it is proximal to a new role on advisory services
for the statesman of the future who will definitely have to be aware that to
govern will mean managing complex systems with intertemporal coherence and
that to orient a country's development will mean taking selective advantage
of opportunities which open up within a process of accelerated and highly
creative world change.