Despite gains in poverty reduction and a growing middle class, Latin American and Caribbean countries continue to see disparities in income, poverty, and access to basic services between their various states or provinces. To address these differences, governments are reexamining existing policies and developing new approaches for productive development with a focus on comparative advantages and public-private collaboration at the regional level.
Additional factors, such as growing demand for global value chains, tax and administrative decentralization, and the presence of large companies, contribute to this mounting government interest in promoting new forms of economic development at the local level, ultimately aiming to increase local business productivity, generate income and jobs, and overcome the hurdles of inclusive growth.
To this end, the MIF is launching a new agenda for action on Regional Economic Development (RED). In this post, I’d like to explain the key elements of this strategy and why it’s important:
1) What makes a development strategy a “Regional Economic Development strategy”?
For the MIF, a strategy to support productivity and competitiveness is considered regional when it is developed based on a complete picture of the geographic region where it will be implemented. A region can be a metropolitan area, a small city or group of cities, a valley or a rural area, even a province or department. As part of this complete panorama, it is important to understand the relation between the most important local actors, local administration, businesses, universities, technology centers, and civil society, as well as the strengths and weaknesses of local institutions and the key productive sectors. In addition, an analysis of potential market opportunities and local private sector growth limitations should be included. In sum, in a RED strategy, the focus is on the region as a whole and the links between the different local actors.
2) What has the MIF done so far?
Since 1994, the MIF has invested more than $112 million in 86 RED projects in 19 countries, leveraging an estimated additional $103 million in funds from public and private partners. In total, over 54,000 micro, small and medium-sized businesses have benefitted from MIF projects.
The MIF’s focus has evolved from a focus on providing business development services to MSMEs, to an emphasis on building networks among these smaller enterprises in specific sectors, and—most recently—to a wider-lens focus on increasing productivity by strengthening local public-private collaboration to leverage a particular region’s assets (natural, human, and economic resources, infrastructure, etc.).
3) What are our main lessons learned?
The MIF’s experience has shown that projects achieve the best results when they combine elements from these different approaches to suit the specific types of regions in which they seek to effect change. Similarly, it is important to engage with the entities capable of scaling up RED approaches from day one, either as partners or as the main audience for knowledge products, to achieve the goal of influencing public policy. (For more detailed lessons, see Chapter 3 of the the strategy.)
This knowledge and learning has been translated into 3 strategic pillars to guide our future RED interventions:
- Innovation: testing the effectiveness of innovative, public-private projects designed to address the specific challenges facing different types of regions;
- Scale and Policy: working together with the IDB Group and strategic public and private partners with the capacity to scale up effective projects and influence public policy; and
- Knowledge: producing high-quality knowledge products demanded by the network of RED practitioners in Latin America and the Caribbean, with an emphasis on results measurement and using practical knowledge gained from pilot projects to influence policymaking.
4) What is the MIF’s action plan moving forward?
The MIF will concentrate on 4 priority areas:
- Working with private corporations and governments on large investments (for example, in extractive industries and infrastructure);
- Fostering innovation (for example, by providing incentives for groups of businesses to work closely with local research and technology centers to develop innovative solutions for the businesses’ production processes);
- Supporting productive development strategies in urban settings
- Working with local and global value chains
The specific interventions to be carried out in these priority areas will be driven by a careful analysis of the type of region being targeted by each project (marginalized, emerging, or declining). (For more information, see Chapters 4 and 5 of the strategy).
In conclusion, this new strategy will allow the MIF to conduct better-targeted experiments, fill knowledge gaps, and ultimately, scale up effective interventions and influence public policy.
Building strategic partnerships is key to achieving significant scale. As governments in the region rethink their RED strategies, the MIF invites other interested partners to join forces, looking beyond individual interventions to achieving influence with a broader reach.
Access the strategy here.