Brazil needs technological education to develop, says World Bank deputy

In addition to having the lowest growth prospects of any region in the world in 2022, Latin America could continue to suffer for several years from the effects of the pandemic while facing political polarization that alienates investors. The assessment is from the World Bank, for which urgent measures are needed to overcome the problems.

Carlos Felipe Jaramillo, vice president of the World Bank for Latin America and the Caribbean, says that the deterioration observed in the region’s indicators is a cause for concern, especially in education – impacted by the closing of schools. “This needs to be dealt with quickly or we will have a generation with less schooling than the previous one,” says the Colombian in an interview with leaf during a visit to Brazil.

For him, the country needs a strict plan to monitor students with learning disabilities, expand internet access in schools and for the population in general, and pass reforms to encourage the private sector to invest and hire workers.

In addition, he considers it crucial to boost investments in science and technology and promote an educational transformation so that the country can insert itself in the forefront of global growth, such as biotechnology and artificial intelligence – while Brazil and the region still rely heavily on commodities. “For that, you need more educated and educated people at all levels. Otherwise, it will be very difficult to advance”, he says.

The World Bank and other institutions project that growth in Latin America will be slower in 2022 than in the rest of the world. What is happening with the region? It is a continuation of what was happening before the pandemic and it becomes clearer now, in the final phase of the health crisis. Most economies were not growing well in Latin America. If we look at the period from 2012 to 2019, well before the pandemic, the region’s average per capita growth rate was less than 0.5%, the lowest among all regions.

My main concern is that after the pandemic we will have a period of low evolution again. The key to unlocking growth is well known and has to do with reforms, for the economy to attract more investment from the private sector — which is the engine of growth.

Is the idea of ​​the private sector driving the economy somehow hampered at this time of recovery? The United States, for example, is implementing a huge infrastructure project with public resources. I don’t think it’s harmed. The United States, China and Europe have fiscal space for stimulus. But Latin America does not. No country in the region has the scope to stimulate its economy for a long period of time without running into serious debt and sustainability problems. Brazil used fiscal space to spend mainly on the population [na pandemia], something admirable. But it’s not a sustainable standard [continuar usando recursos na mesma proporção] for Brazil and other Latin American countries.

The Brazilian government has been acting to circumvent the tax legislation in force, which has generated concern in the market. Is there still a need to present a balance plan between protecting the poor and a sustainable fiscal policy, something advocated by the World Bank? This crisis is unprecedented and therefore requires unprecedented and unprecedented programs to alleviate the impacts on the poorest and most vulnerable. As long as spending is targeted to clearly serve these populations, it is generally justified spending.

Brazil has been heavily affected by inflation. In addition to raising interest rates, what other measures should be adopted to combat it? We have confidence in the Central Bank of Brazil, which has a lot of credibility. The only other important measure is to bring the fiscal level back to where it was [antes da pandemia]. In my view, it is correct to spend during the crisis on countercyclical expenditures, and Brazil did a lot of this stimulus to avoid a worse crisis. But once the economy recovers, it is necessary to remove these stimuli and rebuild fiscal space for the next crisis.

The World Bank’s analyzes are based on the guidelines of the so-called Washington Consensus, created in the 1980s to encourage liberal measures. Has the pandemic brought the need for this vision to be updated? In my opinion, the Washington Consensus was an incomplete exercise. It included basic and very valid measures, such as debt sustainability and the importance of the private sector, but left out concepts such as innovation and productivity. Countries need to invest in systems and processes to raise productivity and wages. This, in turn, requires robust human capital, including investments in universities, science and technology. So are companies and investors willing to invest in areas at the forefront of growth, such as biotechnology and artificial intelligence. While Latin America is overly focused on agriculture and mining.

This change can only be achieved through investments in education, right? And more than money, it demands a transformation in the educational system… Yes, exactly. Investments in education, science and technology. Latin America lags behind in the quality of education and human capital. We need to attract investments to more sophisticated areas. It could be in agriculture, but it has to involve the application of high technology. It could be mining, but involve mineral processing. It could be services, but it needs an upgrade, a process improvement. For that, you need more educated and educated people at all levels.

The pandemic generated a setback in this sense, directly affecting education. How bad are we compared to the rest of the world? Latin America was the most impacted among all developing regions, and our indicators are very bad because of the school closures, which lasted a long time and made us very worried. Brazil lost the equivalent of 1.5 years in education. This needs to be dealt with quickly or we will have a generation with less schooling than the previous one, which would go in precisely the opposite direction of what is needed.

What corrective policies are needed? This calls for measures to connect schools to the internet so that they have access to excellent technology and have alert systems that monitor students so that those without progress receive dedicated attention to avoid dropping out of school. We need to improve school management at all levels—municipal, state and federal.

The inequality of access to the internet was evident during the pandemic and the World Bank defends the expansion of its use. How can expansion be accompanied by better use of technology? Only half of the population in Latin America has access to the internet, which was a tragedy during the pandemic. Those who had access could work through the computer, provide education for their children, access financial services and even use telemedicine. But the other half didn’t have that. It is essential that everyone has access to the internet and that they develop digital skills to have better quality opportunities and jobs.

The World Bank has identified that crises tend to affect employment in Latin America for several years, and that is why action is needed to boost the labor market. How to do this right now? I’m concerned about the nature of the jobs, which tend to be more informal. We need to encourage countries to improve labor rules so that people can enter the formal economy, which means making it easier for companies to hire workers. Part of the problem is that Latin American countries have an expensive process with too many rules. I understand that there has been a good movement in this direction in Brazil, with simplification of labor rules. We need more of this.

Some people may claim that this type of measure can take away people’s rights. How to respond to this kind of perception? No. The type of reform we are advocating is to make hiring easier, not to take away anyone’s rights. It is giving the right to formal employment to those who do not have access to it.

Political instability has dominated countries in the region, such as Haiti and Guatemala. In Brazil, there is tension between the President of the Republic and the Supreme Court. How does this affect the economy in the region and in Brazil in particular? I see greater polarization throughout Latin America. I’m not sure what the causes of this rivalry are, but it is a fact that there is greater political tension. There are concerns particularly among private sector investors, concerns that often escalate before elections.

In 2021, we were very concerned about Peru, Ecuador and Chile. In 2022, we will have elections in Brazil and Colombia. There can be a lot of uncertainty. These periods are often dominated by a lot of tension and tend to affect investment levels until things lighten up and become clearer. It is part of a normal pattern, but it is exacerbated by polarization.

In Brazil, is there a higher level of concern? I have a hard time comparing where it is higher or lower. I don’t follow politics very much. [local], but in all countries there is a perception that there is a great and strong polarization.

X-ray

Carlos Felipe Jaramillo, 59

Vice President of the World Bank for the Latin America and Caribbean region, responsible for the bank’s operations in 31 countries. He has been director of the institution for the African region and public servant in Colombia (with positions in the Ministry of Finance, Central Bank and Ministry of Commerce). He holds a master’s and a doctorate in development economics from Stanford University (USA).