LATAM Must Prop Investments in Education and Technology – ECLAC Says

The Economic Commission for Latin America (ECLAC) has urged Latin American countries to invest more in education, science & technology and infrastructure in order to achieve economic growth.

The UN agency also recommended to improve controls on tax evasion in hopes of increasing collection levels and prop tax revenue across the countries in the region.

“Thanks to a series of reforms, the tax burden has moved in the right direction over the past decade, and this has facilitated a significant rise in social spending. However, tax policy still has a low impact on countries’ fiscal policies in general, which is reflected in the low level of tax receipts,” said Alicia Bárcena, Executive Secretary of ECLAC, speaking at an international seminar on tax policy organized in Mexico City last week.

Mexico has the means to become a knowledge and information society, but the country does not seem to been investing more on research and development, the ECLAC pointed out.

According to ECLAC data, the average tax burden of Latin American countries was just above 14% of GDP in the period 2000-2011, compared with 11.5% between 1990 and 1999, while the region’s social spending rose from 10.2% of GDP in 1990-1995 to 14.3% between 2005 and 2010.

In Mexico, the tax burden decreased slightly in 2000-2011 to 9.3% of GDP, having risen to 9.6% in 1990-1999, while in Brazil the figure rose from 18.4% of GDP in 1997-1999 to 22.3% in 2000-2011. In Argentina, it rose to 16% in 2000-2011 (from 12.3% in 1990-1999) and in Chile it increased from 16.1% to 17.3% in the same time period.

However, the rising levels of social spending and the decreasing level of investment in research and development has raised eyebrows within the agency.

Between 2005 and 2010, Cuba spent 36.6% of GDP in social welfare, followed by Brazil (24.5%), Argentina (23%), Uruguay (21.4%), Costa Rica (19.3%) and Bolivia (17.5%).  Chile’s social spending was 13.9% in this period, while Mexico posted an average of 10.1%, according to ECLAC.

“Mexico invests 23% of GDP in total, but investment in research and development stands at just 0.39%, which is much lower than other countries such as the United States (2.9%) and Sweden (3.4%),” Bárcena said.

“We believe that public finances need to respond to a progressive fiscal policy. We must focus on investment (especially in human capital) and assign resources for future generations,” she added.

Bárcena urged LATAM countries to reduce their dependency on the commodity market.