December 14, 2017


Saturday, July 19, 2014

The future of innovation

By Miguel Braun
For The Herald

There is a rosy consensus about post-2015 Argentina. Whoever wins the elections, the story goes, will normalize macroeconomic policy, generating rapid investment in agribusiness, mining and energy. This investment will fuel economic growth, and return Argentina to a relevant position in the global economy. However, the real key to Argentina’s development is innovation. Of course agribusiness, mining and energy will be important engines of growth, but nothing will drive sustainable growth as innovation, basically because of two things: first, innovation is not exclusive of one sector but a force that can help all of the economy; second, because innovation is the only thing capable of fostering not just growth but development.

Before Argentina can start moving in that path, it will have to correct many policies of the past decade. First, a semblance of macroeconomic order must be achieved. Inflation must be curbed; the long term exchange rate will need to be sustainable, reasonably stable and competitive so that a myriad of sectors can compete throughout the country; foreign exchange restrictions must disappear. Basically, Argentina should move to macroeconomic policies that are not too different to what has worked for most of the region. All of this cannot be achieved without credibility and with new and more reasonable relations with the rest of the world. the change of government will provide a chance to hit the reset button.

Such a correction will certainly give new wind to an important set of competitive sectors of the economy. Agribusiness, the energy sector with the opportunities in non conventional resources, and mining are some examples. But that will not be enough to foster sustainable development.

First of all, because innovation is not exclusive to a single sector but transversal to all and with the capacity to foster all. The simplest and clearest example is the soybean experience in Argentina. The soybean revolution has been the result of innovation: new seeds, new non-till agricultural practices known as siembra directa, new business models, etc. All of this innovation allowed Argentina to be ready to reap the benefits of the commodity price boom of the last decade, fuelled by the surge of India and China.

Innovation should and will complement the traditional growth sectors (agribusiness, energy, mining) with the creative industries of the future (software, fashion, design, content). Another good example from agribusiness is the Malbec revolution. A couple of decades ago, Argentina produced low quality wine and exported very little of its production. Innovation in production and marketing and in business associations and in public-private collaboration changed everything. Now, Argentine Malbec is a worldwide brand, and through it a whole array of activities have grown: from the design of labels and branding to high-end tourism of vineyards and cuisine.

Innovation is thus an engine that will allow us to go farther, opening the doors of a world that is increasingly globalized and demanding but that, at the same time, offers unique opportunities for a country with our natural resources and talents.

The green agenda, for example, will continue to provide opportunities: sugarcane production in the Northwest, for example, can be used for biofuels (ethanol) and biomass energy, the same as winds and tides in Patagonia, and there is an incredible opportunity in forestry in the Northeast (where a eucalyptus is ready for production in 7 years as opposed to 20 in Europe).

The second reason, as we said, is that innovation is the only engine capable of fostering sustainable development. Argentina can grow in mining, the soy complex and energy without a significant creation of jobs in general and highly skilled jobs in particular. But the economy and growth have no sense at all if they do not create interesting jobs, jobs that people can be happy in. The big step forward in agribusiness, for example, is not horizontal but vertical: it is not to extend the agricultural frontier but the value chains. From soybeans to animal feed to animal protein to branded cuts; from trees to pulp to paper to print to the export of books written by Argentine writers. And universities of life sciences and social sciences and business to educate all of Latin America.

Economic history teaches that sustainable improvements in quality of life come from productivity gains and that productivity gains come from innovation and knowledge. If we fix the basic issues that most of the opposition forces now seem to agree on, we will certainly have growth. But that growth will be ephemeral if the engine of innovation is not turned on. And for that to happen we need more than fixing the most evident problems, we need to address the long term issues: institutions, infrastructure, quality education, credit. These are the long term issues that are necessary for innovation to appear and thrive, and that is the key to have real sustainable development in Argentina.

* Miguel Braun is executive director of Fundación Pensar, the think tank of Buenos Aires Mayor Mauricio Macri.

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