 Welcome to those online and those in the room to the product in America. My name is Lourdes Casanova. I'm the director of the Margin Markets Institute at Cornell University. Productivity has been kind of a holy grail of Latin America. Many reports show us that the productivity increases in Latin America have not been great in the last 15 years, even during the Golden Decade. Often, we link productivity to low labor costs, but if we dig into data from Mexico, we see that in spite of the low labor cost of Mexico, Mexico does not compete that well with China. In the phase facing the Fourth Industrial Revolution, the question is which type of development policies governments can implement to increase productivity. We are going to start with Fabian Hill to my right, who is in Dow Chemical Latin America, and will give us his perspective from the private sector. Thank you, Lourdes, and thanks for the opportunity to share with all of you a little bit of our vision from the private sector standpoint, representing more than 7,000 employees in Latin America. We have been here for 60 years, but also a good network of customers and local companies from every size that do business with Dow for many, many years. One of the things that I'd like to start sharing with you is in our vision, of course, our activity demands a lot of capital and investments, and usually we don't look at countries only for the GDP or for inflation, we try to look also at business conditions that are created in the countries to invest. Latin America has a huge potential as we all know. It is a region with a lot of natural resources and human capital. We know that we have opportunities and we are passionate about the growth opportunities that we have in the region, particularly on the energy side, on the opportunities from food security, also infrastructure, and the new consumer habits. So it's our passion to be in technology to the communities in the way of business. But the conditions in which countries create for companies like Dow to invest are becoming more and more critical. The globalization of the supply chains, the globalization of the value chains are making that countries for companies like us compete to each other. So where do we put the money? Is Bayleague also basic on the conditions that the country provides long term? We believe that for Latin America, Latin America has a big opportunity to transform itself. And for us, the big engine for doing that is what we call the manufacturing sector. I mean, we have been working with a concept which is the advanced manufacturing programs in many countries around the world. We are starting to work with this in Latin America. This is a great opportunity to develop long term plans for Dow and other companies. It's a way of looking at market opportunities in ways of value chain in which not only big companies but small companies, local companies can work together with the public sector to develop strategically where are those opportunities. We have a lot of natural resources. The question is what do we do with them? And now for companies like Dow, these manufacturing advanced plans are becoming key to decide where the money is going. So it's a key factor for investment. On the ask side, when we look at these long term plans and we look at opportunities, we have a few basic principles that I think affect the productivity if you want a decision for investment. The one thing for us is key decisions on energy policy. Our region has a lot of resources. We are sitting here in Argentina in the second or third largest reserve of shale gas in the world. This is really huge. But the question is what do we do with that? Do we explore gas? Do we explore hydrocarbons only just to burn fuel or to export fuel? Or do we something with it? And that's the power of this advanced manufacturing concept. We can start adding rings of manufacturing starting from the building blocks of the natural resources all the way down to very complex value chains with high value that can really drive growth, jobs and opportunities for companies. So for us, energy policy is key. The second principle if you want in these plans is to have a good tax system. Tax is becoming a key issue for us in the region. We have countries in the region where we need to put three times the amount of resources compared to other countries just to administer the tax system. So tax is something that we really need to make things happen. The other thing is to have a smart regulatory framework. We want to have regulatory frameworks that can be transparent, that can be based on science, that can be efficient and that can be predictable also because things change a lot. And this is also part of how the business are perceived in a country. The other thing that is important to point out in this principle is to address the issue of future skills. And as we develop these rings of manufacturing based on natural resources, it's obvious that we need more engineers, we need more mathematicians, we need science. The whole thing around the STEM discussion, we need to start working on STEM education because for sure if we fulfill this vision of creating all this manufacturing in a region like this, the first thing that we will need to know is more people, more qualified people. So education is going to be key for us. And everything is also based on free trade. Free trade is like a magnet for a capital. And free trade creates true long-term competitiveness for a country regardless of ideology, regardless of the specific policy of a given government. It's a long-term competitiveness that affects productivity. The last one, I'm sorry to take it all this time, is I think in all these discussions that we're having, like forks like here, Mercosur, where governments are discussing policies, is to be sure that businesses have a seat on the table. Because we are working in those long-term plans. We know what buttons need to be pushed to unblock the opportunities for growth and we can help a lot with our vision. Again, we are very excited about the future of Latin America. We can solve these four or five issues that I just mentioned briefly. I think the opportunities are tremendous. Thank you, Fabian. Ricardo Haineine from ATT-CARNI. You have been studying this very complex issue of productivity. And now we are facing a new era in terms of free trade. The new U.S. administration has been quite confrontational with respect to Mexico and NAFTA. And one of the most successful value chains was the automotive industry between Mexico and the U.S. How do you see that in your studies about productivity and how do you see the future after this new U.S. administration? What we think is that NAFTA needs to be modernized, but it needs to be modernized based on the business and economic trends, which really are related to some of the aspects of the Fourth Industrial Revolution, like digitization, labor, environment. But if you follow a protectionist approach to modernizing NAFTA, I think that will have destroying consequences for the three countries, for Mexico, for the U.S. and for Canada. And both we lose in terms of Mexico and the U.S. where the trade is more important, where Mexico has more than 75 percent of its trade and the U.S. exports to Mexico more than 45 percent of its trade. Our estimate is that for every 10 percentage points that you increase the effective tariffs, we lose around 0.5 percent of GDP and around 64,000 jobs. So that will have an impact either in cost to consumers of the region, and we would be displaced by other countries, specifically China, and that puts the regional competitiveness at stake. The U.S. has a trade deficit of 3 percent of GDP. Of that 3 percent, Mexico has around 8 percent supravit. That's the deficit of that 3 percent, 8 percent corresponds to Mexico, and 47 percent corresponds to China. And that has been fairly steady, and the analyst does not, do not expect that that might change. So the approach should be let's modernize NAFTA and not try to be protectionist, because then China will really get deeper into the region instead of having a very strong region when we have a lot of complementarity with a global supply chain. For example, the investment, the foreign direct investment of the U.S. in Mexico since 1990 has been around 250 billion, and that foreign direct investment has really transformed into exports to the U.S. So what's the issue? How does it relate to productivity? Mexico has modernized, basically, with NAFTA in some of its sectors. And Mexico has three main sectors that exports like around 80 percent of... It's basically automotive, electric and electronics and machinery, and we have others like aerospace that have been growing in a very important way. So it would really hurt Mexico and the U.S. And are we happy with the level of productivity that we have? Are we happy with how we have modernized those sectors? And we feel that we're really concentrating in a very small part of the Mexican economy. Manufacturing for Mexico represents around 17 percent of GDP. And for example, the automotive sector, if you see the whole value chain, it represents around 5 percent of GDP when we're a very important world producer. So how can we increase productivity and value added in a sector that really has a lot of presence? We're importing a lot, but how do we do that right investments, as Fabian was saying, the right investments to really participate more in engineering and design in more smart manufacturing where we can really add more and more value. And instead of having around 5 percent of GDP, that sector can really transform into an 8 to 10 percent of GDP. And we're talking only about 17 percent in terms of manufacturing. But if you see the service sector that represents around 63 percent of the economy, we need to talk in terms of this bulk of how to increase productivity in those sectors Government, all this digital transformation in government has to really happen much deeper and much faster. Telecommunications, financial sector, and all the SMEs that are around service and that are with very low levels of productivity and that hire and employ more than 70 percent. We need to create an ecosystem that really fosters that type of innovation. So we can have small companies become medium and medium become large, but they have been fairly, fairly steady. So I think productivity, we have a huge gap, but we have a lot of the elements that we can control internally in terms of training and retraining with our demographic boom so that people can really adapt and adjust and not only in the automotive sector. And you said something that China beats Mexico, not in the automotive sector. That's the only sector where Mexico has really been the leader in terms of the global supply chains linked to the US. Good news from Latin America, good news from Mexico. We need more of those to have good benchmarking that we can follow. Great news. And also Mexico has very good engineers and the percentage of graduates who are engineers is quite high compared to the rest of the region and very close to the OECD levels, which is of course you have the talent needed to be in more value added sectors. And we need more because if you compare the technology and the design centers in Mexico relative to China, I think that's why a lot of those centers have been going to China, to India. I think if we have more than the other countries in Latin America, I think we have a lot of potential to really continue building on that and to bring back a lot of the Mexican engineers that have outstanding positions in global companies. So let me just turn to Ricardo Hausmann from Harvard. Ricardo has been an early promoter of the need for countries to diversify their economies and of course Latin America as we know has been too dependent of commodities. So how and of course this is a very important part of productivity and growth. So to sustain growth, Ricardo has always said we need economies that are diversified, that they are not dependent on one sector. So let me respond a little to the discussion. I think to increase productivity you have to increase the average productivity of workers. And the average productivity of workers is some of the productivity of each worker. And when you look at Latin America there's an enormous dispersion in productivity. You're talking about the productivity at the super right side edge of the productivity distribution and there, you know, Latin American productivity growth has been okay. The only thing is that that productivity has been growing so much that that sector in terms of employment has even been shrinking. In a study we did of Mexico we found, you know, that the productivity differences between a state of Chiapas or Guerrero and the state of Nuevo León is something like a factor of eight. That means that Chiapas is more or less like at Honduras levels and Nuevo León is at Korean levels. So with the same sort of energy policy, tax policy, this policy and that policy you are having these enormous differences in productivity. One way for Mexico to increase its productivity is for having Chiapas and Guerrero emulate the productivity of Nuevo León. So the question is how do you do that? In the studies we've done on Bogotán we ask ourselves, you know, why is the informal sector so large in Latin America? Where are there so many people self-employed in activities that are very low productivity? Well, part of the answer is that Latin Americans face the highest commute costs in the world. That we have designed cities that are really unlivable where people have to live very, very far away connected by very lousy urban transport. People are faced with the choice of going to work, spending two hours in the attempt to go to work, two hours coming back and more than two hours of salary in the process. So it's like they're 12 hours out of home, they collect eight, minus two is six, so it's like a 50% tax ongoing to work before you start paying payroll taxes. So we have to have more productive cities. In a study we did on Panama, Panama, as you know, it's the fastest growing country in Latin America for the last 25 years, for the last 10 years, because they have really developed an ecosystem to support service exports. And they are at the peak of foreign direct investment into the region. Part of the secret of why Panama has grown so much is that by Latin American standards they have a relatively open immigration policy. By Canadian standards or by Australian standards they have a disastrous immigration policy. But by Latin America's disastrous immigration policies they are fairly good at. And we have done studies to show that the productivity of the locals is dramatically increased when they work with foreigners. So in the case of Mexico, for example, there is one foreigner for every 250 people. In Singapore, 40% of the people are foreigners. In Canada, 25% of the people are foreigners. In Colombia, 0.25% of the people are foreigners. There is one foreigner and 400 people. So that also limits the ability to mix your skills with other people's skills. So what I would like to put on the table is that part of the problem of Latin America, low productivity, and part of the high inequality in Latin America is due to an enormous inequality in productivity. It's not that the pies are being shared in the wrong way between capital and labor. It's that in different parts of the country, in different parts of the city, people are baking cakes of radically different sizes. And if we really want to talk about improving productivity in Latin America, we have to include people, incorporate people into activities of much higher productivity. Thank you. Philippe Leueru, as CEO of IFC, you were in Colombia while I was there last week, and you announced that IFC was going to invest $4 billion in the next five years in Colombia. Infrastructure, as Ricardo just said, is a very important part of the equation of increasing productivity and increasing growth. What are your plans for Colombia, and how do you see the region? Well, thank you. And first of all, I'd like to say that I completely agree with what Mr. Gill said. I mean, it kind of laid out really the key, building blocks that you need to... And productivity is a resultant, obviously. One of those, so I maybe zoom in on two, and Ricardo mentioned on that too, the inter-regional trade. I worked for a long time in Eastern Europe, so I compared to Eastern Europe, Latin America, more or less the same level of middle income. But the trade, the inter-regional trade in Latin America is very low. I mean, I saw 20%. It's 50% in ECA. So, I mean, there's a huge way to go. Link to that, and look to what Ricardo was saying, is I saw statistics talking about Colombia. To send whatever, a container from Bogota to the coast, Atlantic coast, cost 40% more than from the coast to Shanghai. So, yeah, intracity, but across country, I mean, how do you want to fight such a disadvantage? So, in IFC, we decided to, it's a new push on our strategy, is to try to go much more strongly in the infrastructure space. Because what we see is, in many countries, there's no fiscal space. Not only there's not enough fiscal space, but it's reducing. For macro reasons, that in many countries are obvious, because you need some stability on the macro side as a precondition for investment. We all understand that. The problem is that how do you bring private finance to finance ports, airports, but also roads. What really fascinated me in Colombia two days ago was a discussion about what we call the 4G program, fourth generation. It's why it's fourth generation, it's the fourth generation of PPPs. Now, public-private partnership, a lot of people like them, especially in Ministry of Finance, because it's a way to crowd in private finance. However, to do it right, it's very difficult. You need the legal framework, the documentation to make sure you're at scale, and you need a local currency solution for long-term. So you need a capital market. So I think that we have worked for the first generation in Colombia. We have improved some here, by the way, in Argentina. We are very happy with that. We have worked with our colleagues in the World Bank and the government to put this new PPP framework. I think that is a lot of promise. And the Renovar program, I think it's a very good example for wind, I mean renewable, but essentially wind energy. And that's good. That's one pillar. But you need to develop the other pillar, which is a deeper capital market. Because financing in dollars, infrastructure that will give you local currency revenue, it's an issue. So we are working in Colombia very closely with the government to deepen the capital markets. We'll have more and more of this type of solutions. Because even the swap market, you cannot rely on that. So we cannot swap easily. And here in Argentina, I think that we have to follow the same path. So this is one slice, if you want, of the bigger or huge productivity issue. But connectivity, logistics and infrastructure is critical. We believe that the role of the private sector can be multiplied not by a percentage but by a factor in this area. I think that we have made a lot of progress through trial and error on PPPs. And PPP is not something you go to university. There's a book on it and you just apply it. It's a lot of trial and error. I think that we have matured and we are in a very nice place. So that's on the PPP framework, if you want, and capacity of a government to implement this framework. The next challenge is deepen the capital markets. I would like to be involved in that. And again, if you think about what is IFC and what is even, I will go beyond that, the whole World Bank Group, I called it in London recently, it was just a huge de-risking machine. And it's all about de-risking. We just floated a new instrument to crowd in private finance in the infrastructure realm. We call it the MCPP, but the idea is very simple. We approach insurance companies, big ones, Alliance, we were talking yesterday with three AXA. They are sitting on billions of dollars. So the point is what kind of investment you put for the long run. So what we did is we told them this and in IFC, we invest in all emerging markets. So why don't you take a slice of the portfolio automatically? But that was a problem because they had not the risk appetite to go through their boards, to have triple B. I mean, I don't want to go too technical. So we told them, fine, because the returns can be much better than, you know, a trade rebond in Germany for 20 years, which is not very profitable. So the return, they liked, but they didn't like the risk. So what we did is, okay, we'll give you a first-loss guarantee. Now, this first-loss guarantee, 10%. Enable to reduce the risk and increase the risk to about a triple B equivalent. But then we went even further because I didn't like to have that on my balance sheet. So you can turn around and have part of these 10% first-loss given to ODA. In this case, it was a Swedish development company because it's very interesting. So you do risk, and that's maybe a new way to utilize development finance. So we're trying to explore, based on the infrastructure, so it's all linked. Infrastructure needs, lack of fiscal space. How do we find private solution to attract these huge pools of capital for it? We need also the local side. And we are starting to find new, very interesting instruments which will enable to completely rethink the development finance as we know it. Thank you. And now we turn to the governor of the Central Bank of Argentina, Federico Sturzdenegger. What are your views to increase growth and increase productivity? And we can talk a little bit of Argentina. My taxi driver, when I came from the airport said, how are things? He said, oh, we have a lot of hope. That's good news. Next semester. With a general comment and then talk about the challenges for productivity in Argentina. And the general comment goes back to an academic paper, which I think was very interesting written a couple of years ago, which is called the economic growth one from one million before Christ until today by a Harvard professor called Michael Kremer. And what he finds in that paper is that the rate of growth of per capita income at the world level is proportional to the population of the world. So let me repeat because so we understand it. This means that as the world becomes bigger, as the population becomes bigger, the rate of growth of per capita income grows. So this is kind of the world is becoming bigger. And as it becomes bigger, it grows faster. And the Kramer's explanation which tries to the trade issue that you were discussing before has to do with the fact of the incentives to innovation. If you're going to develop the digital camera kind of moving from what we had before and you have a market of 5 million people, it's much more different if you have a market of 5 billion people to which you're going to sell this thing. So as the world has become bigger, the incentives to innovation have become larger. The incentives for productivity change have become larger and that's the reason the world grows faster and faster. So if you think of what's the only relevant thing or the most relevant thing that happened in the world over the last 20 years is basically that you've incorporated China and India to the world market. So suddenly the world has become much bigger. So if this logic which held from 1 million before Christ until today continues to hold for the next 20 years, that means that we're moving into perhaps the 20 or 30 future years of highest growth the world has ever seen. So that's kind of a first tone. I think the productivity agenda is going to become increasingly important and it's increasingly fast and it's going to surprise us in a way that we don't anticipate. I always tell the story that my 11-year-old kid, when he was 7, he watched TV. But my current 7-year-old daughter doesn't know what TV is. She just looks at YouTube and Netflix and on her iPad. So it's a very different world. Now that means that the incentives to innovation have to be related to the size of the market you target. And in Argentina, for example, we have an example which is the agricultural sector, which is a sector which has really kind of always built with a view, kind of looking to the world as its market. Well, in Argentina, you have the trucks or self-driven. The farmers check their crops with drones. So you have really a very thriving and very innovative and very productive environment. So I think that the relationship between innovation and trade is there. It's very strong. It's very important. This is going to be a very important part of the agenda that Argentina is going to push in its presidency of G20 next year. Now let me go to the... So I have a very positive and very optimistic view of the world going forward. Let me talk about the challenges for Argentina because then you have to come down and each country has to see, okay, how do you actually profit from these great opportunities that the world is going to give? And I'm actually going to run through the same things that you mentioned because really, there's nothing new there. But for example, human capital. If you look at the competitive index of the World Economic Forum, you'll see that Argentina, one of its strengths, is human capital. And for example, engineers. You were mentioning engineers. Well, I'm sure you'll get, for doubt, the best engineers in Argentina. They'll eventually be all around the world working for now. So we have a very good human capital at that level. But at the same time, we have a huge challenge because today, for example, half of our kids don't finish high school. So those who go through actually become among the best professionals engineers in the world, but we have a really significant challenge at the level of our country. Then the other thing is physical capital. Huge challenge for Argentina. We have a financial sector which is 15% of GDP. I'm sure that those of us who visit from other countries, they won't believe what I'm saying. 15, 1, 5. So this is one-third, one-sixth of the financial sectors in other countries. Now, why does this happen in Argentina? Well, because we never protected the depositor in the financial sector. Financial repression. Negative interest rates. People didn't save in the financial sector. We don't have Argentinian savings intermediated through the financial sector. We have to change this radically. Argentinians have in $400 billion saved abroad, which we need to be intermediated through the financial sector. So I think we have a big challenge. Infrastructure is, I think, another chapter, which IFC obviously helps a lot. We're auctioning off road construction around half the price that the previous government did. So transparent procurement is very important. But the most important thing, for example, if you take road construction, there are no cars. And sorry, this is not a joke, okay? If you build roads where there are no cars, the productivity is very shallow, okay? So just bring that money to where you have cars increase the productivity a hundred times, a thousand times, you name it. I mean, it's kind of... So I think there's a very significant role there. The other thing that affects government... Of course, then Ricardo told us that all this is wrong, but I'll get back to that in a second. Government efficiency, you talked about taxes, no? I think three simple principles that you should have about taxes. Taxes should be as low as possible. They should be as simple as possible, and they should be paid. So those are the three things, and that's the way you should think about your tax structure. But efficient government is what is going to allow you to reduce the tax burden. So it's using the resources. I think when they asked me about the current government having worked with President Macri for the last 10 years, I always tell everybody, go and look at what this person did in his tenure while he was a mayor of the city of Buenos Aires. If you want to see a huge improvement in the quality of public services and efficiency in government, where you had a government which started providing many, many more services at a lower cost, and that is feeds directly into efficiency, no? And then the big combo where I feed, where the central bank feeds, which is rules, and having, well, this is the game. And sometimes more important than what the rules are, knowing that the rules are stable, so you can say, okay, these are the rules I operate with, and then I know what, so it's all the legal framework and the judicial framework, which is very important. But then you have, and this for Argentina, it's much more important than for other Latin American countries, because you've already solved this problem, which is the macro stability framework. You need to have a macro which is stable, so you have to have fiscal sustainability and you have to have low inflation, which is my agenda, or my responsibility, I should say. And here that the lowering of inflation is, it kind of touches on three issues, and with this I finish. First is an equity issue. Inflation is a tax, and it's a tax that's paid by the poor. So the lowering of inflation has something that perhaps is a little bit, it's a little bit absent from the debate. I see some Argentinian journalists here, so that's why I'm emphasizing this. Absence from the debate, the fact that when you lower inflation, you have a tremendous past and a tremendous improvement in equity, because you're reducing the tax that's paid by the poorest population. Now the other thing is, for example, we've done a study of countries which have crossed the 20% annual inflation rate, which is where Argentina is right now, in a sustainable manner, doubled their growth rates in the following 10 years. So you have the growth agenda at the same time. And the third thing is that the reason that low inflation feeds directly into productivity is when you have high inflation, the markets don't work. People don't know what prices are. You have a lot of instability. You have to take a lot of insurances. You shorten the horizons of your investment and saving decisions. So kind of everything starts working in a much less orderly fashion. So we believe, and I think President Macri also mentioned this yesterday, we don't see any trade-off between growth and inflation in Argentina. Maybe you have that trade-off in a low-inflation country. Maybe you go to Chile, or you go to Peru, or you go to Colombia, and maybe you don't have that trade-off here. Because the growth effect and the equity effect of lowering inflation is so strong that that's why it has to be first in the public agenda. But public agenda, both in equity, but both in productivity and therefore in growth. So will be next semester? No, last semester, because inflation in the last semester of last year already fell to a third of what it had been in the first half of the year. The thing is that, of course, in Argentina, never at that moment here, you have these tariffs come down, then tariffs go up, so it was a little bit choppy throughout the semester. That's why people didn't perceive how much inflation had really declined last semester. So also, another thing regarding the peso, I was really shocked when I said, no, 15 pesos to the dollar. So how do you combine, in a moment in which all currencies in Latin America, Mexico, Colombia, and of course Argentina and Brazil, of course, the currency is very low. So this combination of very low currencies, that then, because the whole region has very low currency, with respect to the dollar, the competitive advantage disappears. Inflation and debt in dollars. Argentina has been quite aggressive in issuing bonds in dollars. So how do you see all these combinations? Looking forward. We decided to stop improvising. So what Colombia did, we saw what Mexico did, what the UK did, what Chile did, what Canada did, what Australia did. And small open economies like Argentina, which want to be integrated in the world, they have decided that the best macroeconomic framework is to have an inflation targeting regime with floating exchange rates. With floating exchange rates. And that's what we have implemented, and that's the way it has been operating. We have virtually not intervening in the real exchange rate market for the last eight or... We have built up a little bit of our reserves. We've bought about 17 billion dollars in reserves, because we started from a very low level of reserves, and we think Argentina needs that kind of a bit more insurance on that side, but we have basically not intervened in the... Now, the real exchange rate today, the real effective multilateral exchange rate today is 30% more depreciated than it was before we released the exchange rate controls at the end of 2015. Now, people may say that's too much. Some people may say that's too little. That's where the market has it today. Very stable real exchange rate. I mentioned this to sometimes to people, and they are surprised, the real exchange rate over the last eight months has been very stable, very stable. Maybe four or five percent overall change over the last eight months without any clear trend in one way or the other. You have to be careful. In Argentina, they pay a lot of attention to the relationship between the peso and the dollar. But it can very well happen that over the last semester we had a lot of changes in the dollar. So, for example, the peso can depreciate vis-a-vis the dollar, but at the same time the real is depreciating and the Mexican peso is depreciating or the euro is depreciating, then you have no depreciation in the real exchange rate. And then this year you've had a sharp appreciation, but at the same time that the real was appreciating, the euro was appreciating, the Mexican peso was the one who appreciated most, and therefore you don't have a movement in the real exchange rate. In fact, the stability of the real exchange rate is really floating. So, sometimes, I mean, we have to be just to start with the numbers, and what we think is good about the floating exchange rate is that it allows the economy to have a shock absorber, and we're not using the exchange rate as an anchor for anything. I've said this many times. So, the only thing we focus in terms of our monetary policy is inflation. So, if the exchange rate needs... everybody thinks, okay, the exchange rate is cheap, well, then I guess someone will buy it and then it would depreciate, and vice versa. But again, it's... we're not making up anything. We're just copying a model that served very well all this emerging economies, and I think it's time for Argentina to do what everybody has shown that it works. Thank you very much. Let's open the discussion to the public. Please be brief and identify yourself. Hello, this is Valentin Schmidt with the Epoch Times from New York. Now, Mr. Sturzneger, you mentioned that lowering inflation is good for equality, productivity, and growth, and I think everybody would agree. But how exactly is the central bank going to lower inflation with the money supply year-over-year? What are the exact measures you're going to implement to reach your target? Thank you. Okay, then we take three or four questions and then we answer. Any other questions? Yeah. My name is Julio Estrada from Guatemala. In the write-up or the session summary, there is some ideas about using force industrial revolution tools for increasing productivity and I wonder if any of the participants, maybe Dr. Hausmann or Mr. Hanayne or even the moderator has some ideas of how that force industrial revolution, how is there chances to leapfrog? Should we have a lot of uneducated people who will remain uneducated for a long time and even the one we educate will be educated in about 15 or 20 years? So if we have a force industrial revolution, is there anything we should take into account just to create jobs productivity and just leap a generation? Is there a chance to just avoid a complete third revolution? Because in some of our countries we haven't gone through the third revolution, industrial revolution. So if any ideas there, we're very open and eager to hear them. Excellent questions. Next one. Marcus from Brazil. My question is to Mr. Ricardo Hausmann. If you were a president of a country like Brazil or Argentina, how would you develop a new generation of industrial policy? Okay, excellent questions. Let's start by the central bank of Argentina. Okay, let me start. Again, as I said, we don't want to invent anything and inflation targeting regimes of its management of monetary policy is pretty standard. You choose a policy instrument which in our case is the interest rate. If inflation comes down, the interest rate comes down, if inflation goes up, the interest rate goes up. That's it. Simple. Everyone understands it. You tighten monetary conditions if inflation comes up and you release monetary conditions if inflation comes down. Last year, of course, we were coming out of the unification of the exchange rate market. The government had also set up a program of very significant adjustment in utility prices. We brought the interest rate up to 38%. We said we were not going to move it until we saw inflation coming down, which started happening three months afterwards. As inflation came down, as I already mentioned in the second half of the year, the inflation came down to a third, what it had been, for example, in the city of Buenos Aires index, a third of what it had been in the first half of the year. The communal interest rate started coming down. We had very good numbers in December and January. We ended the second half with the lowest inflation in eight years. The numbers in February, the government, again, started like a second round of utility price adjustments. So the number in February came, the general level came up a little bit. The number that we saw in March convinced us that we had to do a tightening of monetary policies, which we have already done. So we have already done a tightening over the last month in the longer part of our yield curve with an increase of about 200 basis points in our interest rate. Of course, this is a non-going debate. Having an inflation targeting regime doesn't mean, oh, I said I want to have a 12, 17%. Look at the number we have. So we're still very high inflation. So 12, 17, that's the modest objective that we have for this year. And it's not say, oh, I do that and then I pray to see what happens. No, no, inflation targeting means that you have to act to have that happen and you use it adjusting monetary policy conditions. We have already done that in March and this is an ongoing exercise with the central bank that's permanently, and it builds its credibility by acting in a consistent way with its mandate and the objective that it has set for itself. So again, nothing new under the sun. The only thing is that as time goes by we try to be consistent, we try to be coherent, we try to act accordingly to what we say and we hope that will strengthen credibility over time. These are not things that you build from one day to the next. One comment here. One of the big agendas that we have is financial inclusion. And boy, when you were mentioning we have a lot of uneducated people so how do they jump to the fourth generation revolution? But the ability of these people sometimes in the lower income levels or where there are lesser education, their embracing of technology sometimes surprises you. I was president of a commercial bank, a state-owned commercial bank before coming governor, and I set up the first branch in Ashantetown. So we set up a branch in Ashantetown and we did it. It didn't have human cashiers. It was a totally technological branch. And once I went into the branch and there was someone trying to do an operation on the machine and someone from Ashantetown said, no, no, you're doing it wrong. It has to be done this way. And he looked at me like, you don't understand anything. No guy, it's done this way. And he kind of got things done. So careful. Careful. I mean, I think there's a lot of potential there perhaps in the most surprising places. I would request the rest of the panel members to also answer these questions. The difficult balance between job production as it has happened in the U.S. that most of the jobs have been reduced not because of free trade, but because of technology, of robotization, etc. So how do you balance the need to create more jobs in Latin America, mainly in the poorer countries, in all of them, with the technological revolution with the fourth industrial revolution? Maybe we can... Yeah, let me... You know, the Latin American countries in terms of their productivity and GDP per capita are between 5% and 30 to 35% of the U.S. How do you... We have talked about physical infrastructure, human capital. How do you go to the technological part? I think the third industrial revolution, which we are still behind, what we really need is more investment to really deep the penetration of internet users, broadband penetration, mobile subscribers. Basically, Chile and Brazil are the highest, but all the other countries are really behind. Now, in terms of the duality, how do you go to the fourth industrial revolution? I think a lot of the investments that are taking place are in the manufacturing sector, in automotive, electrical electronics, in aerospace. What we've seen is a lot of those investments are really... The companies, the large corporations that are really participating in the global trade are really investing a lot in the future of production, in terms of how do you incorporate and change your whole business model to introduce advanced robotics, to introduce artificial intelligence, to introduce internet of things. That would really create a displacement of the current way you employ because you are changing completely the way the production takes place in terms of physical places and how you design your whole business model. You cannot say exactly what will happen, but there's a lot of investment taking place and that we're seeing from the large OEMs and for the large tier one companies. As long as someone was saying, if you need to have open economies to really integrate the fourth industrial revolution, because if not, you cannot do it if you do not consider a global supply chain. So I think as long as you are really integrated globally in a global supply chain, you will really take advantage of these three or four types of new technologies that are taking place in the fourth industrial revolution. Thank you. Lourdes, first to your question, it's interesting because when you... we look at these advanced manufacturing plants that we put together, what is the first thing that comes out of these plants? The need or the opportunity for more companies. So when you start building in this complex value chain throughout the value chains, it's automatically more jobs. So if you have this advanced manufacturing view, jobs will come. And to build on yours is a very interesting question about your fourth generation. Give you a couple of things to build on your... give you a different perspective. Productivity, for example, if you take beef production in Latin America with the technology that we already have today, it's just we use the technology and we increase productivity to half of what U.S. has as productivity to produce beef, the region can release equivalent of land, equivalent to the size of the country of Costa Rica. One-third of the food in a region which has a high level of poverty is wasted. One-third. All from farming to consumers. But you know what? The technology to fix all that is available and it's affordable. So just by using what we have in our hands next Monday, we can still fix in issues of productivity that can really bring a lot of value to the region. I'm not saying that it's one or the other. I think we have to do both. Very good. Philip? I like the leapfrogging. In fact, it's the name of a company, a company of leapfrog. And they're working in Africa and they're coming up with extremely creative solutions. So the key is how to use all this innovation and adapt them in emerging markets but you will be surprised even in the poorest places. And it goes everywhere. Education, I was in Bhutan. Bhutan is in Malaya so it's very hard to cater to schools in rural country, rural country, very complicated. But they developed kind of the e-education where you can reach across the country. You know, I did the math class with the Prime Minister and we reached the class on the other side of the country. So, and this is starting to be introduced in Colombia. What's the name? UNI Minuto is using a big chunk of their delivery mechanism thanks to new IT. I mean, in Africa you'll be surprised. You were talking about, we saw beggar in the street in one of the poorest African countries. We wanted to give some omen. I said, well, give me through the iPhone. I mean, you see now drones being used to go to very remote areas to get some blood samples, bring the blood samples back to the hospital, get the analysis and the drugs. I mean, so the imagination now it's taking over. So the limit is imagination, how you can recombine these new technologies because it's all about combination and recombination materials. We don't talk about it because IT is maybe more spectacular or something, but materials, there's a revolution there too. So energy efficiency I think will see huge, huge improvement. And the best way to cut energy cost is making it more efficient. So for me the use is limitless, only the imagination, but, and that's the but I want to put on the table. I know there's a big debate we're going to skip the third revolution and go straight to the fourth revolution, and maybe, and I will not pronounce myself on that, but I know one thing that in Bhutan it would not have been possible to do this kind of e-learning if you don't have broadband. That's infrastructure. At the end you come to something very hard. You need the roads, you need the water, you need the clean water. You can use new technology to improve the efficiency of, you know, water treatment, etc. But at the end of the day you have to have this base on which platform of infrastructure, on which then you can base and use and reuse and recombine all these new technologies. So that's, again, very consistent as you can see on infrastructure. We have the two big countries in the region for different reasons, Brazil and Mexico, in trouble right now. So Ricardo, you have been invited to be president of Brazil. Let's take this scenario, president of Brazil, and can you answer what you would do in this case? The question was about industrial policy. I mean, I was aspiring to become emperor of the galaxy, but I'll have to settle for Brazil. But let me start by, you know, connecting what would you do with industrial policy with the previous discussion. I think that, you know, what you can say about the fourth industrial revolution is the same thing you could say about the Holy Roman Empire. It's neither the fourth, nor is it industrial, nor is it the revolution. So because what you need to reinvent and we consider the possibilities of leapfrogging is, you know, say you have Uber, right? Before Uber, you needed to know how to drive, where to drive, you know, what are the tricks of the city. Now Uber knows more than an experienced taxi driver. You know, they used to take, I don't know, three years to graduate in London to become a taxi driver. So it makes, that's an example of leapfrogging. You don't need as much know-how as you needed before to do that. All the technologies that are being considered thought for education about moving things to the tablet and providing more feedback to the student, to the teacher about progress and so on. That is an example where you sort of like leapfrog from having just excellent teachers to a system that can provide more education with more regular teachers. What is being done here in agriculture in Argentina of having, how do you call it, precision agriculture? Non-tealing. No-till agriculture, but precision agriculture with the satellites that tell you meter by meter how much fertilizer you need to put in and so on and make it available as a software to all farmers across the country. You know, the possibilities of 3D printing of having a lot of solutions and stuff done locally in communities and so on. So this suggests that the application areas are well below beyond manufacturing into the holes of society and to harness them, this is what I like to call a high bandwidth problem. This is an information intensive problem. So the way I think we should think about quote-unquote industrial policy now, the IDB suggests that we call it productive development policies is that the fundamental role of these policies is to reveal information of where are the opportunities and where are the obstacles. So it's a mechanism to reveal information about opportunities, obstacles, and to come up with an action plan. And we have identified here action plans in several areas and we need more of them because the possibilities are so disseminated throughout all the activities that we need to bring them to the fore. And to do that, you need to have a dialogue process with society. Now the problem, you know, Wittgenstein said that all problems in philosophy are problems in language and we are trapped by the wrong language. When people say private public dialogue, we sort of understand what they mean by public. But the question is what do they mean by private? And by private, everybody thinks it's sort of like businessmen, empresarios, as Spanish. And that is right the wrong way to put it because if you're talking about a major corporation say like DAO, what is DAO? Is DAO a group of shareholders that own the company? Or is DAO the CEO of the company? Or is DAO really, you know, all the workers of the company, the suppliers of the company, the customers of the company, the neighbors of the company, the service providers of the company? So is DAO sort of like that stakeholder ecosystem? That when they sit down, they're thinking about that stakeholder ecosystem, right? And that's what you represent. When you represent your company, you represent your stakeholders. So when you sit at the table, you think about how do I increase the productivity of my stakeholders? How can I make it win-win? Because if it is a question of just the owners of the capital that want to get a higher return for the money, then first of all, why do you want a seat at the table? Democracy involves other people also having a seat at the table. And why should you getting a higher return for your money preempt other people having other things in society? So what's the legitimacy of this conversation? Or for example, in the case of Argentina, you say, well, if you have to have the entrepreneur, the businessman at the table, you need labor at the table. But I thought that labor was part of DAO, right? Labor was part of the ecosystem. So now it's supposedly instead of like integrating that ecosystem and representing it, it's being split off in between capital and labor and having a discussion there that makes no sense in terms of exploiting those synergies. So I think that we need to change what we call dialogue. We need to change what we call dialogue. We need to make it legitimate vis-a-vis of society like Cristina Kirschner would never sit down with the enemy, right, with the private sector. So we need to make it legitimate vis-a-vis society. And we should have a mechanism so that when ideas are presented, they can be argued in terms of the public interest, they can be monitored and implemented. Okay, extremely rich discussion. We have plenty of ideas, plenty of positive outcomes. The need of the fourth industrial revolution as an enabler to live frog. The great human capital that is in the region. And then you are calling for a 2G free trade. I don't know if it's 4G. The need for a free trade that needs to be revised, a 2G free trade. And last but not least, the need for a dialogue. And that's why we are all here. And the World Economic Forum provides this dialogue. So thank you all. Please join me in thanking the panel members in this very rich discussion.