The Knowledge Economy in Latin America

˙ PREAL Blog

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The rapid pace of globalization and increasingly complex nature of economic interaction demonstrate that the world is changing, and changing fast. Perhaps the most striking example of this transformation is in the field of Information, Communications Technology (ICT).

The personal computer is empowering millions of individuals to become authors of their own content in digital form.  The spread of the Internet and the emergence of the World Wide Web are enabling more people than ever to be connected and share knowledge.   Universal software standards allow users to collaborate seamlessly regardless of location.

These global trends lead to five key observations:  (i) the ability to create, access and apply knowledge is becoming a fundamental determinant of global competitiveness; (ii) innovation policies are critical to the ability of countries to compete and grow in a globalized environment; (iii) new models of knowledge production, access and distribution are emerging (e.g., open source software and knowledge communities) and we can all use them; (iv) the widespread shift toward knowledge-intensive industries highlights the importance of technical training; and (v) Technological Connectivity is transforming the way government, business, and citizens interact (as  the Arab Spring made clear).

In this context, what are Latin American and Caribbean (LAC) countries – and their education systems, in particular –doing to take advantage of these changes?  How are they using and accessing information? Are they applying knowledge and technology?

Most education systems in LAC are adjusting to the Knowledge Economy in one way or another by addressing: (i) first generation challenges such as access, equity, and quality (ECD; basic, secondary and tertiary education) and minimum institutional setting; and (ii) second and third generation challenges such as adjusting teaching and learning environments to respond to new competency requirements; expanding opportunities and building competencies with quality in secondary education; expanding relevant and high quality tertiary education; strengthening vocational and firm-based education and training in a cost-effective way; and some are even adopting comprehensive lifelong learning policies.

Some specific programs and actions worth noticing are the following.  In secondary education it is good to see that some countries are developing curricula that is more flexible, relevant, and responsive to both local needs and the global environment.  Some countries are fostering better linkages between schools and labor market institutions (facilitating the transition from school to work).  In other countries we see the development of reform assessment and examination systems to provide a direct measure of achievement on a global scale.  Some are increasing funding for secondary education through public, private, or community sources, while maximizing efficiency and effectiveness in resource allocation and utilization.

We can see similar efforts at the tertiary education level, where some countries are improving quality and relevance by improving linkages to market needs and increasing institutional diversification.  Several countries are strengthening science and technology research and development capacity, including linking universities and research centers with industries.  And some are promoting greater equity mechanisms to assist disadvantaged students through student loans and fellowships.  Higher demand for tertiary education is also incentivizing stronger management capacity at the institutional level.  And in many countries, different stakeholders (government, banks and financial institutions) are exploring new ways to establish sustainable financing systems to encourage responsiveness and flexibility.  Finally, indicators show that an increase in access to ICTs and training is helping to close the digital divide.

Outside of formal education there is an effort to strengthen life-long learning and countries are beginning to utilize technologies such as radio, television, and the internet to meet the needs of youth and adults that are not part of the formal education system.  Many are creating certification and accreditation systems to allow recognition of non-formal education experience.  This, together with the creation of multiple education and training pathways to acquire qualifications within a national framework is a positive step toward more efficient employment systems.

Each of these programs and strategies are helping LAC countries to meet the demands of the modern Knowledge Economy.  But in today’s competitive world, others are doing the same or even more to get and stay ahead, making it difficult for LAC to catch up.  Economists have developed two means of measuring how well countries are adapting to the knowledge economy (see Figure 1). The Knowledge Economy Index (KEI) quantifies the extent to which a country’s environment is conducive for knowledge to be used effectively for economic development, while the Knowledge Index (KI) measures a country’s ability to generate, adopt, and diffuse knowledge. In both measures, Latin America ranks in the middle of the pack – close to East Asia and ahead of Africa, but behind Europe, Central Asia, and North America.  For some this may be a comfortable position.  Personally I think it is not, and additional efforts are needed.  Mainly in countries like Argentina, Bolivia and Venezuela that have lost significant positions in these two indexes since 2000.

Table 1: Regional Performance on KEI and KI




 North America



 Europe and Central Asia



 East Asia and the Pacific



 Latin America






 Middle East and N. Africa



 South Asia






 High Income



 Upper Middle Income



 Lower Middle Income



 Low Income



 Source: World Bank, WBI – KAM

KI (Knowledge Index): Measures a country’s ability to generate, adopt, and diffuse knowledge (combines education, innovation and ICT)
KEI (Knowledge Economy Index): This index takes into account whether the environment is conducive for knowledge to be used effectively for economic development (includes in addition to KI, economic incentives and institutional regime)

The author is an Independent Consultant with 35 years of international experience in the education sector;
and worked in the World Bank as the Education Sector Manager for Latin America and the Caribbean, and for East Asia and the Pacific.

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