Knowledge economy, a path for Argentina’s development

Exposition of Mg. Aldo Abram, Executive Director of Libertad y Progreso, at the International
Foundation think tank dialogue on: Innovation, Development and Competitiveness.

Organized by Geneva Network with Centro de Políticas Públicas in Santiago de Chile, April 15th of 2019.

Find full presentation Here

For decades a myth has been installed in Argentina: that industrialization is the path to development. Therefore, the most efficient agricultural sector was squeezed to subsidize unproductive industries and this is one of the causes of Argentine decadence.

Today, that myth is even less real. Because due to the evolution of agricultural production during the history of mankind, if you bought a field, then you should start working it with your own hands, later using the help of animals and finally buying machinery. What you will do is buy a machine at the beginning.

Today, knowledge economy is what generates wealth and added value, not industry, as verified by
the S&P indicator (slide 3).

In addition, the concerns for the negative impact of technology on jobs are false. The developing countries reduce jobs in industry and agriculture, but they increase them in services (slide 4).

In fact, it is a myth that robots are leaving us without jobs. If so, how could we explain that, in general, the most advanced countries have the lowest unemployment (slide 5).

Nowadays, in Argentina, we are very concerned about exports. If we look at this table (slide 6) we see that we are not well positioned in all types of services exports but we do better in software and computer services. This gives us something to investigate.

In recent years, Argentine exports of services grew more than the other sectors, particularly those concerning the knowledge economy (slide 7). In fact, in 2017, the foreign sales of that sector were nearly the same amount as primary products and more than those of the automotive industry.

The number of companies does not stop growing and in 2015 were near 4.700, despite having three recessions in that period. And another remarkable issue, is that they are developed by small entrepreneurs. This is logical, since in a country with little banking credit and a small capital market, it can be undertaken with a minimum capital invested by the entrepreneurs themselves.

On the other hand, they are great generators of employment; since they are intensive in human resources. As an example, in the software an IT services, means 63% of its costs (slide 11).

This sector always creates more job positios, even through periods of poor economic evolution, when other sectors destroy them. Another relevant fact is that average salaries have had a tendency to increase much faster and now exceed that of industry and agriculture.

Therefore, without a doubt, the path to progress, for Argentina and its people, is the development of the knowledge industry. Unfortunately, for that to be a reality, we have a lot to do in terms of respect for intellectual property rights. We are the worst positioned country in the G20. We wish our politicians to understand this and as a result accelerate the necessary reforms.