“Dinero Magazine” Interview with Council President Wince-Smith

Recently, the Consejo Privado de Competitividad (CPC)—Colombian Council on Competitiveness—invited Deborah L. Wince-Smith, president of the CPC’s counterpart organization in the United States, to speak at the release of their Second Competitiveness Report and give her perspective on the key competitiveness challenges that the United States and Colombia are facing.

The report, which highlights competitiveness as the way to prosperity, emphasizes Colombia’s progress in the use of Information and Communications Technology (ICT) and greater education coverage. The report also mentions that Colombia’s current increase of per capita income has not been accompanied by an overall regional convergence, which highlights the importance of monitoring regional competitiveness. In addition, the report does an in-depth analysis of competitiveness and its effects on the judicial, energy and agricultural sectors, as well as highlighting the importance of reforming those areas that are relevant to national competitiveness due to the current uncertain state of the global economy. Dinero Magazine spoke with Wince-Smith about the keys to achieving competitiveness.

What are the keys to competitiveness in the United States?

We have identified eight necessary conditions to enable the transformation of an economy during the current global economic situation: digital revolution and a global communications network; changes in consumer behavior and investment in emerging markets; the emergence of global corporations (trans-national corporations) and the rapid transformation of global trade; a 24-hour system of functioning global trade; an increasing pace in scientific discoveries and the convergence of information technology, biotechnology and nanotechnology; the integration of manufacturing and services and the increasing value of intangibles; a global consensus for cooperation on issues ranging from energy, the environment, and climate change, to food production, water, health, and national security; and finally, the birth of a 21st century innovation-based economy.

Why are these 8 factors important?

Increasing productivity is one of the greatest challenges a country faces when looking at the future. The first important factor, a global communications network, is important due to the increasing global interconnectivity that has resulted from advanced, high speed telecommunications technologies. The second factor, investing in emerging markets, is important because of its ability to create faster growth. This is due to the transformation of emerging markets’ traditional development curve as well as the increasing availability of high skilled labor, lower salary requirements, and R&D investment. Most emerging markets have created the necessary conditions to attract foreign capital investments. In fact, I think that in 2020 80 percent of the world’s middle class consumers will be in emerging markets.

How would you rank Colombia compared to other emerging markets?

Colombia, as the CPC (Colombian Council on Competitiveness) report points out, is doing very well at increasing growth through investment. In addition, the country has many advantages, such as the fact that in the midst of a global economic crisis, the country’s financial sector has suffered less damage than other countries in the region, therefore showing strong foundations in Colombia’s financial sector.

Competitiveness, today, is based on producing the product with the highest value added. Current global prices are set by companies with global operations making investments in emerging markets.

What is the impact of arbitrage in international trade?

It’s the first time in history that we really have global arbitrage 24 hours a day. Now, companies know what they can and cannot do. Also, in a digitalized and commoditized world, you can be sure that there is someone around the world competing for your job. Nobody is immune to global arbitrage.

What is the role of technology?

Concerning biotechnology and nanotechnology, the full impact of these technologies is still unknown, given that biotechnology may offer better possibilities for personalized medicines, and nanotechnology can play an important role in agriculture. Agriculture, in particular, will encounter great changes due to the current scientific and technological revolution – it will probably result in more fusion crops and bigger companies.

Do you find cases like these in Colombia?

It can be compared to what the Compañía Nacional de Chocolates (National Chocolates Company) has done. There is a lot of value added in its design, quality, patents, and branding. This is where the real value of a large company lies.

What are the new priorities?

I always emphasize the importance of creating an adequate environment to foster innovation. These great challenges that every country must address require both adequate resources and cooperation. Then, it is also important to address challenges faced by economies anticipating a state of emergency: in both the developing and the developed world, it is difficult to compete with commodities, especially those that are natural resource-based. These products, as well standardized products that are also natural resource-based, do not usually yield high profits.

How do you create and economy with these characteristics?

The idea of freedom of information is an important economic principle. There must be a lot of ingenuity and imagination in order to create the goods and services that people need. Competition must not only be focused on salaries or commodity prices, which are always linked to the same type of activities. For example, there are people who would be willing to pay a lot for Colombian chocolates—they do not act as a commodity. Chocolates in Colombia are actually a high quality product that represents and very well positioned brand. This is a great example of how to create a food group and add value through quality. The problem is when people think that there are no possibilities to add anymore value when there are actually always endless possibilities.

What are the main challenges that you see in Colombia?

There are obviously weaknesses, mainly in the country’s ability to create business opportunities in a short timeframe. This issue is highlighted in both the CPC’s Competitiveness Report and by World Bank and World Economic Forum statistics. Another challenge is the existence of an inadequate tax system, which hinders appropriate financing for major projects, a main competitiveness factor. Another key area in which Colombia faces great challenges is the country’s infrastructure and logistics.

How would you score Colombia on Research and Development?

I understand that there have been efforts to address this, but the truth is that Colombia still lags behind in research and development in comparison to other Latin American countries. Investing 0.5 percent of GDP in R&D is not sufficient, although, if I am not mistaken, Latin America only holds 2.2 percent of world R&D investment, most of it coming from Brazil. There is a lot of talk about Colombians’ ability for invention and design, but there must also be a government initiative to exploit this resource.

What is the importance of having a Council on Competitiveness?

It is very important to engage the private sector in cooperating on issues related to the Colombian economy, and also to the global economy. Engaging the private sector will lead to addressing and reducing the informal economy, which will facilitate Colombia’s progress in other areas. The objective of a Council on Competitiveness is to understand the challenges in every sector of the economy, propose a solution, and then make it happen.

What is your main focus right now in the United States?

The main challenge right now is the issue of energy security. In order to solve this problem, we need to foster competitive innovation on sustainable energy for the XXI century. Energy sustainability is not only an important concern in the United States, but it is also an important issue in most developed countries. On September 9 of this year, the Council released a 100-day energy action plan for our new administration. In this action plan, the president, Congress and the private sector are encouraged to work together to increase energy efficiency. There is a great need to increase efficiency in a country like the US where there is much energy waste and our products have very low energy efficiency. If you look at Japan, for example, the country with the highest level of energy efficiency, it is clear that energy efficiency also reduces costs. One of the issues that we are hoping the new President will address is the need to have a general standard requirement for energy efficiency at a national level. The goal is to develop all the possible sources of energy and improve their extraction and use.