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1Djordjija PetkoskiHead of Business, Competitiveness and Development World Bank Institute

Djordjija PetkoskiHead of Business, Competitiveness

and Development TeamWorld Bank Institute

World Bank Institute

1st MercosulForum on

Sustainability


Population and Poverty in LAC• Total population: 551.4 million, of which:

– Nearly one quarter lives on less than $2 dollars per day (115 million people).

– 9.5% lives on less than $1 dollar per day (42 million people).

• LAC is the richest developing region, with average per-capita income at $3,700.

• It also has the higher standards of inequality among its population. In the year 2000:– 23% of the population had access to 61% of GDP – 77% had only access to 39% of total GDP.


Late 1990s: Starting in 1999, growth slowed down due to external shocks –commodity prices fell, financial flows plunged, OECD growth slowed down and OECD demand for exports decreased

Average GDP per capita Growth Rates

Source: World Development Indicators, 2004

2.9

-0.4

2.0

-0.6

2.6

1.31.0

1.2

3.6

5.6

6.7

5.3

3.5

2.3

1.6 1.6

-2

-1

0

1

2

3

4

5

6

7

8

1961-80 1981-1990 1991-1998 1999-2002

Latin America & CaribbeanWorldEast Asia & PacificHigh income: OECD

Latin America - Economic Growth


Manufactured exports have increased but there is still heavy dependency on agricultural and commodity products....

Latin America - Export Composition 1962-2001

Source: World Development Indicators, 2004.

La tin Am e rica a nd the Ca ribbe a n: m e rcha ndise e x port s a s % of GDP

0

2

4

6

8

10

12

14

16

18

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

A gric ulture and Food Produc ts Manuf ac tures Metals & Ores Fuel


.....especially when compared to East Asia

Latin America - Export Composition 1987-2001

Source: World Development Indicators, 2004.

Ea st Asia a nd P a cific: m e rch a nd ise e x po rts a s % o f G DP

0

5

1 0

1 5

2 0

2 5

3 0

3 5

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

A gr ic u lture and Food Produc ts Manuf ac tures Metals & Ores Fuel


ON THE OTHER HAND …


6,880Volkswagen Brazil5012,628PEMEX Gas y Petroquimica25

7,111Volkswagen Mexico4914,522CVRD Brazil24

7,154Telemar, Brazil4815,263Petrobras Distribuidora23

7,162Tele Norte Leste, Brazil4715,300CEMEX Mexico22

7,343Grupo Carso Mexico4615,322Telmex Mexico21

7,352Copec Chile4515,517Wal-Mart de Mexico20

7,508Repsol YPF Argentina4416,791Uruguay19

7,590Bunge Brasil4316,974El Salvador18

7,975Honduras4217,128America Movil Mexico17

8,151Paraguay4117,237CFE Mexico16

8,113Grupo Votorantim Brazil4019,431Costa Rica15

8,268Odebrecht, Brazil3928,302Republica Dominicana14

8,320Ipiranga Petroquímica3831,315PEMEX Refinacion Mex13

8,424Telcel Mexico3731,683Guatemala12

8,876Electrobras, Brazil3636,244Ecuador11

9,076Gerdau, Brazil3558,360Petrobras Brazil10

9,334Bolivia3478,430Peru9

9,696Jamaica3384,152Petroleos de Venezuela8

9,722Ipiranga Distribuidora3287,324Petroleos Mexicanos7

9,928FEMSA Mex31115,250Chile6

10,219Daimler Chrysler Mex30122,309Colombia5

10,490Codelco Chile29138,856Venezuela4

11,096Petróleo Ipiranga Br28183,309Argentina3

11,282General Motors Mexico27768,437Mexico2

11,325Org. Techint Argentina26794,097Brazil1

GDP/ Sales 2005 (data in millions)

Country / Company GDP/ Sales 2005 (data in millions)

Country / Company

Source: WBI utilizing data from World Development Indicators 2006 and Latin Trade the 500 Companies, Dec 31, 2005.


FDI vs OFA in Developing Countries in America

0

100

200

300

400

500

600

700

1990 2000 2002

Foreign Direct Investment(FDI)

Official Financial Aid(ODA+OOF)

51113Official Financial Aid(ODA+OOF)

366609126Foreign DirectInvestment (FDI)

200220001990

Foreign Direct Investment VS Official Financial Aid


Emerging Changes: Rising Risk

McKinsey Quarterly (Jan. ‘06)Identifies

10 Trends to watch in 2006

1. Centers of economic activity will shift: The march of Asia.2. The demographic deficit: Productivity gains for the public sector will be essential. 3. Consumer preferences will change: New consumers in emerging markets.4. The technological revolution will continue: A new way of interactivity.5. The global labor market will open up new talent s ources: Migration of jobs.6. Business will come under sharp scrutiny: Stakeholder pressure.7. Demand for natural resources will grow: Resources are restrained.8. New industry structures will emerge: Non traditional business models.9. Management will go from art to science: New management approaches.10. New models of knowledge are emerging: Leveraging information.


The role of Business in Development : Corporate

Social Responsibility


To think and act comprehensively and systematically about:

• The role of business in development

• The manner in which the business is conducted

• Corporate governance• Poverty alleviation• Corporate contribution to peace

and war against terror• Business, government and civil

society partnership- common ground and collective action

CSR: A New Paradigm


A New Mind Set: Beyond “CSER Pays”- Adding Value

From: Separation and Competition

To: Enlargement and Overlapping

Corporate Responsibility

is the commitment of business to managing and improving the economic, environmental and social implications of its activities at the firm, local, regional and global levels.


Corporate Social & Environmental Responsibility


Why is CSR Important?

• Long-term viability & sustainable/positive returns on investment.

• Reduced operational risk.• Reduced long-term costs of

production.• Improved operating

environment.• Improved investment

environment.• Increased partnerships.


Less influential1%

Equal influence9%

Much more influential42%

More influential46%

Don't know1%

Much less influential1%

Source: Race to the Top: Attracting and Enabling Global Sustainable Business, Business Survey Report, World Bank, IFC, October 2003

Compared to 5 Years Ago

Growing importance of CSR factors


0 10 20 30 40 50 60

Withdraw from a country

Choose one host countryover another

Withdraw from a partner

Choose one partner overanother

Percentage of respondents

Source: Race to the Top: Attracting and Enabling Global Sustainable Business, Business Survey Report, World Bank, IFC, October 2003

Actions taken by companies due to CSR Concerns


A New Mindset / Framework• Looking at longer term profit-by improving longer

term economic prospects• Bigger picture—importance of local conditions for

company’s ability to compete• Understanding the benefits of influencing the quality

of business environment• Focus on the alignment of economic, social and

environmental goals• Importance of specialized knowledge• Importance of partnership

– Common language– Common ground– Negotiation skills—co-opetition


New Framework - CSRSustainability actions

(Strategy, plans & programs, structure & systems)

Corporate & business unit

Strategy

Sustainability Performance

•Work force diversity•Environmental impacts•Bribery/ corruption•Community involvement•Ethical sourcing•Human rights•Product safety•Product usefulness

Long termcorporatefinancial

performance

Stakeholders reactions

•Employees•Community•Customer•Government•Investors•Financial analysis

feedback

Corporate cost = Benefit of actions


Competitiveness

• The Fundamental Challenge for Business is to Remain Profitable and Competitive.

• Operate under increasingly complex, competitive and economically and socially uncertain conditions.

• Publicly listed companies: huge pressure to deliver robust and growing quarterly earnings.

• Pressure to establish cooperation with nontraditional partners and competitors, as well as focus on unfamiliar issues.


Why Competitiveness Framework?

• Corporations– Better relate CSR to their competitive strategy

and competitive context– Better communicate and collaborate with

government and civil society

• Government– Better understand corporate intent and the

drivers behind corporate success– Improved business environment


Why Competitiveness Framework?

• Civil Society– Better understand corporate intent and the drivers

behind corporate success– Strengthen their relevance and credibility through

• Improved governance structure • Relevant knowledge

• Youth – Sustainability and long term impact– Today’s decisions and tomorrow’s consequences– Relevant education and knowledge– Governance structure for relevance and credibility


Potential of the Corporate Sector

• Unleashing the potential of the corporate sector and entrepreneurship is critical to achieve poverty alleviation at scale and in a sustainable manner

• Traditional expectations from corporate sector development– Private sector creates jobs

and income for individuals– Creates tax revenues for

governments


“Corporate Social Responsibility is a topic of vital importance to the World Bank in our efforts to fight poverty. It is a mission we must undertake responsibly, ensuring that we respect culture, protect the environment, and strengthen communities in the course of our work.”

Paul Wolfowitz, President of the World Bank, 2005


Business, Competitiveness

and Development program


Global Program – Reaching more than 30,000 participants per year– Working in more than 90 countries per year

Objectives• Address the need for a better understanding of the

role business can play in development.• Address the need for broader acceptance of multi-

sectoral partnerships, corporate governance, transparency and social responsibility as vital components of corporate strategy.

• Highlight the importance of these issues in relation to poverty reduction, good governance, anti-corruption and country competitiveness.

Business, Competitiveness and Development


Business, Competitiveness and Development

Main themes for capacity building:

– Business and Multi-sectoral Partnerships

– Corporate Social Responsibility

– Business Ethics and Anti-corruption

– Competitiveness and Development

– Sustainable SMEs

– Corporate Governance


Djordjija [email protected], Competitiveness

and Development TeamWorld Bank Institute

Thank you !!!

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