Latin American Subnational Innovation Competitiveness Index

LatinAmericanSubnationalInnovationCompetitivenessIndex VIKTORLAZAR,IANTUFTS,STEPHENEZELL,CAROLINAAGURTO,ALVAROMONGE,GERMANLOPEZ,ANASANCHEZ,VLADIMIRMACIEL,PABLOEGUIGUREN|SEPTEMBER2023 Forpolicymakerstobolstertheglobalcompetitivenessoftheirnationsandregions,theyfirstmustknowwheretheystand.Thisreportbenchmarksthe182regionsofBrazil,Chile,Colombia,Mexico,Peru,andtheUnitedStatesusing13commonlyavailableindicatorsofstrengthintheknowledgeeconomy,inglobalization,andininnovationcapacity. KEYTAKEAWAYS TheUnitedStatesclaimsallthetop47regions,withMassachusetts,California,andWashingtonrankingthetopthree. ThreestatesintheUnitedStates(Mississippi,Alaska,andWestVirginia)ranklowerthanthevery-best-performingLatinAmericanregions. Thefivebest-performingregionsinLatinAmericaareMexicoCity,Mexico;SaoPaulo,Brazil;Lima,Peru;Bogotá,Colombia;andArequipa,Peru. WhileLatinAmericanregionslagbehindU.S.regionsintheiroverallscores,thereislessvariationinregionalscoresinLatinAmerica. Peruvianregions,alongwithmanyregionsinColombia,Brazil,andMexico,lagbehind U.S.regionsmostvisiblyinbroadbandadoption.U.S.regionsalsoparticularlyexcelledatventurecapitalandpatentapplicationscomparedtotheirLatinpeers. Policymakersmustopentheirregionalinnovationmarketstobothacontinentalandglobalscaletocreateinternationallycompetitiveecosystemsandacceleratedevelopment. Policymakersmustboostlocalresearchanddevelopment(R&D),entrepreneurship,andpatentapplicationsforaresilienteconomywithcutting-edgedevelopmentopportunities. CONTENTS KeyTakeaways1 Introduction3 TheIndex4 Results5 RankingList5 IndexScores11 KnowledgeEconomy13 Globalization21 InnovationCapacity25 PolicyRecommendations39 Brazil39 Chile40 Colombia41 Mexico43 Peru45 UnitedStates47 Conclusion49 Appendices50 AppendixA:CompositeandCategoryScoresMethodology50 AppendixB:IndicatorMethodologiesandWeights51 AppendixC:EstimationMethodologies52 Endnotes54 INTRODUCTION DespiteLatinAmericaaccountingforonly8percentoftheglobalpopulationand6.5percentofglobaleconomicoutput,theregionpossessesseveralcharacteristicsthatwillbeinfluentialinthecomingdecades.1Notably,LatinAmerica’sroleinglobalcriticalmineralreservesisremarkable.Theregionisresponsiblefor40percentoftheworld’scopperproductionand35percentoflithiumproduction,amongothers.2Astherapidexpansionofgreentechnologyandthegreentransitionreliesonthesecriticalminerals,theregionstandstogainsignificanteconomicandpoliticaladvantagesbyensuringareliablesupplyofthesemineralstotheglobaleconomy,therebyelevatingitsroleintheprocess.3Thecountriesexaminedinthisstudy—Brazil,Chile,Colombia,Mexico,Peru—represent35percentoftheregion’spopulationand40percentofitseconomicoutput,andthusgreatlyshapetheeconomicrealityoftheregion.4 Despitebeingavitallyimportantregionintheglobaleconomy,LatinAmericalagsbehindthemore-developedpartsoftheworldintermsofeconomicdevelopment.Mostcountriesintheregionfacetheriskofgettingtrappedinthemiddle-incomecategoryandstruggletoadvanceintohigh-incomeeconomies.AstheInformationTechnologyandInnovationFoundation(ITIF)highlightedinapreviouspublication,intoday’sinterconnectedworld,theabilitytomaintaineconomicstrengthandinternationalsignificancedependsgreatlyonpromotinginnovationandembracingtechnologicalprogress,whichareessentialtoachievegrowthinper-capitagrossdomesticproduct(GDP).5Therefore,suchcountriesmustdeveloptheirowninnovationstrategiestoavoidthemiddle-incometrap. Thesignificanceofaninnovationstrategyforacountrycannotbeoverstated.Inthe21stcentury,acountry’ssustaineddevelopmentandeconomicgrowthdependonitsabilitytodevelopandtransferknowledgeandtechnology,enhanceproductivity,andfosterresilience.Numerouscrucialelementsshapeacountry’sinnovationecosystem,includingthequalityofeducationandacademicinstitutions,thelevelofpublicandprivateinvestmentsdedicatedtoresearchanddevelopment(R&D)andinnovation,thepresenceofhighlyskilledR&Dprofessionals,theeconomy’svibrancy,andtheentrepreneurialspirit.However,whilemoredevelopedcountries,suchasthetheUnitedStates,typicallyinvestabout3percentofGDPinR&Dactivities,LatinAmericaonlyinvestsamere0.67percentofGDP.6ThislowlevelofinvestmentisalsoreflectedinthefactthatLatinAmericacontributesonly2.75percentoftheworld’sscientificpublicationsoninnovation,despiteitsmore-sizeableeconomicandpopulationrepresentation.7 Whilemoredevelopedcountries,suchasthetheUnitedStates,typicallyinvestabout3percentofGDPinR&Dactivities,LatinAmericaonlyinvestsamere0.67percentofGDP. TheGlobalInnovationIndex(GII)isaprominenttoolthatprovidescomprehensiveassessmentsofinnovationperformanceonaglobalandregionalscale.TheGIIoffersamultidimensionalperspectiveoninnovation,evaluatingfactorssuchasR&Dinvestments,humancapital,andbusinesssophistication,whichcollectivelycontributetoacountry’sinnovationcapacity.8InlinewiththeGII,ITIFhascontributedsignificantlytothediscourseoninnovationcompetitivenessthroughitsseriesofinsightfulsubnationalinnovationcompetitivenessreports,whichprovidenuancedinsightsintotheintricaterelationshipsbetweeninnovation,economicdevelopment,andregionalcompetitiveness,offeringvalua