CHANGING PRODUCTION PATTERNS WITH SOCIAL EQUITY

Introduction and Summary

FOREWORD 

In this document, the ECLAC Secretariat has sought to present a synthesized study of the main lessons left by the economic crisis of the 198Os. On this basis, it presents a proposal, for consideration of member States' governments, for the development of the Latin American and Caribbean countries for the 199Os and beyond. This proposal revolves around what is considered to be the primary and common task of all the countries: the transformation of the productive structures of the region in a context of progressively greater social equity. Such a process is intended to create new sources of dynamism which will, in turn, make it possible to achieve some of the objectives inherent to a contemporary conception of development: growth, improvement of income distribution, consolidation of the democratization process, greater autonomy, establishment of conditions which will halt the deterioration of the environment, and improvement of the quality of life of the entire population.

 It should be noted, however, the proposal does not pretend to offer a single, universally applicable recipe: rather, it consists of a set of guidelines which must, of course, be adapted to the particular situations of the individual countries.

 The study is set out in six chapters. The first chapter presents an introduction and summary of the main ideas contained in this document. The second analyses the initial setting, noting that there has been a slowing down of growth, macroeconomic disequilibria, a regressive adjustment process, weakening of the public sector, and a decline in investment. The third chapter then analyses some of the factors conditioning the transformation of the productive structure: the international environment, macroeconomic equilibria, the availability of development financing, and the support of diverse actors of societies. The fourth chapter goes on to set forth the main features of changing production patterns with social equity, together with some of the dilemmas that the process will be faced with.

On the basis of what has been covered in the preceding chapters, chapter five outlines some basic policies which facilitate the desired changes in production patterns. After analyzing the subject of specific national features, it deals with policies designed to support true competitiveness, to strengthen production linkages, and to improve interaction between public and private agents. Finally, chapter six deals with the contribution that economic integration could make to the process of change in production patterns and proposes some policies in the areas interacting with the international economy, promoting production linkages, and strengthening the institutional foundation of integration.

This study is based on the rich and varied lessons learnt during the 1980s, both within and outside the region, and on the analysis of concrete experiences, some of which are briefly described in boxes in order to illustrate the proposed policy outlines. Like every undertaking of this scale, the document forms part of a broader and deeper process. Thus, it not only contains the general thrust of a proposal, but also sketches the broad priorities of the future work programme of the Secretariat. Ultimately, this study and future activities which will stem from it seek to contribute to the present and future debate in the region, as it approaches the twenty-first century, on how to achieve sustained development.

 INTRODUCTION AND SUMMARY

 a) The starting point

 The development experience of Latin America and the Caribbean in the l98Os has already been thoroughly explored by the ECLAC Secretariat in numerous documents, which stress the setbacks suffered by the vast majority of the countries in the economic and social sphere. These setbacks can be better appreciated in the light of the progress achieved in previous decades and also, in the 198Os themselves, in the light of the progress achieved by other regions of the world, especially the industrialized member countries of the Organization for Economic Co-operation and Development (OECD) and various Southeast Asian countries.

The ECLAC documents referred to above used the expression "lost decade" to illustrate the magnitude of the setback suffered in terms of development is measurement is limited to a global indicator such as the evolution of the per capita gross domestic product, this expression even falls short, for at the end of 1989 the real per capita product stood at the level, not of ten years earlier, but thirteen, and even more in some economies. Consequently, the countries of the region are entering the 1990.s under the burden of the recessionary inertia of the 198Os, the heavy load of their external debt commitments and the fundamental lack of correspondence between the structures of international demand and the structures of Latin American and Caribbean exports.

Furthermore, the region continues to suffer from a number of serious shortcomings, including in particular unsolved macroeconomic disequilibria, the increasingly obsolete stock of capital goods and physical infrastructure (due to depressed levels of investment, a growing gap between the intensive technological changes taking place in the world and their application in the regional, the erosion of the financial and managerial capacity of governments, the frustration of an ever-increasing number of people who are trying to enter the work force, the misuse and destruction of natural resources, and the degradation of the environment.

The l98Os did not only witness setbacks, however. There were also advances: partial and sometimes shaky in the economic field, but substantial in the political sphere. In this respect, the 198Os was also a decade of "painful learning". In the politico-institutional field, many countries progressed towards pluralist and participative societies, and the end of the decade witnessed the progressive reduction of ideological consideration in the political and economic debate. This is reflected in the various forms that political and social consensus building have taken. At the level of intraregional relations, most of the rivalries between neighbouring countries became a thing of the past, being replaced in some cases by creative schemes of co-operation. In the economic field, it became abundantly clear that the region's asymmetrical participation in the international economy must be redressed; governments also became more aware of the importance of maintaining short-term macroeconomic equilibria and complementing them with sectoral policies to support the process of change. Efforts to take greater advantage of the potential offered by regional integration were redoubled, and substantial progress was made in overcoming false dilemmas regarding the relations between industry versus agriculture, the domestic versus the external markets, the State versus the private sector, and planning versus the market.

The by no means negligible economic changes which took place, even in the context of the frail performance of the region's economics in the 198Os, were also part of the painful learning process. This heterogeneous performance of different areas of industrial activity was brought out, and the relative vitality of the agricultural sector was confirmed: also, in many countries the big urban concentrations suffered a heavier impact than smaller cities and rural areas. The export coefficient was raised in a wide range of activities, an increasing number of dynamic entrepreneurs emerged, and the coverage of certain social services, such as education, was maintained in spite of budgetary restrictions. The demand for certain kinds of goods and services continued to expand: home electricity consumption and the per capita availability of television receivers maintained their upward trend, in contrast with the regressive performance of aggregate economic indicators.

Thus, in the 198Os opposing trends existed, side by side. In the institutional sphere, political interaction was strengthened, but public institutions were weakened. Adjustment had a very high social cost, especially for the middle-level and popular strata, but those who were most seriously affected often devised their own defence mechanisms. The economies were characterized by a generized loss of dynamism and a marked deterioration in the levels of equity, but at the same time a process of adaptation to the changing circumstances began, and in the course of it many enterprises improved their international competitiveness, while there were many examples of creativity and originality.

In short, the 198Os represented, in historical terms, a turning point between the previous pattern of development of Latin America and the Caribbean and a phase which is not yet fully defined but will undoubtedly be different and which will mark the future development of the region. This lost decade of painful learning might parallel past periods which other nations have had to go through in all the successful cases of late industrialization. Perhaps this will prove to be the basis on which the region will be able lo resume the path of growth, with different modalities regarding institutions and policies, and accompanied, this time, by a sustained effort to overcome shortcomings in the areas of equity and international competitiveness; all this within an environmentally sustainable context. The purpose of this document is precisely to contribute to this task.

 b) The challenges of the 1990s

 Thus, as they enter upon the decade preceding the new millennium, Latin America and the Caribbean stand at a new crossroads. The challenge is non other than to find the path that leads to development: a path from which the countries seem to have gone astray in the turbulent decade which has just ended. The task of overcoming the crisis brings with it an extraordinary mass of demands. For example: on the one hand it is necessary to strengthen democracy, while on the other countries are called on to adjust their economies, stabilize them, bring them into a world of intensive technological change, modernize their public sectors, increase savings, improve income distribution, introduce more austere consumption patterns, and moreover do all this within the context of environmentally sustainable development.

Debilitated economies, societies and States can hardily tackle this mass of demands successfully without carefully weighing, in a climate of consensual mutual support, various kinds of options, priorities and sacrifices. Indeed, the task before them is so great and so complex that it would hardly be possible to tackle it from a single, holistic perspective, especially in view of the enormous diversity of situations which exists in the region. There are, in addition, pressing immediate matters which have so far obliged the authorities to focus their attention on short-term economic policy to the detriment of longer-term projects and proposals, even though these may be essential in order to correct the existing imbalances: this happens to be the case, for example, regarding the balance of payments. In this respect - taking advantage of the longer time horizon offered by the beginning of the 1990s- this document stresses what it considers to be the prime common task of all the countries: the transformation of the productive structures of the region in a context of growing social equity.

 c) Some conditions for the transformation of the productive structures

 The direction and results of the domestic efforts to overcome the crisis will depend to a considerable extent on the external environment, which will always decisively influence the performance of the economies of the region. Among the various elements conditioning this performance are, in particular, the degree of openness of international trade; the way in which excessive indebtedness - a problem that limits both the import capacity and the investment possibilities of many economies of the region - is managed; and the possibilities of gaining access to technologies and know-how on terms that facilitate changing production patterns so as to achieve international competitiveness.

The conditioning factors of external origin are intermingled with others of internal origin and often act to strengthen them. Among the latter factors, in particular, there is the need to correct macroeconomic disequilibria, which were the dominant feature of the 198Os. A major query also arises as to the manner in which development will be financed, in view of the massive negative transfer of financial resources of recent years. Thirdly, the guidelines offered by this document take into account the need to maintain social cohesion, a matter which places clear limits on the content of economic policies and strategies.

 d) The domestic effort and international co-operation

 Promoting the transformation of the productive structure and clearing the way for greater social equity are tasks that call for decided, persistent and whole-hearted efforts by governments and all members of society. These efforts will only bear fruit, as already noted, in an external environment which provides conditions that are at least minimally favourable to such vital matters as financing in general (including, more specifically, a solution to the external debt problem), trade, and the transfer of technology and know-how. All this raises more forcibly and enhances the priority of the need for international economic co-operation.

In this respect, it is to be hoped that the region will be able to face the international dialogue and negotiations from a more favourable position than in the past, for if the countries of Latin America and the Caribbean adopt their own strategies which enable them to progress in changing their pattern of production, this would put them in a more legitimate, credible and efficacious position for demanding that the industrialized countries should shoulder their own responsibilities in the ordering of a vigorous world economy capable of offering dynamic growth to all countries. Moreover, the reactivation of the economies of the region, accompanied by a higher degree of intraregional co-ordination, would strengthen the bargaining power of the Latin American and Caribbean countries vis-a-vis other nations.

Furthermore, the industrialized countries themselves seem to be rediscovering at least some of the advantages of multilateral-type arrangements. In connection with subjects such as the environment or marine resources, it has become clear that the bilateral arrangements so dear to the main developed economies in recent times are insufficient for dealing effectively with certain problems. lt is to be hoped, then, that those economies will also accept, more specifically, the idea that the possibility of keeping up a sustained and orderly expansion of the world economy as a whole depends in essence on finding ways and means which benefit both the developed and the developing countries.

 e) The central proposals of this document

 The statements set forth below all stem from a single conviction: that although the countries of the region do indeed face serious obstacles, there are ways of overcoming them. In some respects, this conviction allays the discouragement generally felt when viewing this situation of Latin America and the Caribbean as this new decade unfolds. It is based on the advances made in other parts of the world, where structural and short-term difficulties have also been encountered (some of them similar to those now affecting the development of most of the countries of the region), as well as on the painful lessons of the last decade and on the rich store of assets built up by the region in the chequered course of recent decades.

The complexity and magnitude of the task at hand call for a more or less lengthy period of learning and adaptation. Many countries have already completed part of this process, so that concrete achievements may be expected in the early years of the 1990s. Even so, there is still a long way to go. This statement also holds implications for the field of international co-operation: the countries need a certain amount of leeway in their external sector in order for their efforts to bear fruit, and time is also needed before the benefits are borne out.

The following sections set forth the criteria on which ECLAC's proposals are based, the guidelines for designing the policies needed to implement them, and the institutional support they require.

 i) The main criteria

Changing production patterns with equity must be achieved within the context of greater international competitiveness, based more on the deliberate and systematic absorption of technical progress by the production process (with corresponding risks in productivity) than on the maintenance of low real wages. In this respect, proper account must be taken of the need for learning and dissemination of internationally available know-how: a possibility which has not been sufficiently exploited by the region in the past. What is needed is to progress from the "transitory rents" derived from natural resources to "continuing rents" offered by the absorption of technical change by productive activities.

Emphasis must be placed on the systemic nature of competitiveness. In the international market, competition takes place among economies in which the enterprise, although of crucial importance, forms an integral part of a network of linkages with the educational system, the technological, energy and transport infrastructure, the relations between employees and employers, public and private institutions, and the financial sector: in other words, it is integrated into an entire economic and social system. From this point of view, promoting changes in the pattern of production calls for decided, persistent and above all properly integrated efforts.

Industrialization is the kingpin of change in the pattern of production, mainly because it is the vehicle for the absorption and dissemination of technical progress, but also because in today's circumstances it is necessary to go beyond the narrow sectoral framework within which it has so far been approached, so as to link it with other areas of primary production and services in order to integrate the productive system and further the progressive homogenization of productivity levels. Overcoming rigid sectoral divisions is one of the keys to transforming the pattern of production and entering into the new phase of industrialization.

Changes in productive patterns must be compatible with conservation of the physical environment, and consequently the environmental and geographico-spatial dimension must be fully incorporated into the development process. What is needed is, on the one hand, to reverse the negative tendencies towards the depletion of natural resources and the increasing deterioration through contamination and global imbalances, and on the other hand to take advantage of the opportunities for making use of natural resources on the basis of research and conservation.

Sustained growth based on competitiveness is incompatible with the continued existence of lags as regards equity. This is not to ignore the difficulty of simultaneously attaining equity and growth, for trade-offs naturally arise in connection with the values to be assigned to these objectives and the capacity of the system to absorb and assimilate changes. In this respect, the urgency of correcting shortcomings in different fields will differ from one country to another: for some, strengthening the weakened social fabric is almost a sine qua non for survival, while for others this first priority is to promote competitiveness, without however suffering any substantial setbacks in equity.

 ii) Some guidelines for policy design

The desired changes in productive patterns can hardly be achieved merely by creating a stable and appropriate macroeconomic climate or applying a policy of "the right prices". They also demand the combination of macroeconomic management with sectoral policies, as well as the integration of short- and long-term policies. In addition, they will call for institutional changes in line with strategic orientations that are likewise of a long-term nature, and which would offer a foundation to new forms of interaction between public and private agents, as essential ingredients for achieving equity and social harmony. Such an interaction must, in fact, form part of a new global system of relations between the State and its citizens.

The imperative of equity means that changes in production patterns must be accompanied by redistributive measures. No matter how intensive the effort to secure changes is, it will undoubtedly be a long time before it is possible to overcome the existing structural heterogeneity through the absorption of all marginalized sectors into activities of greater productivity. It will therefore be necessary to think in terms of supplementary redistributive measures, including technical, financial and marketing services as well as mass training programmes for micro-entrepreneurs, self-employed workers and peasants; the reform of various kinds of regulations which hinder the establishment of micro-businesses; the adaptation of social services to the needs of the poorest sectors; the promotion of reciprocal and arrangements and proper representation of the needs of the most under-privileged groups to the State authorities; and measures to take full advantage of the redistributive potential of fiscal policy, both on the income side and as regards the orientation of public spending.

Latin American and Caribbean integration and intraregional co-operation are essential, as they make a vital contribution to strengthening changes in production patterns, democratization, and greater justice in income distribution. In this field, concrete measures are proposed, based on sectoral -preferably subregional- and gradual criteria which may stress on competitiveness and profitability and which presuppose a leading role for the enterprises, institutions and associations already existing in the region. Such action is designed to ensure that integration assists and strengthens the proposed development strategy.

 iii) The institutional context

All the foregoing is based on the recognition that the economic strategies and policies must be applied within a democratic, pluralistic and participatory context. This affects the content and scope of economic policies and strategies, the way they are formulated and applied, and the forms of interaction between public and private agents. In this respect, the policies and strategies must faithfully respect the will expressed by the broad masses and must be subject to change, in accordance with expressions of the majority opinion.

In democratic societies, the concept of "concerted strategies" takes on decisive importance. Such strategies comprise a set of broad-ranging explicit and implicit agreements between the State and the main political and social actors with regard to changing production patterns with equity and the series of policies and institutional innovations required in order to achieve them. What is at issue is the due legitimization of mechanisms and actions which, on the one hand, give rise to forms of behaviour consistent with the common aims and, on the other, prevent the actions of group interests which could harm collective aims. The capacity of governments to generate agreement on long-term goals and targets, as well as the means to be used to attain them, is directly related with the degree of pluralist participation, the suitability of the policies selected, and the effectiveness of their implementation.

The style of State intervention will no doubt change in relation to past decades. During the 198Os, the priorities of the States in the region were frequently reduced to seeking a form of growth which would make it possible to service foreign debt. Now, however, these priorities must be shifted towards the strengthening of a form of competitiveness based on the absorption of technical progress together with a trend towards reasonable levels of equity. This does not necessarily mean either increasing or decreasing the role of the public sector, but rather increasing its positive impact on the efficiency and effectiveness of the economic system as a whole. It also calls for a change in the State's traditional procedures in the field of planning in order to create closer links between the short-, medium- and long term decision-making processes; to promote intersectoral co-ordination, and to provide technical support for the necessary efforts of dialogue and social consensus building. Clearly, the strategies adopted will be put to the test daily as regards their effects and their degree of acceptance by the various participants.

 f) The main elements of the proposals *

In addition to the central postulates set forth above, this document makes a number of proposals aimed at improving the region's participation in the international economy, promoting better linkages of productive activities, and inducing a creative interaction between public and private agents, all with the objective of fulfilling the strategic goal of generating real competitiveness: an objective which brings together all these specific aims and would constitute a guide for changing production patterns. These proposals are based on the idea of incorporating the positive experience already put into practice in various countries of the region. They should therefore be considered in the broader context of their capacity to help achieve changes in production patterns with equity.

The macroeconomic sphere and the policies which make it up are of vital importance, both for correcting the disequilibria which marked the l98Os and for achieving the sought-for changes in the medium and long term. One of the lessons learnt in the past decade was that the imbalances in the main macroeconomic variables can only be allowed to reach certain limits, and market prices must at least approximate social prices. Another lesson was that the marked emphasis placed on stabilization, on adjustment, and on measures to influence demand and the reallocation of resources conflicted, to some extent, with policies designed to stimulate supply.

There is no need to go into detail here about the content and Scope of short-term economic policy, which will vary significantly from one situation to another. Emphasis should be placed, however, on the importance of a policy framework which imparts coherence to its various components and on the need for a reasonable degree of stability in its application. Stress should also be laid on the extraordinary importance which has been acquired by fiscal policy on the range of instruments available to governments for tackling sometimes conflicting objectives such as stabilization, growth and greater equity in income distribution. Financing changes in the production patterns naturally calls for some reorganization of fiscal policy in order to increase, public savings that can be used for investment. Every effort should be made to prove the allocation of expenditure, but it seems clear that most of the fiscal adjustment must be through tax reform. A system with few, but broad, tax bases, using preferentially uniform rates of taxation, is preferable to a complex system with multiple nominal rates. The adoption of broad tax bases represents an important step towards the objective of greater equity, and moreover it simplifies tax administration and enables revenue to be increased.

With regard to trade and exchange policy, achieving changes in production patterns calls for greater openness of the economy, as a means of generating increases in productivity and stimulating the absorption of technical progress. There is no single formula for securing trade liberalization, but in order for said liberalization to strengthen the growth process rather than hindering it, it is essential that it should lead not only to greater imports but also to a rapid and sustained increase in exports. lt should therefore be graduated in line with the availability of foreign exchange. In addition, it involves the harmonization of tariff and para-tariff protection, exchange policy and export promotion policies, and with the aim of bringing the level of effective protection for export activities to a level similar to that of the import substitution sector. An essential requisite to ensure that greater trade liberalization contributes to growth and changing production patterns is the maintenance of a high and stable real exchange rate. During the critical stage in which the conversion and modernization of the industrial system is being carried out, the selective intervention of the State through the granting of tax, credit and trade incentives could serve, as an important supplement to tariff policy.

In connection with technology policy, the region's status of "late industrialization" offers hitherto insufficiently exploited opportunities as regards the learning, absorption and dissemination in the productive sector of the internationally available stock of technology. As guidelines for the 199Os, it is necessary to supplement and adapt the technological infrastructure in the most backward priority activities; to promote a greater propensity to incorporate technical progress and innovations within enterprises; and to further a proper appreciation of technology as a strategic variable and source of benefits by giving government incentives to existing businesses to undertake innovative activities and supporting the establishment of new enterprises with a high technological component. lt is also suggested that efforts should be made, through various institutional arrangements, to set up a network linking the research system and the rest of the technological infrastructure, on the one hand, with the productive sector on the other, as well as to promote within the latter a system of close contacts between users and producers of goods and services. This latter objective could be achieved through various integrated systems of production in which basic experience and competition has already been built up at the local level (as in the case of certain sectors which process natural resources and the industries associated therewith). Finally, selective criteria must be applied, as only in this way will it be possible to generate endogenous nuclei of technological innovation in the region.

With regard to the training of human resources, emphasis should be placed on its crucial role in changing production patterns. This is the area where there is the best possible conjunction, of economic growth considerations with those relating to social equity. The speeding-up of technical change, the heterogeneity within and among the countries of the region, the changing needs as regards labour skills, and the diversification of the agents of production mean that it cannot be expected that one single agent should be responsible for the tasks of educating, training and retraining human resources. In addition, the shortage of resources available for improving training systems means that it is essential to make the fullest use of the various contributions that different institutions can make in the field of training and retraining human resources. All this fully justifies the need for a long-term strategy designed to raise, gradually and steadily, the educational supply in the various phases and areas: the pre-school, basic and secondary cycles, universities, research centres, training systems, mass education and adult education programmes, and occupational retraining programmes.

As regards the establishment of enterprises, there is a need to design policies to stimulate the formation of enterprises and the training of entrepreneurs. It is recognized that this is a complex task, as the investment process involves factors that are not always included in traditional economic approaches, and even some that are intangible, such as human creativity. The current conception of this problem, however, involves giving particular attention to the creation of groups with entrepreneurial potential, implementation of projects, the financing of enterprises, and the rationalization of the different forms of productive employment at the national level. At the same time, there is another aspect of special importance for Latin America and the Caribbean: the need to assign an enhanced social value of entrepreneurial activities.

The industrial policy outlines offered form part of the set of proposals designed to promote, inter alia, an improvement in production linkages. This set includes gradual and selective trade liberalization, the integral promotion of industrial exports, the absorption and dissemination or technical progress, and support for small- and medium-scale enterprises. The proposed actions will have to be embarked upon in a context of financial restrictions and weakening of public sector institutions, which gives rise to three challenges: making a coherent selection of those areas that warrant government intervention; giving priority to the strategic reconstruction of public sector institutions, and assigning priority to institutional innovations in the management of the productive process.

With regard to agriculture, intersectoral linkages, and international competitiveness, in general it is desirable to get away from the urban/industrial bias in the allocation of economic investments and social spending, as well as assigning new and higher status to rural areas; to modify the current bias in favour of large modern agricultural enterprises through a more selective approach which envisages, as appropriate, the strengthening and modernization of small-scale agriculture; to avoid the concentration of investment in large-scale water projects, with emphasis instead on the maintenance, complementation and development of smaller works, as well as the integrated management of water resources; to strengthen intersectoral linkages and the consolidation of efficient production, transport and marketing arrangements, while avoiding enclosure in sectoral compartments; and to end the persistent disputes over land and other ownership by regularizing legitimate title deeds.

The subject of natural resources and production linkages is also dealt with. A policy for the rational use of the region's natural resources in the next decade must be aimed at correcting the shortcomings of the past and making progress in a number of aspects. Natural resources cannot be left at the mercy of a short-sighted system of maximum immediate exploitation, but must be subject to a system of careful management which calculates the appropriate rates of use of non-renewable resources in the light of the present situation and future prospects of the markets and ensures the maintenance of the reproductive capacity of renewable resources. Nor must the natural resources sector he viewed as a mere source of income for transfer to other sectors; instead, steps must be taken to build up productive systems linked with industry and services, so as to lighten the value of the resources and contribute to a process of technological and organizational change which will strengthen their competitiveness.

With regard to basic support services and their production linkages, their production linkages, the proposed changes will need the support of the various basic services such as electricity, water, communications, banking, insurance and transport. Some of these will have to be adapted to the circumstances of the 199Os. In the case of transport, for example, the use of the market mechanisms should be favoured where they already exist or can be created on suitably competitive terms, while it will also be necessary to prevent the continued concentration of investment in physical infrastructure and to try to ensure that the transport services are appropriate, in terms of quality and cost, for the process of change in productive patterns. Furthermore, isolated actions in the individual transport media must give way to the establishment of properly integrated transport systems.

In respect of financial systems and changing production patterns, it is noted that in the 199Os a basic objective of the banks and development funds will be to procure on the market medium and long-term resources to supplement those that may be provided or channelled by the public sectors. This points to the importance of issuing securities that offer a good yield, the emphasis that must be placed on the profitability of investment projects, and the need for project financing formulas that keep down the loan risks of the development institutions.

Measures to secure active interaction between public and private agents and the restructuring of the public sector will form part of a process whose content and scope cannot be subject to preconceived formulas. They will depend not only on the institutional, social, economic and political context in which they take place, but must also arise from a broad effort at consensus building among the various representative forces. Consequently, this document only offers some general principles for State action in support of changing production patterns with equity. Outstanding among these principles are selectivity in the actions of the State, the self-limitation of such actions, the simplification and decentralization of State intervention, and improvements in the medium-term forecasting capacity through new forms of planning.

Economic integration, as a process which contributes to changing production patterns with social equity will be an aspect that acquires fresh relevance and support in the 199Os. In this context of the objectives of change in the patterns of production, it is proposed to promote innovation, learning and the dissemination of technology through the expansion and extension of relations between enterprises, sectors and institutions at the subregional and regional level, together with the application of flexible integration instruments and geographical groupings. Liberalization of intraregional trade, co-operation in transport and in trade facilitation together with the rehabilitation of payments mechanisms, would expand markets and promote competition, thus hoping to create a symbiosis between external and regional demand. This would increase competitiveness and the possibilities of increasing exports to the region and to the rest of the world. All this would be facilitated by selective co-operation in the field of sectoral policies and through the establishment of a wider scientific and technological outreach, with joint actions in such aspects as intellectual property and information technology. Furthermore, it is proposed to explore the possibilities of making use of joint trade liberalization, perhaps by selectively binding tariffs, as a negotiating instrument for guaranteeing access to external markets. Emphasis is also placed on the need to strengthen the institutional basis of integration, with greater participation of the various types of actors, both public and private, in the decision-making process.

* Summary of chapters V and VI of this document.

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