Chapter 1. Assessment and recommendations

In recent years, Uruguay has made remarkable progress in strengthening its macroeconomic management and improving its people’s well-being. The recovery from the Argentinian and Uruguayan crisis in 2001-02 saw the country begin its most extended period of economic growth. For most of the 2001-10 decade, stable macroeconomic policies and the favourable external environment allowed for solid growth and counteracted the devastating effects of the crisis. This is reflected in improvements in different dimensions of well-being. The country’s achievements are remarkable both by regional and OECD standards. As one of the few high-income countries in Latin America, and with the lowest levels of poverty and income inequality on the continent, Uruguay scores highly in areas such as life satisfaction, environmental quality, health, trust, perception of government and air quality (Figure 1.1). Nevertheless, some challenges remain, including unequal access to education (particularly secondary), youth unemployment and social exclusion.

Figure 1.1. Well-being in Uruguay compares favourably to the rest of the world
picture

Note: Bivariate regressions were run with the relevant well-being measures as the dependent variable, and GDP per capita as the independent variable, to estimate a coefficient for the relationship between GDP and the outcome in question. The coefficient was then applied to Uruguay’s actual GDP per capita to produce an expected value for the outcome. Uruguay’s actual well-being outcome is expressed as a ratio of the expected outcome measured in standard deviations. PISA: Programme for International Student Assessment; GNI: gross national income.

Sources: OECD calculations based on Gallup Organization (2013), Gallup World Monitor (database); UNDP (2015), International Human Development Indicators (database), http://hdr.undp.org/en/data; UIS (2015), UIS Data Centre (database), http://data.uis.unesco.org/; World Bank (2015), World Development Indicators (database), Washington, DC, http://data.worldbank.org; PISA 2009 data.

 https://doi.org/10.1787/888933329967

While Uruguay’s growth path is currently stable, its history of economic fluctuations urges caution. Over the past decades, Uruguay’s growth performance has seen external conditions and domestic living standards fluctuate rapidly. Volatility in growth rates has been high compared to OECD countries, with Uruguay swinging between periods of strong economic growth, economic crises and subsequent recoveries. Such inherent volatility has increasingly challenged Uruguay’s capacity to maintain previous living standards. Between 1961 and 2014, per capita gross domestic product (GDP) grew by 1.8% annually, significantly below the 2.2% average for OECD economies with similar income levels. Today, the macroeconomic policy framework is solid, but external conditions risk curbing economic growth. Uruguay needs to address the structural issues driving economic and social vulnerability.

This second volume of the Multi-dimensional Review of Uruguay provides an in-depth analysis of Uruguay’s critical constraints to development. It extends the analysis completed in the initial assessment (OECD, 2014a), taking it a step further and proposing concrete recommendations for key policy issues (Box 1.1). The initial assessment stressed the role of Uruguay’s institutional capital in constructing a solid policy framework to deal with external and domestic challenges. These include reducing external vulnerabilities, diversifying the economic structure and preserving a social agenda. Uruguay’s institutional strength – witnessed by high public trust in government, low perceptions of corruption and well-developed social capital – suggests that the country is well-placed to undertake important long-term reforms. Constraints in education and infrastructure underline the need for a long-term perspective in implementing reforms.

Box 1.1. What do multi-dimensional country reviews involve?

The OECD multi-dimensional country reviews are carried out in three phases, which constitute the basis for an exchange with policy makers: The first phase, or initial assessment, provides a general diagnosis of the country’s development model and identifies its main constraints. The second phase, in-depth analysis and recommendations, tackles the most binding constraints identified and examines them in greater depth. Taking into account linkages, trade-offs and synergies across policies, the in-depth analysis provides a series of policy recommendations to overcome these structural barriers. Finally, the third phase of strategy building and implementation incorporates recommendations into a coherent development strategy, proposing an appropriate sequencing for the implementation of policies.

The in-depth analysis contained in this report focuses on three key areas for intervention: First, Uruguay’s need to improve its international integration strategy, by harnessing new opportunities in global value chains, improving the investment framework and developing its services sector (Chapter 2). Second, the present state of infrastructure development in Uruguay, and the existing institutional barriers to improving the national transport system (Chapter 3). Third, the current challenges for consolidating the education and skills systems, the economic and social costs of current deficiencies and the education policies required to improve performance, equity and other educational outcomes (Chapter 4). This chapter reviews these constraints and summarises the main policy recommendations identified to mitigate them.

Building stability through better international integration, infrastructure and education

The initial assessment found that Uruguay’s binding constraints were in the areas of international integration, infrastructure development and education. “Binding constraints” are defined as those with the largest effect on the development outcomes under analysis. As a first step, the Better Life framework,1 an overall assessment of Uruguay’s living standards, allowed for a preliminary appraisal of Uruguay’s main constraints. The initial assessment also focused on three dimensions: the evolution of Uruguay’s structural trends and productivity, the patterns of inequality (in income, access to public goods and employment) and the sustainability of the current macroeconomic and fiscal framework. All things considered, three policy areas for future action were identified:

  1. International integration, through trade and investment. Uruguay’s reliance on exporting goods and services, its involvement in various intraregional platforms and its willingness to develop new economic sectors and become a regional hub should put the integration agenda at the forefront of public policy.

  2. Infrastructure development, especially in the transport sector. Uruguay’s infrastructure gap could be putting an important brake on economic growth. Its efforts to strengthen its transport network reflect its ambition to become a logistics focal point in the region. Despite a high coverage of road and railroad networks, quality improvements and a consolidated long-term national plan for transport will be critical for fulfilling the country’s productive and integration strategy.

  3. Education, especially secondary and post-secondary education. A better-performing and more equitable education system can provide more opportunities to broader segments of the population, strengthening the country’s human capital and skills, reducing pervasive inequalities and favouring social mobility.

Low diversification, a rigid regulatory framework and the sub-optimal use of trade arrangements hinder Uruguay’s integration in global markets

Uruguay is an open, liberalised economy with an investor-friendly regime and is increasingly participating in international trade. The country’s recent record of solid economic growth has been partially driven by its dynamic external sector. Doubling in less than a decade, Uruguay’s export sector remains an important pillar of the economy, with about one third of GDP embodied in exports, while the same share of jobs depend on external demand (Ferreira and Vaillant, 2014). Nonetheless, the benefits from Uruguay’s trade and investment profile are still relatively limited compared to other economies. This suggests that there is considerable scope for stronger integration and greater competitiveness in new sectors. For this, as stressed in the initial assessment, Uruguay’s integration model needs to be reinforced. Until recently, regional and plurilateral agreements have allowed the country to strengthen links with its neighbours. Today, however, new challenges demand a more ambitious integration strategy. Global value chains (GVCs) have reconfigured the patterns of international trade – harnessing new opportunities to participate in them has become a priority. In addition, the regional context, with a more uncertain macroeconomic environment means it is critical for Uruguay to forge trade ties with commercially relevant partners outside Mercosur. Uruguay is therefore increasingly inserting itself beyond the region through its services sector, including transportation, tourism and business services, but existing barriers to international integration in services could undermine this process (Figure 1.2).

Figure 1.2. FDI restrictions by sector in Uruguay remain high in some sectors, 2013
picture

Note: OECD 2013 FDI Regulatory Restrictiveness Index: closed = 1, open = 0.

Source: Authors’ elaboration based on OECD (2015), FDI Regulatory Restrictiveness Index, www.oecd.org/investment/fdiindex.htm.

 https://doi.org/10.1787/888933329971

Low diversification, a rigid regulatory framework and the sub-optimal use of trade arrangements could hinder Uruguay’s integration in global markets. Uruguay’s capacity to diversify its trade towards new markets and sectors remains an important challenge. The recent development of a “global services” sector, less sensitive to distance and economic downturns, is a move in the right direction. However, Uruguay’s regulatory profile for domestic services remains relatively restrictive, undermining other sectors of the economy and hampering its connectivity to world markets. Besides regulation in the services sector, Uruguay has yet to tackle modern, behind-the-border disciplines (or rules) essential for sustaining the development of GVCs and consolidating the institutional framework for a truly “deep integration” agenda. Finally, the regional context, in particular Uruguay’s commitments in Mercosur, highlights the need for better use of current international trade and investment agreements.

Recommendations: towards more strategic international integration, investment and services

  • Deepen engagement in trade and investment. Uruguay needs to collaborate closely with its Mercosur partners to strengthen integration. It will need to deepen and upgrade disciplines, notably advancing services negotiations and including comprehensive disciplines on competition, state-owned enterprises, intellectual property rights and regulatory coherence. To ensure that current agreements are compatible with its overall strategy for further integration, Uruguay should ensure that these agreements are conducive to the development of regional and global value chains. This involves the revision and accumulation of rules of origin and other flexibilities; and adapting regional trade agreements to include disciplines that cover issues such as intermediates trade, free flow of capital, global demand for services across chains, international movement of skills, and protecting the knowledge and technology that accompany production. These measures, aimed at increasing coherence in regulatory regimes across countries, will be critical to Uruguay’s GVC participation. For this purpose, Uruguay could establish a committee in Mercosur to identify and review good practices emerging from new disciplines in 21st century agreements, with a view to assess their relevance and to tailor them to the Mercosur context.

  • Look to new markets, in particular Asia. Uruguay should take advantage of any flexibilities within Mercosur to diversify its markets and forge new agreements with commercially important partners, including fast-growing economies in emerging regions (e.g. Asia). It should align its trade partnerships with existing and emerging global production networks (including with countries home to the headquarters of multinational enterprises) (OECD/CAF/ECLAC, 2015). The first step is to develop a market diversification strategy for those GVCs and other products for which Uruguay has comparative advantages. Pursuing opportunities to plug into new emerging initiatives, and deepening ties with members of the Trans-Pacific Partnership, could help to further these diversification efforts.

  • Maintain and intensify efforts to participate in bilateral negotiations and plurilateral platforms. Uruguay should continue to diversify its current dialogue platforms, and ensure the successful conclusion of key negotiations, notably the Mercosur-European Union agreement. At the same time, Uruguay should continue unilateral service reforms, evaluate the potential benefits of plurilateral negotiations, such as the Trade in Services Agreement (TiSA) and, depending on the assessment, re-consider its participation. The country should also consider full membership of the Pacific Alliance. To increase its participation in these bodies, Uruguay’s task is two-fold: 1) identify prevalent regulatory barriers to exports to target markets, to develop a clear request list for these negotiations; and 2) identify ongoing and priority areas of reform, to shape the proposals it can put forward in negotiations.

  • Aim for more comprehensive trade and investment agreements with partners. To do this, Uruguay could adopt a suitable model agreement to use as a base, containing flexible and cumulative rules of origin; GATS Plus practices with respect to rules governing services; and open accession clauses, substantially covering all trade, competition disciplines and TRIPS Plus provisions. The country should set up a working group to propose elements that should systematically be considered for inclusion in a model Bilateral Investment Treaty (BIT) and Free Trade Agreement (FTA) for Uruguay, drawing on the most progressive existing agreements (i.e. with Chile and Mexico), as well as international best practices.

  • Consider undertaking unilateral reforms in services sector regulations to decrease restrictiveness in key sectors and to enhance compatibility with regional partners. The effective harmonisation of regulations would foster greater competitiveness in services sectors where regulatory barriers play a fundamental role. This will require establishing a centralised unit that ensures coherence in national regulations, particularly in services; and to review good practices in regulatory coherence and co-operation, such as those in the Trans-Pacific Partnership and other negotiations. One example is efforts to facilitate the movement of people through the Visa Program between the Pacific Alliance and Mercosur.

  • Adopt a supply-chain approach to trade and investment promotion. Strengthening export and investment promotion goes beyond targeting specific sectors and products towards investment and trade promotion activities that take into account upstream and downstream activities. For this, Uruguay could develop programmes that promote the competitiveness of services that are embedded or embodied in the country’s comparative advantages. This can be accomplished by creating tailored programmes and instruments for services and goods that are complementary to Uruguay’s key exports. The current portfolio of Uruguay XXI, the country’s investment promotion agency, could be expanded, and new instruments could be tailored to the internationalisation of services. Several OECD examples, discussed in Chapter 2, can offer guidelines. Uruguay should also consider working together with Mercosur or Pacific Alliance members to group export and investment promotion activities. This allows for greater impact and efficiency in asset use.

  • Reinforce programmes to integrate small and medium-sized enterprises (SMEs) into global services activities and facilitate their access to integration mechanisms, such as free trade zones. Uruguay’s free trade zones have contributed to a more diversified export basket, and the value added they have created accounts for around 4% of GDP. To better integrate them with the rest of the economy, Uruguay can reinforce programmes targeting SMEs to integrate them into global services activities and facilitate their access to these integration mechanisms. To achieve this, the government needs to co-ordinate and centralise all existing programmes for SMEs in the service sector.

  • Strengthen the institutional framework and inter-ministerial co-ordination for fostering competitiveness in services. This can be done through the pursuit of a National Services Strategy, which brings together relevant actors across ministries in order to enhance coherence and effectiveness of adopting public policies relevant to service sector regulation and support. The example of Jordan is illustrative for this purpose.

  • Finally, improving information systems, particularly in the services sectors, is crucial. Uruguay should put in place efficient services data collection mechanisms meeting MSITS (Manual on Statistics of International Trade in Services) 2010 norms, and should centralise services data collection institutions. At the same time, the National Statistics Office or Central Bank should establish a census of the channels through which services exports take place (cross-border, e-commerce, movement of persons, establishment, etc.). Uruguay could exchange practices and technical assistance with countries that have collected services data at the firm level (e.g. Colombia and New Zealand).

Transport infrastructure and planning are holding back Uruguay’s growth

The initial assessment concluded that Uruguay has a significant infrastructure gap in the transport sector. Strong economic growth over the last decade has placed greater stress on the country’s transport infrastructure, and today Uruguay’s transport endowments are insufficient to meet the needs of the economy. Uruguay faces challenges in a number of areas of transport infrastructure, from planning and management to delivery and operation. Uruguay lacks a National Transport Plan, as well as a clear strategy for how its infrastructure sector should be organised. This makes project programming and prioritisation difficult. The initial assessment also stressed Uruguay’s need to improve the co-ordination of the infrastructure sector (OECD, 2014a). The lack of co-ordination among the different bodies involved in the infrastructure cycle is significant, and challenges in the distribution of responsibilities are evident. In addition, current regulations, in particular for executing public-private partnerships (PPPs), are lacking.

While the quality of ports, electricity supply and telecommunications is good, the quality and coverage of Uruguay’s roads are not. In 2012, up to 55% of roads were considered to be in “mediocre or bad” condition (Figure 1.3). As almost 97% of commercial cargo is transported by road in Uruguay, poor conditions can have a significant impact on economic activity. Moreover, Uruguay’s performance on logistics is only 30% that of Germany, and is largely held back by the quality of its infrastructure and customs procedures, hindering its capacity to become a logistics hub.

Figure 1.3. Road condition in Uruguay by management type
picture

Source: CAF (2010), Análisis del sector transporte. Serie informes sectoriales. Infraestructura. Serie Informes sectoriales. Infraestructura. http://publicaciones.caf.com/media/1131/IS_URUGUAY.pdf.

 https://doi.org/10.1787/888933329986

Recommendations: Overcoming the barriers to transport infrastructure development

  • Create a National Transport Plan. This could be achieved by upgrading the existing transport, infrastructure and logistic plan developed by the Ministry of Transport and Public Works to reflect best practice in national transport planning. Such a plan should be adopted at the highest political level and provide a clear roadmap to the relevant line ministry.

  • To improve infrastructure delivery, Uruguay needs to adopt a holistic view on how its infrastructure sector should be planned and organised. Although the country appears to be focusing on PPPs to close the gap, only after proper foundations have been secured should private participation be considered. At present, given the lack of a national transport plan, PPPs should only be considered where there is a critical and clear present need. Moreover, infrastructure projects developed as PPPs need to be aligned with the National Transport Plan. Also, the prioritisation and procurement decisions should be carried out by separate entities to avoid potential bias on the project evaluation process. Uruguay should enforce and strengthen the current regulations, avoiding off balance sheet PPP execution. Clearer regulations should be set in place for PPPs’ contract renegotiation.

  • Re-organise the governance of infrastructure. To improve transport performance, Uruguay needs to corporatise its infrastructure management (especially the road sector). This involves the creation of an institution responsible for publicly reporting performance indicators on the condition and financial viability of infrastructure projects. Where such governance already exists (e.g. in the rail sector), performance contracts should be established between the Ministry of Transport and Public Works and the infrastructure managers.

  • Design a proper regulatory framework for all actors involved in the infrastructure sector. This will initially require a regulator attached to the government. Once the economic regulator develops sufficient capacity, Uruguay may wish to consider detaching the institution to create an independent economic regulator. This may be desirable for ensuring fair access to infrastructure and allowing a more transparent approach to financing. This approach should cover rail and roads once the full corporatisation of road infrastructure management is completed. Given Uruguay’s relatively small pipeline of infrastructure projects, one economic regulator could cover several sectors.

  • Avoid relying on public private partnerships (PPPs) for infrastructure. Although the country appears to be focusing on PPPs to close the infrastructure gap, private participation should only be considered once proper foundations have been secured. At present, given the lack of a national transport plan, PPPs should only be considered where there is a critical, clear and urgent need. Future infrastructure projects delivered as PPPs need to be aligned with the National Transport Plan.

  • Ensure that decisions to execute a project and decisions on the procurement method are made by separate entities. It is recommended that Uruguay revise the roles of the Ministry of Economy and Finance (MEF) and the Office for Planning and Budget (OPP) in this process and assign responsibility according to the nature of their work and the investment framework currently in place.

  • Ensure PPP projects are part of both the national and sub-national budgets. PPP expenditure should systematically be included in the national budget in the same way as traditional expenditure, so as to avoid implicit bias in procurement decisions. Where PPPs are implemented by a state-owned enterprise and the budgetary framework does not require a detailed budget line for its expenditure, the Central Budget Authority or responsible entity should put in place a reporting and evaluation mechanism, independent of the PPP unit. An independent body should also be in charge of PPP management.

  • Establish clear regulations for PPP contract renegotiation. Uruguay should adopt mandatory guidance, involving detailed descriptions, stating when renegotiations of PPP contracts are allowed and to what extent. Responsibility for the supervision/administration of renegotiations should be devolved to a body seen to be independent (e.g. the competition authority, or supreme audit institution). The substance and economic impact of renegotiations should be made publicly available. Considering the complexity of PPPs, an independent competition/arbitrage committee with specialised staff should be created to resolve any disputes. Alternatively, the competition authority may be tasked with this function.

Insufficient human capital and skills are key obstacles to growth and social inclusion

Inequalities in access to and the poor quality of education, particularly secondary schooling, remain a critical challenge for Uruguay. Uruguay’s basic education provision is good: adult literacy is almost universal and access to pre-primary and primary education is among the highest in Latin America. The educational path, however, tends to get narrower the further students progress through the education system. Attainment and learning outcomes at more advanced levels of education are worrying. As illustrated by the Programme for International Student Assessment (PISA) 2012 results, performance is low (Figure 1.4). Uruguay’s secondary school graduation rate has changed little in the last two decades, and dropout and repetition rates are among the highest in Latin America. A consensus has emerged on the need to improve the provision of Uruguay’s secondary schooling.

Figure 1.4. Repetition rate in lower secondary education, selected PISA economies, 2012
Results based on students’ own responses
picture

Note: Percentage of students reporting that they have repeated a grade once in lower secondary school.

Source: OECD calculations based on PISA 2012 database, Table IV.2.18, http://pisa2012.acer.edu.au/.

 https://doi.org/10.1787/888933329995

Today, the insufficient provision of human capital and skills is considered one of Uruguay’s main obstacles to growth and social inclusion. As Uruguayan exports become more skills-intensive, and the situation of young people not in education, employment or training more critical, the challenge of improving Uruguay’s education and skills systems is more urgent (OECD/CAF/ECLAC, 2014). Various learning outcomes and labour-market indicators stress that improving the quality and relevance of Uruguay’s education system is a priority. Nearly 30% of Uruguayan firms identify an inadequately educated workforce as a major constraint to their activities, compared to only 15% in OECD countries (Melguizo and Perea, 2016). Uruguay’s public expenditure on education is low by OECD standards, and disparities in attainment and performance by socio-economic background are significant. In 2010, only 25% of 15-17 year olds in the lowest-income quintile completed lower secondary education, compared to 85% in the highest quintile (OECD, 2014a). Key weaknesses in several areas of education policy explain the current situation: the variability of student assessment frameworks, the inequality in learning conditions, the lack of proper student support schemes and the low status of the teaching profession.

Public higher education in Uruguay faces similar equity challenges as the rest of the public education system. Access rates are in stark contrast with success rates, especially for disadvantaged students. Ways are needed to create a more supportive academic environment which meets students’ learning needs and is flexible enough to allow for adjustments in their academic career. Learning opportunities could be better tailored to meet with the employment needs and Uruguay’s international integration objectives.

Recommendations: Strengthening education and skills

  • Improve methods for identifying students in need of support. To give every student in the country a fair chance not only of enrolling, but also of graduating, effective support mechanisms are needed. Education authorities need to improve classroom assessments by specifying assessment procedures and creating objective criteria to guide teacher-led assessments. The choice of criteria should allow students’ success or failure to be tracked over time, knowledge and skills gaps to be identified, and the information on success and failure to be communicated clearly to parents and students. The use of assessment results for formative purposes regarding the students should also be encouraged. OECD experience highlights that students’ performance not only indicates individual success or failure, but can also indicate problems and necessary adjustments for the teaching and the learning environment.

  • Combine classroom assessments with external standardised examinations for a fuller picture of students’ needs. The National Learning Assessment administered at the primary level is a good, home-grown example of the information potential of standardised testing built on a rich, externally maintained pool of multiple-choice and open-ended questions, complemented by questionnaires on students’ socio-economic context. Teachers should be encouraged to use the external test for developing their classroom assessments.

  • Improve the conditions for teaching. The importance of teachers in the education process cannot be overstated. It is essential to improve the conditions of the teaching profession by giving teachers in secondary schooling more time and stability with a group of students, primarily by curbing the detrimental practice of teaching multiple shifts in different schools. In this direction, long-term education reforms should develop a realistic plan for scaling-up the full-time school model nationwide.

  • Create incentives for teaching. Current teaching reforms call for a package of measures tailored to the expectations and needs of young teachers without a teaching license, providing them with incentives to obtain one and to stay in the profession. The incentives could be both financial (e.g. a salary premium upon licensing) and other, such as work-time flexibility, a greater degree of autonomy in developing the curriculum, and greater job security. In higher education, promoting student mobility by initiating a revision of the carrera system in favour of a modular approach to study content and awarding credits is recommended to increase responsiveness to student needs. Overall, a more comprehensive assessment of the profession is needed.

  • Increase the autonomy of schools. Standardised international tests suggest that schools with greater autonomy and leadership to adjust curricula and teaching perform better (OECD, 2014b). Experiences from OECD countries also confirm that a certain degree of autonomy to adjust the organisation of instruction time, class composition and teaching can lead to more personalised and effective learning environments which benefit disadvantaged students (OECD, 2012). Strong school leadership can also lead to significant school improvements. Encouraging peer learning among secondary schools on experiences with greater teaching and curricular autonomy could help to set guidelines for balancing student-centred instruction with aligned curricular and assessment practices.

  • Facilitate mobility in higher education. International practice points towards a growing awareness of the benefits of more flexible student pathways and student mobility within and between tertiary institutions. Universities in several OECD countries offer a modular approach in which students can accumulate transferable academic credits for each successfully attended course. Allowing for a certain degree of mobility within tertiary institutions in Uruguay will allow students to change or fine-tune their initial study choices and concentrate on subjects of real interest. Promoting student mobility implies a need to revise the carrera system in favour of a modular approach to study content and award credits.

  • Strengthen support for students in higher education, especially for students’ own initiatives to improve learning. Universities should devote more attention to self-help groups by fostering a stronger connection and better co-ordination between them and the “official” academic world at the National University (UdelaR). Uruguay could recognise these groups as academic instruments and institutionalise them by providing them with content and instructions sanctioned directly by the faculty, and requesting that the faculty take ownership and responsibility for their respective self-help groups.

  • Improve the coherence between secondary and tertiary education levels. The divide between upper secondary and tertiary levels of education means misalignments between their curricula, diverging expectations of schools and universities regarding the preparedness of secondary school graduates and a lack of information in schools about university courses and professional career paths. Transitioning support schemes to reduce the information gap between both levels, and to introduce induction and remedial courses for first year students are recommended.

  • Do more to match higher education provision with employers’ needs. Uruguay’s new Technical University (UTEC) is a key initiative for addressing some of the higher education issues in Uruguay. Ensuring UTEC fulfils its potential will require it to become, from its inception, suitable and attractive for private sector participation (OECD, 2014a; Melguizo and Perea, 2015). UTEC must offer relevant and up-to-date curricula, and promote innovation in the study process, while avoiding emulating the National University (UdelaR) and its research outlet. This can be done by preserving a more technical, labour market-oriented character and formalising arrangements for inter-institutional teacher and student transfers between UTEC and UdelaR.

The synergies between these three policy areas, integration, transport and education and skills, should be exploited. Uruguay’s current constraints to development require specific, closely inter-related policy responses for improvements in the areas of education and infrastructure to best respond to integration challenges. Regarding education, the composition and quality of the country’s human capital will be determinant of its capacity to integrate internationally and develop niches in the service sector. As a key driver of the country’s global value chain participation in services, an adequately trained population, with the necessary language and communication skills, cultural affinity and internationally recognised qualifications will be critical for Uruguay. This requires a whole-of-government framework to strengthen education systems, activate the skills supply and develop relevant skills for the labour market. The emphasis on talent development by the Global Services for Exports Programme is a good example. In a similar manner, infrastructure development will be critical for Uruguay’s trade competitiveness and potential for integration. Uruguay has invested in industrial parks, put in place important logistics infrastructure projects and consolidated a relatively high-quality technological infrastructure. However, transport challenges are limiting its successful insertion into global value chains. Reducing these gaps in education and infrastructure will be an essential step towards the consolidation of a real integration strategy.

References

Ferreira, N. and M. Vaillant (2014), “Uruguay’s trade policy and specialisation over two decades: A gradual and permanent path to trade openness,” background paper, mimeo.

Gallup Organization (2013), Gallup World Monitor (database).

Melguizo, A. and J.R. Perea (2016), “Mind the skills gap! Regional and industry patterns in emerging economies”, OECD Development Centre Working Paper, No. 329, OECD Publishing, Paris.

OECD (2015), FDI Regulatory Restrictiveness Index, www.oecd.org/investment/fdiindex.htm.

OECD (2014a), Multi-dimensional Review of Uruguay: Volume 1. Initial Assessment, OECD Development Pathways, OECD Publishing, https://doi.org/10.1787/9789264209459-en.

OECD (2014b), PISA 2012 Results: What Makes Schools Successful? (Volume IV): Resources, Policies and Practices, PISA, OECD Publishing, Paris, https://doi.org/10.1787/9789264201156-en.

OECD (2013), PISA 2012 Results: What Makes Schools Successful? Resources, Policies and Practices (Volume IV), PISA, OECD Publishing, https://doi.org/10.1787/9789264201156-en.

OECD (2012), Better Skills, Better Jobs, Better Lives: A Strategic Approach to Skills Policies, OECD Publishing, Paris, https://doi.org/10.1787/9789264177338-en.

OECD/CAF/ ECLAC (2015), Latin American Economic Outlook 2016: Towards a New Partnership with China, OECD Publishing, Paris, https://doi.org/10.1787/9789264246218-en.

OECD/CAF/ECLAC (2014), Latin American Economic Outlook 2015: Education, Skills and Innovation for Development, OECD Publishing, Paris, https://doi.org/10.1787/leo-2015-en.

UIS (2015), UIS Data Centre (database), UNESCO Institute for Statistics, http://data.uis.unesco.org/.

UNDP (2015), International Human Development Indicators, (database), United Nations Development Programme, http://hdr.undp.org/en/data.

WEF (2014), World Competitiveness Report 2014-2015, World Economic Forum, Geneva.

World Bank (2015), World Development Indicators (database), Washington, DC, http://data.worldbank.org.