Proantioquia: Medellin, Antioquia Must Boost Industrial Specialization, Education, Infrastructure

A new report from Medellin-based think-tank Proantioquia shows that the Medellin metro area and the surrounding Antioquia department must redouble efforts to boost industrial specialization, public education, public health and transport infrastructure in order to meet the challenges of the coming decade.

The report (see: https://www.proantioquia.org.co/wp-content/uploads/2019/07/desafios-y-oportunidades-competitividad.pdf) identifies and examines problems and opportunities in several crucial areas: industrial specialization, people-skills development, environmental protection, economic advancement, specialized education, infrastructure development, public health funding, public security and the “peace process” with guerilla/criminal groups.

As for industrial specialization, the report cites a study by Colombia’s national statistical agency (DANE) indicating that Antioquia had a specialization index rating better than the national average, at 1.07.

But in a separate, related study by Colombia’s national economic planning department (DNP), Antioquia came in eighth place over-all in industrial specialization in 2018 — better than the 10th place showing in 2017, but still below the rankings of Bolívar, Santander, Cauca, Valle del Cauca, Atlantico, Boyaca, and Caldas (see chart, above).

DANE statistics show that 16% of Antioquia’s gross domestic product (“PIB” in Spanish initials) comes from industry – far above the 12% of PIB that industry contributes to Colombia’s economy nationally, the report notes.

Even so, Antioquia lags far behind the 42.7% PIB contributed by industry in China or the 23.4% PIB from industry in Brazil, the report notes.

However, greater promotion of technological innovation could help boost Antioquia’s industrial PIB, the report concludes.

As an example, Medellin’s “Ruta N” technology center could help lead the charge by promoting and sponsoring more high-tech forums such as TEDx Medellin, “Charlas N,” the Start-up Forum and Fair, Innovation Land and others, according to the Proantioquia report.

The Antioquia departmental government and local Chambers of Commerce could help subsidize and organize more such events beyond just Medellin, the report adds.

As for science, technology and innovation (STI) development, the city of Medellin ought to dedicate at least 7% of its annual profits received from public utility EPM for STI partly at Ruta N, according to the report.

Such funds also could go for student scholarships in public schools and local/international university studies, with a special educational focus related to Medellin and Antioquia’s “clusters” of strategic industries including those tied to “global value chains,” according to the report.

Medellin’s strategic clusters today include sustainable energy, fashion/textiles, advanced manufacturing, business tourism, digital businesses, health/medical business and sustainable habitats. Beyond Medellin, Antioquian strategic clusters already include coffee, cacao and dairy products, the report notes.

Infrastucture Deficit: Build More Highways

Recent studies by DANE and Colombia’s private-sector Competitiveness Council show just how far behind Antioquia still remains in building crucial transport networks in and through its mountainous terrain for connection to Atlantic and Pacific ports.

As a result, Antioquia ranks 19th among Colombia’s 26 departments in kilometers of primary highway per 100,000 inhabitants, and 14th in secondary highways per 100,000 inhabitants, the report shows.

A related study by Colombia’s national business trade group ANDI (Association Nacional de Empresarios) shows that Colombia’s industries in interior cities including Medellin and Bogota suffer by paying two-to-four-times as much as neighboring Latin American countries to move standard 40-feet-long containers to and from ocean ports.

What’s more, Antioquia ranks a poor 19th among all Colombian departments in average transport costs to-and-from major ports, or 21% higher cost than the national average, the study shows. Antioquia shipping costs recently averaged about US$34 per ton, or US$1,484 per container, versus just US$13.87 per ton in Boyaca, the report shows.

However, the now-under-construction “fourth generation” (4G) highways including Pacifico 1 & 2, Mar 1 & 2, and “Regional Norte” in Antioquia would dramatically reduce logistical costs, the study notes.

Public Health Cost Problem: Savia Salud

Meanwhile, Antioquia faces another huge cost problem: Savia Salud, Colombia’s single-biggest “mixed” public-private health network, which covers most of the poorest populations.

Savia Salud arose from the bankruptcy and collapse of several other subsidized “EPS” networks, which roughly resemble the “HMO” and “PPO” networks in the USA.

As the report notes, far too many people pay little or nothing for ever-more-complex, ever-more-expensive health services in Antioquia.

Colombia’s national government provides billions of dollars of subsidies for the “subsidized” (poorest) patients and the uninsured, while workers and employers help offset some of these costs in the parallel “contributory” EPS system, the report notes. The governments of Medellin and Antioquia pitch-in with yet more subsidies, while the employer-funded Comfama organization attempts to make-up the rest. But between the three organizations, the subsidies still aren’t enough.

Some sort of “capitalization” scheme (such as a partial sale of stock in Savia Salud to some private health-care company) potentially could ease the fiscal crisis, the report adds. Heftier subsidies from the national government also would help. But Colombia’s national government is already running deeply in the red, making massive increases in subsidies highly unlikely.

On the other hand, pioneering efficiency standards as employed by Sura — Colombia’s leading private-sector EPS — probably could help cut some of the deficit, according to the report.

Savia Salud has more than 2.2 million people in its network in Antioquia, of which 1.56 million are the poorest “subsidized” patients. Too many of these poorer people have chronic illnesses and demand the costliest medicines and costliest procedures, which they can’t afford in the private health networks. In addition, many poorer patients in rural parts of Antioquia (and elsewhere) that lack nearby, high-tech hospitals travel to Medellin where they contribute to chaotic, overcrowded conditions in local public hospitals, the report notes.

During the year 2017, Savia Salud ran-up a COP$175 billion (US$52 million) debt and had an accumulated negative net worth of COP$453 billion (US$134 million), the report noted.

What’s more, the mainly public Savia Salud “mixed” EPS “runs the high risk of politicization and burocratization given that its partners [including public hospitals] have certain [payment] expectations and [treatment] mandates,” the report notes.

“This is what in part is the experience today of Savia Salud, where there’s no co-responsibility” between the EPS network and health-service providers to rationalize care. “The model of the EPS has been distorted by an excess of political influence,” the report adds.

Education, Labor, Broadband Upgrading

On other key fronts, Colombia needs to invest much more in technical and technological education —  if the country ever hopes to compete better with more-advanced nations, the report notes.

Partly because of a history of relatively lower-quality public education — which often doesn’t prepare people sufficiently for today’s higher-tech jobs — about 45% of Colombia’s work force is in the “informal” sector rather than working for modernized companies and corporations, the report notes.

According to a recent report from Colombia’s Private Council on Competitiveness, Colombia needs to make several labor reforms, including:

1. Reduce the costs of certain mandatory, non-wage benefits.
2. Modernize labor codes to enable greater work-standards flexibilities.
3. Reduce the costs of hiring new workers.
4. Broaden the tax base to include more salaried employees, hence making possible more-competitive corporate tax rates.
5. Update the social-security systems for health and pensions.
6. Create incentives for informal businesses to convert to formal, tax-paying businesses.

As for public education programs, Antioquia is lagging behind many of its Colombian departmental neighbors, especially in the crucial “STEM” rankings for competence in science, technology, engineering and mathematics, the report notes.

Meanwhile, just over one-third (34.5%) of Antioquia’s students have access to higher education, according to the report. That puts Antioquia below Risaralda (41% access), Norte de Santander (40%), Boyaca (40%), Quindio (39%) and Atlantico (39%), according to the report.

At the other end of the scale, nations that are members of the Organization for Economic Cooperation and Development (OECD) on average ensure that 73% of students have access to higher education, while Latin America in general has 48% access coverage, according to the report.

For Antioquia to hit the Latin American average, it ought to be offering higher-education coverage to 263,000 students between 17 and 21. But Antioquia was offering such coverage to just over 199,000 students as of 2017, the report shows.

Future development of proposed “digital universities”  would enable more students in rural areas to access university education — and that would help cut Antioquia’s higher-ed coverage gap, the report notes.

Expanding broadband internet access also would boost educational prospects for students throughout the Antioquia department, the report notes.

Current Antioquia broadband penetration is 16.6% of the department’s population, second ranked in all Colombia — and way ahead of the 10% penetration average in all of Latin America, according to the report.

However, more-advanced nations have 35% broadband penetration, while Uruguay, Argentina, Chile and Puerto Rico have broadband penetration rates between 17% and 27%, according to the report.
For Antioquia to reach Uruguay’s broadband penetration, another 780,000 citizens would need connections, while 1.27 million would need to be added to reach advanced-nation levels, according to the report.