Inter-American Dialogue´s Latin American Advisor publication

1. www.thedialogue.org Friday, August 29, 2014
FEATURED Q&A
Will Technology Cities Succeed in Places Such as Ecuador?
QEcuador's government is advanc-ing
plans for a multibillion dollar
planned city known as Yachay, or
the City of Knowledge, in the
north of the country, which will eventually
include a science technology park,
research university and campus for com-panies
to set up offices, in an effort to
diversify the country's economy and
become a leader in innovation and the
information technology industry. Are
planned technology cities, which have
been tried in other nations, a good model
for fostering innovation and economic
development, and do you expect Ecuador's
effort at it to be successful? What are the
pros and cons for Ecuador?
ANathalie Cely, Ecuador's ambas-sador
to the United States:
"Ecuador has built and just
opened the Yachay City of
Knowledge, a futuristic city of education,
innovation, science and technology that
integrates urban centers with Ecuador's
richly biodiverse nature. Ecuador's goal in
Yachay is to create a solid foundation for
the organic growth and development of
private innovation, research and competi-tion.
To achieve this, Yachay offers a wide
range of services, including housing, public
space, national research institutes and top
financial incentives in the region to attract
FDI—such as tax credits for technology
investment and entrepreneurship, business
incubators and accelerators, market inves-tigation
centers, land concessions, compa-ny
support centers and others. Thus far,
Yachay has already attracted a wide range
of leading international high-tech partners
who share our vision, including innovation
centers by Cisco, China Telecom and the
Korea Research Institute of Bioscience and
Biotechnology, coupled with higher educa-tion
partnerships to teach students in the
fields of technology, sciences, engineering,
research, medicine and related fields.
Importantly, Yachay is not an isolated ini-tiative
of the government. Rather, it is one
component of Ecuador's broader
Inside This Issue
BOARD OF ADVISORS
FEATURED Q&A: Will Technology Cities
Succeed in Places Such as Ecuador?................1
Colombia Arrests 32 Politicians
for Alleged Paramilitary Ties ................................2
Mexico Eyes New Airport
to Serve Capital by 2018........................................2
Continued on page 3
IMF Likely to Lower Growth
Estimates for Latin America
The International Monetary Fund is likely
to lower this year's growth estimates for
Latin America, the organization's direc-tor
for the Western Hemisphere,
Alejandro Werner, said Thursday during
a seminar in Santiago. See story on page
2.
File Photo: International Monetary Fund.
IMF May Lower Growth Estimate
for Latin America: Werner ....................................2
Mexico City Mayor Proposes
Minimum Wage Hike..............................................2
Banco do Brasil CEO Paid
$54,000 Fine in 2012: Report..................................3
Diego Arria
Director,
Columbus Group
Genaro Arriagada
Nonresident Senior
Fellow,
Inter-American
Dialogue
Joyce Chang
Global Head of
Emerging Markets
Research, JPMorgan
Chase & Co.
W. Bowman Cutter
Former Partner,
E.M. Warburg
Pincus
Dirk Donath
Senior Partner,
Aimara Capital LLC
Jane Eddy
Managing Director,
Corporate & Govt.
Ratings Group,
Standard & Poor's
Marlene Fernández
Corporate Vice
President for
Government Relations,
Arcos Dorados
Peter Hakim
President Emeritus,
Inter-American
Dialogue
Donna Hrinak
President,
Boeing Brazil
Jon Huenemann
Vice President,
U.S. & Int'l Affairs,
Philip Morris Int'l
James R. Jones
Co-chair,
Manatt Jones
Global Strategies LLC
Craig A. Kelly
Director, Americas
International Gov't
Relations,
Exxon Mobil
John Maisto
Director,
U.S. Education Finance
Group
Nicolás Mariscal
Chairman,
Grupo Marhnos
Thomas F.
McLarty III
President,
McLarty Associates
Carlos Paz-Soldan
Partner,
DTB Associates, LLP
Beatrice Rangel
Director,
AMLA Consulting LLC
José Antonio Ríos
Chief Executive Officer,
Vadium Technology Inc.
Gustavo Roosen
Chairman of the Board,
Envases Venezolanos
Andrés Rozental
President,
Rozental & Asociados
and Senior Fellow,
Brookings Institution
Everett Santos
President,
DALEC LLC
Shelly Shetty
Head, Latin America
Sovereign Ratings,
Fitch Inc.-
Start Content-
Copyright © 2014, Inter-American Dialogue Page 1 of 4

2. Inter-American Dialogue’s Latin America Advisor Friday, August 29, 2014
Political News
Colombia Arrests 32 Politicians
for Alleged Paramilitary Ties
Authorities in Colombia have arrested 32
local political leaders on accusations of
having ties to right-wing paramilitaries,
Agence France-Presse reported Thursday.
Those placed under arrest include cur-rent
and former town mayors, former
town council members, past Senate can-didates
and civic leaders in the Urabá
region in northwestern Colombia.
William Palacio, the mayor of the port
town of Turbo, was among the people
arrested. A source involved in the politi-cians'
prosecution told AFP that confes-sions
from impris-oned
members of
paramilitary groups
led to the issuance
of 50 arrest war-rants.
"The investi-gation
indicates
these people are
linked to the Elmer
Cardenas block,
which was led by
Freddy Rendón
Herrera, alias 'The
German,' " said a
statement from prosecutors. Rendón is
accused in connection with the killings of
4,301 people in massacres that happened
in Urabá in the 1990s and 2000s when
paramilitary groups unleashed a terror
campaign in an effort to intimidate vot-ers.
Approximately 32,000 paramilitary
members disarmed between 2003 and
2006 after reaching deals with the govern-ment
of then-President Álvaro Uribe to
disband. Some 1,700 of the paramilitary
fighters are currently in prison serving up
to eight years under a 2005 law that spec-ified
that prison term for paramilitaries
who confessed to their crimes. Among
them is Rendón, who is to be released this
year. The paramilitary groups originally
formed in the late 1980s to battle
Colombia's left-wing rebels during the
country's decades-long armed conflict.
However, the paramilitaries wound up
forming alliances with politicians and
turning on local residents.
Economic News
Mexico Eyes New Airport
to Serve Capital by 2018
Mexican President Enrique Peña Nieto
will soon announce plans for a new air-port
for Mexico City that would open in
2018, Bloomberg News reported
Thursday, citing three unnamed sources
with direct knowledge of the plan. Peña
Nieto could make the announcement as
soon as Tuesday when he is scheduled to
deliver his state of the nation speech,
according to the sources, who asked not
to be named because the details for the
plan are not yet public. The new airport
would have three runways, one more than
Mexico City's current airport, Benito
Juárez International. Officials have been
discussing for months how to lower air-traffic
congestion in Mexico City,
Bloomberg News reported, adding that a
new airport would likely be the largest
public-works project of Peña Nieto's
administration. Previous estimates have
put the cost of a new Mexico City airport
at 120 billion pesos ($9.2 billion). "The
airport is urgent," Bernardo Velez, an ana-lyst
at the Corporativo brokerage in
Mexico City, told the news service. "It's
very positive that it would only take four
years. That's very quick." The new airport
would be located a few kilometers away
Page 2 of 4
NEWS BRIEFS
IMF May Lower Growth Estimate
for Latin America: Werner
The International Monetary Fund
will likely revise its Latin America
growth forest downward for 2014
amid lower investment and a slow-ing
demand for commodities,
Western Hemisphere Director
Alejandro Werner said Thursday in
Santiago, Reuters reported. The
growth estimates of individual
countries such as Brazil, Chile, Peru,
Argentina and Venezuela will also be
reduced, he added. Werner said the
slowdown is expected to partially
reverse in 2015 and 2016, but that
the region faces a decade of weaker
growth than it saw over the last 10
years.
Mexico City Mayor Proposes
Minimum Wage Hike
Mexico City Mayor Miguel Ángel
Mancera has proposed raising the
country's minimum wage from
67.29 pesos to 82.86 pesos, or from
about $5 to $6 per day, the
Associated Press reported. Mancera
has said that low wages "are at the
heart of all the country's economic
and social problems," but federal
officials have expressed concerns
that a wage increase could drive
inflation. Mexico has the lowest
minimum wage of countries in the
Organization for Economic
Cooperation and Development.
France's Vivendi to Enter
Exclusive Talks With Telefónica
Vivendi said Thursday that it plans
to enter exclusive talks with Spain's
Telefónica about the possible sale of
its Brazilian operator, Global Village
Telecom, or GVT, the Associated
Press reported Thursday. The
announcement came after Telefónica
raised its offer to buy GVT to 7.45
billion euros ($9.82 billion).
Copyright © 2014, Inter-American Dialogue
“ The airport is urgent.”
— Bernardo Velez
Rendón
File Photo: Colombian
Government.
To Our Subscribers
The Latin America Advisor will not be
published Monday, Sept. 1 in observance
of the Labor Day holiday in the United
States. We will resume publication on
Tuesday, Sept. 2.

3. Inter-American Dialogue’s Latin America Advisor Friday, August 29, 2014
from Benito Juárez International and
would eventually force the current air-port
to close, according to two of the
sources, who added that the site of the
new airport, between Mexico City and
Texcoco, would have enough room for an
eventual expansion to six runways.
Mexico City's current airport is Latin
America's busiest in terms of takeoffs and
landings and handled 31.5 million pas-sengers
last year, a record number. Mexico
had planned to build a $3 billion airport
for Mexico City, but abandoned those
plans in 2002 after farmers armed with
machetes protested in an effort to protect
their land.
Company News
Banco do Brasil CEO Paid
$54,000 Fine in 2012: Report
The chief executive officer of Banco do
Brasil, Aldemir Bendine, paid a fine of
122,000 reais ($54,000) in 2012 to Brazil's
tax agency in order to settle a matter
related to his per-sonal
cash holdings,
daily newspaper
Folha de S. Paulo
reported Thursday,
without citing its
sources. Bendine
was fined for failing
to prove the origin
of approximately
280,000 reais in his
annual income tax
filing. The Banco do
Brasil chief 's pur-chase
Bendine
File Photo: Banco do
Brasil.
of an apartment with cash in 2010
was also involved in the matter, the news-paper
reported. Bendine declined to dis-cuss
the situation when asked by Folha.
Banco do Brasil, which is controlled by
Brazil's government, told Bloomberg
News that the matter was dismissed and
that Bendine has no outstanding issues
with tax authorities. Bendine was not
investigated after paying the fine, accord-ing
to the news service. A representative
of Receita Federal, the country's tax
agency, declined a request for comment
from Bloomberg. Bendine has been
Banco do Brasil's CEO since April 2009.
Featured Q&A
Continued from page 1
Knowledge Revolution, which recognizes
the importance of nurturing our most
important resource: our human talent.
Ecuador's economy in recent years has
been among the fastest growing in the
region, but we know that in order to
“ Yachay has already attracted
a wide range of leading
international high-tech
partners who share our vision.”
— Nathalie Cely
maintain our growth and stay competi-tive,
it is essential that we develop the
human talent necessary for the country's
ongoing development. That is why under
the Correa administration we have
increased investment in education more
than the last five governments com-bined.
We have also launched IKIAM, a
groundbreaking new university in the
Amazon that will become one of the
most important living laboratories in the
world. Through these efforts and others,
the government of Ecuador is putting in
place the proper infrastructure to allow
our citizens and the private sector to
continue to grow and flourish."
ACésar Montúfar, former mem-ber
of the Ecuadorean
Congress, president of
Movimiento Concertación, and
director of the Global and Social Studies
program at the Universidad Andina
Simón Bolivar in Quito: "Yachay is based
on the premise of a linear model of sci-ence
and technology innovation. This
model has already been surpassed, but
further, it is incongruent with Ecuador's
possibilities and needs. Given that our
economy is poorly diversified and inte-grated,
with weak linkages and low-tech,
it is nonsense to expect to build, at an
exorbitant cost that would be enough to
finance the entire Ecuadorean university
system, poles of cutting-edge technolog-ical
development that will only deepen a
technological gap in the national pro-duction
system and would not be orient-ed
toward resolving its pressing prob-lems.
The creation of technological clus-ters,
such as Silicon Valley, corresponds
to the needs and conditions of other
societies and is not transplantable. A
replica of that in Urcuquí, as intended
with the Ecuadorean City of Knowledge,
would deepen already-existing problems
and asymmetries, such as the segmenta-tion
of production, poverty, unemploy-ment
and social exclusion. A dynamic,
selective and innovative sector, a real
technological enclave, would be created
while the rest of the economy and socie-ty
remain disconnected and smothered
by an oppressive statism. We should not
be surprised if Yachay is transformed
into another Yasuní and becomes anoth-er
disappointment that will occur at a
very high cost to Ecuadorean universi-ties.
And the government has not
explained why instead of investing in
improving what already exists and rein-forcing
the efforts of many of the coun-try's
universities and polytechnics, it
continues to build white elephants based
on outdated premises."
AJosé Andrade, professor of
civil and mechanical engi-neering
at the California
Institute of Technology and
academic secretary of the Board of
Trustees at Yachay Tech: "The
Ecuadorean model must be a unique
model. While there are other examples of
planned technology cities such as Silicon
Valley, Singapore Science Park and
WISTA in Germany, among others, none
of these clearly fit the Ecuadorean situa-tion.
Yachay City of Knowledge will have
Yachay Tech, a premier research-inten-sive
university, as its heart and to provide
the country and the region with highly
specialized human talent, something that
has never been done before in the coun-try
or the region. Some of the great pros
of this major social experiment are: the
Continued on page 4
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4. Inter-American Dialogue’s Latin America Advisor Friday, August 29, 2014
Featured Q&A
Continued from page 3
country's mega biodiversity, extensive
natural resources (including oil, gas and
minerals), strategic geographic location,
sustained economic growth and political
will. The biggest con is the relative lack of
specialized human talent in the region,
making it very difficult to recruit top
leaders with the right balance of creden-tials
and energy to jump-start the most
ambitious science and technology project
in the region."
ASarah Moser, assistant profes-sor
in the department of geog-raphy
at McGill University:
"The stated goal of Yachay to
become the 'Silicon Valley of Latin
America' is ambitious but not unprece-dented.
For guidance, we can look to
Cyberjaya, Malaysia's high-tech 'knowl-edge
city,' which aspired to be the 'Silicon
Valley of the East.' Started in the 1990s,
Cyberjaya is a master-planned city that
sought to attract global players in the
high-tech industry that would then men-tor
Malaysian companies in the hopes of
fostering a local innovation hub. While
cheap land and other incentives attracted
some global high-tech firms such as Dell,
rather than nurturing Malaysian innova-tion,
Dell and other companies set up
back offices for their global operations.
Today, Cyberjaya is a hub for call centers
and technical support, a far cry from the
initial ambitions of being an Asian peer
of Silicon Valley. Beyond the riskiness of
attempting to engineer the dynamism of
Silicon Valley, I foresee a number of chal-lenges
facing the builders of Yachay. First,
the high cost of building a new city from
scratch may not pay off. Financially
speaking, it may be wiser to invest in
upgrading urban infrastructure in exist-ing
cities. Second, with a national popula-tion
of just 16 million (even less than
Malaysia's 30 million) and Yachay's iso-lated
location in northern Ecuador, the
city is at risk of being too quiet to attract
“ The high cost of building
a new city from scratch
may not pay off.”
— Sarah Moser
high-tech companies and knowledge
economy workers who generally prefer
city living. As we can see in Silicon Valley,
employees of Google and other high-tech
companies increasingly prefer to live in
San Francisco and commute rather than
live in a sleepy suburb near work. The
attraction of an urban lifestyle cannot be
underestimated. If Yachay is to successful-ly
attract long-term residents, it will need
to replicate what people love about cities:
access to good restaurants and street
food, a diverse population, a vibrant arts
scene, nightlife, energetic street life and so
on. Finally, creating new cities from
scratch is an extremely long-term invest-ment
that must weather many election
cycles. Seeing Yachay through to comple-tion
will require convincing Ecuadorean
voters that Yachay will yield tangible ben-efits
to the general population rather than
just to the elite."
The Advisor welcomes reactions to the
Q&A above. Readers can write editor
Gene Kuleta at gkuleta@thedialogue.org
with comments.
Latin America Advisor
is published every business day by the
Inter-American Dialogue, Copyright © 2014
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