Piero Ghezzi, former Minister of Peru, in his presentation for the 20th TCI Global Conference: Mesas ejecutivas in Peru: a tool for productive Development Policies

1. MESAS EJECUTIVAS IN PERU
A Tool for Productive
Development Policies
Piero Ghezzi, Former Minister of Production of Peru

2. MESAS EJECUTIVAS IN PERU
A Tool for Productive Development Policies
2
Piero Ghezzi, Former Minister of Production of Peru
Bogota, 9 November 2017

3. Development has equaled industrialization
Source: Kennedy (1989) & The Groningen Growth & Development Centre (2017). Author’s Elaboration.
0
5
10
15
20
25
30
35
40
UK USA Germany Japan Korea China
ManufacturingshareofGDP%
Beginning of
Industrialization
0
5
10
15
20
25
30
35
40
UK USA Germany Japan Korea China
ManufacturingshareofGDP%
Beginning of
Industrialization
Peak of
Industrialization

4. Manufacturing: the “growth escalator”
• It offered significant advantages:
High and growing productivity (unconditional
convergence)
Large employment generation for unskilled labor
Not limited by domestic market size
Generation of “capacities”
4

5. Quickest way to boost productivity :
structural transformation

6. Structural Transformation has been a strong
contributor to productivity growth…
Source: McMillan, Rodrik & Spúlveda (2016) and Rodrik & McMillan (2011). Author’s Elaboration.
…but its contribution has now declined
-3 -2 -1 0 1 2 3 4 5
India (90 - 99)
Brazil (65 - 79)
Botswana (70-80)
Latin America (50 - 75)
Korea (70 - 90)
Vietnam (90-00)
Contribution to productivity growth (pp)
-3 -2 -1 0 1 2 3 4 5
India (90 - 99)
India (00 - 04)
Brazil (65-79)
Brazil (90 - 05)
Botswana (70-80)
Botswana (00 - 10)
Latin America (50 - 75)
Latin America (90 - 05)
Korea (70 - 90)
Korea (95 - 10)
Vietnam (90 - 00)
Vietnam (00 - 08)
Contribution to productivity growth (pp)
Early Period Late period

7. What explains this decreased contribution?
Premature deindustrialization
Labor-saving technological change
Late industrializers can´t compete on low
wages
But we may not know the complete answer yet
7

8. In general, EM productivity growth has declined
Source: Conference Board, FMI – WEO (abril 2016).
2.00
0.40
1.10
0.20
0.00
0.20
0.00
0.50
1.00
1.50
2.00
2.50
EMERGING ECONOMIES ADVANCED ECONOMIES WORLD
TOTALTFP
2003 - 2010 2011 - 2014
-1.8 pp.
-0.9 pp.
-0.4 pp.

9. How are we going to “replace”
manufacturing as the growth escalator?
Multiple sectors (in addition to manufacturing)
with manufacturing-like characteristics
To increase productivity within each sector
9

10. Traditional agriculture
1. Very limited use of
technology
2. Tillage/plowing (soil
erosion)
3. Low (and stagnant)
productivity
4. Repetitive tasks not used
elsewhere
5. Very vulnerable

11. Absolute control of all phases of the productive process to reduce uncertainty
and maximize efficiency gains
Modern agriculture
Before planting Pre-harvest Post-harvest
Absolute control of all phases of the productive
process to reduce uncertainty and maximize
efficiency gains

12. Before planting
1. Adaptation of best seeds
to local conditions
2. Use of germplasm bank
for cloning the best
3. Large scale nurseries of
seedlings
4. Genome editing
5. Development of
organisms for biological
control of pests

13. Absolute control of all phases of the productive process to reduce uncertainty
and maximize efficiency gains
Modern agriculture
Before planting Pre-harvest Post-harvest

14. Pre-harvest
1. Sensors info to optimize
fertilizers, water and
pesticides (or organisms
for biological pest
control) per parcel
2. Optimal density of
planting (multispectral
analysis)
3. 24/7 monitoring
4. Very high productivity

15. Absolute control of all phases of the productive process to reduce uncertainty and
maximize efficiency gains
Modern agriculture
Before planting Pre-harvest Post-harvest

16. Post-harvest
1. Machine learning for
sorting products
2. Immediate cooling
3. Maximization of shelf-
life of products

17. “ Farms are becoming like factories: tightly
controlled operations for turning out reliable
products, immune as far as possible from
vagaries of nature “ (The Economist, June 2016)

18. Not only farms are becoming like factories:
Modern Livestock Raising
Modern Aquaculture
Mining
Knowledge Intensive Business Services, etc.
• WHAT you produce may be less important than
HOW you produce it
18

19. Objetive: maximize productivity of ALL sectors
• Need to Identify and remove constraints to the
productivity growth of all sectors. This is precisely what
Productive Development Policies are about.
• Not easy. Increased uncertainty/fast-paced technological
change. Higher International Standards (environmental,
labor, phytosanitary, etc.)
• Multiple public and private actors need to cooperate to
solve coordination failures
• This process of cooperation needs to be institutionalized
19

20. Public sector stakeholders
Private sector stakeholders
Public – public
coordination
problems
Private - private
coordination
problems
Public - private
coordination
problems
Which coordination failures?

21. Mesas Ejecutivas
21

22. What is a Mesa Ejecutiva (ME)?
A ME is a tool designed in Perú to implement more effectively PDPs.
 It is a public-private working group that….
 …identifies and removes the bottlenecks that affect the productivity
of a sector (forestry, tourism, agro-export, etc.) or factor (logistics,
capital markets, transit, etc.)
It focuses on implementation and on the specifics. Not on general
discussions.
It includes key public and private stakeholders around sector/factor.
It does not replace ministries or public agencies. It works with them.
22

23. Who participates in a ME?
Ground
level body
High level
body
- Private sector stakeholders
- Public sector stakeholders
- A dedicated team that
coordinates the ME
MORE CONTEXTUAL KNOWLEDGE
- Ministers and above (can´t
be just one minister)
MORE CONVENING AND
COORDINATING CAPACITIES
THEY COMPLEMENT
EACH OTHER

24. Types of MEs Meetings
Periodic Sessions: regular meetings where
representatives of GLB of the ME participate and where
progress is presented. High periodicity (weekly or
biweekly) works as pressure mechanism.
Inter-sessional Meetings: smaller (bilateral or
multilateral) meetings in which solutions to problems
identified during regular sessions are implemented.
Could include HLB.
Dedicated team makes sure there is continuous progress
24

25. What does government provide in a ME?
 Government, with respect to the private sector,
differentiates between MPs (“my problems”) and YPs
(“your problems” ):
 MPs are related to the public goods and services that
government must provide as inputs for private
production.
 YPs are things that private sector needs to do to be
competitive.
 ME should provide only MPs
25

26. What does government provide in a ME? (II)
 MEs help government to align its supply of public goods and
services (MPs). For example:
 Reduction of red tape (norms and implementation)
 Regulation that is adequate to productive reality of the sector
 Fill in loopholes
 Help complying with technical requirements for new export
markets
 Complementary public sector interventions.
 Creation of new public entities (and/or improve existing ones)
 Public infrastructure suited to productive needs of the sector.
 Incentives to promote innovation suitable to the sector
 Design of sector-specific training programs
26

27. Public sector stakeholders
Private sector stakeholders
Public – public
coordination
problems
Private - private
coordination
problems
Public - private
coordination
problems
How do MEs help with coordination failures?

28. Public sector
Private sector

29. Steps to launch a ME
Define a sector
/ factor
candidate
Decide if ME
is feasible
Launch ME
No ME (not yet)
- As narrow as
necessary (i.e.
common problems)
but as broad as
possible (i.e. move
the needle)
- Is the private sector
self-organized
- Commitment to
participate in ME?
- Does it involve several
public entities?
Yes
No

30. Steps to start operating a ME
1. Set a LT
objective and
generate initial
list of problem/
solutions
2. Chose 3 or
4 problems
and start to
solve them
4. Solve other
problems and
incorporate
new
Elevate to high
level bodyIf process
hits a wall
- Budget allocation
- Dispute resolution
- Regulation
- Convening other
actors

31. In public policy sometimes we think we
did our job because:
We passed a law, enacted a regulation, produced
new guidelines, etc.
We created a new public sector institution
We launched a program
We allocated budget to achieve a given objective
We copied international “best practices”
31

32. But are we having an impact on the ground?
Very often we are not
We need to see where, in the whole chain, the
process breaks
Are the norms adequate?
Are they being implemented correctly?
Or even being implemented at all?
 Is money allocated being spent? And well?
Are “best practices” really adequate to local reality?
Frequent ME sessions allows to “keep us
honest”. And make adjustments/corrections.
32

33. Mesas Ejecutivas: Experience in Peru
33

34. MEs in Peru
• The Ministry of Production of Peru created 8 MEs in 2015-16
• Forestry
• Aquaculture
• Creative Industries
• Textile
• Gastrononomical
• Agroexports
• Logistics
• High-Impact Enterpreneurship
• New government initially discontinued MEs but has relaunched
them due to private sector demand
• It shows the importance of “getting things done” for continuity
34
Sectorial
Transversal

35. Example 1: Forestry Mesa Ejecutiva (I)
• The sector has two subsectors: Forest plantations and Forest
concessions in the Amazon jungle
• There are 10 to 12 million hectares in the Amazon jungle ready for
forest concessions. It is high quality wood
• Also, in the jungle there are approximately 4 millions Has. ready for
reforestation. Inexpensive land, abundant sunshine and rainfall, and
privileged topography.
• But sector has not lived up to its potential:
• Less than 2 million has. of the Amazon Forest are utilized in
concessions. And less than 40k has. have been reforested (for a
commercial/industrial use)
• Peru´s forestry exports: stagnant in the last 10 years
35
0 10 20 30 40 50
Clonal Plantations Peru and Brazil
Peru
Brazil
Uruguay
New Zealand
Mexico
Chile
Argentina
South Africa
Australia
USA
Canada
Finland
Sweden
m3 / ha / year
VOLUME INCREASES IN FORESTRY PLANTATIONS

36. 0
200
400
600
800
1000
1200
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
MillionsUSD
Peru´s Forest Exports and Imports 1992-
2016
Exports Imports

37. 0
1000
2000
3000
4000
5000
6000
7000
1992
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Millions
Forestry Sector: Peru vs Chile exports
Peru Chile

38. Example 1: Forestry Mesa Ejecutiva (II)
• First phase of Forestry ME operated from Dec 2014 until
July 2016
• It included 6 Ministries, other 4 public entities and private
sector.
• New government stopped ME but it was re-launched on
Feb. 2017
• It included more actors: regional/local authorities and
small producers (represented by the recently created
CONAFOR-Peru)
• For the first time, forestry´s full potential is understood.
38

39. Forestry ME: All Actors Improve
• Public sector entities are “forced” to coordinate. Likewise different
levels of government (national/regional/local) have to coordinate
• Government entities started to learn how the forestry sector really
functions
• It has generated institutional memory. It reduced the impact of
“turbulence” resulting from government change
• Private sector starts to understand how public sector works
• It promotes associativity. Example, creation of CONAFOR-Peru (entity
that includes 16 regional small business associations)
• Private banks have started to focus on the sector. First loans ever
39

40. Before After
Forestry plantations not recognized as different
from forest concessions in the Amazon Jungle
New Law and Regulation (led by ME) recognizes
plantation trees as crops
No financing for the sector (particularly
plantations). Banking system did not know the
sector.
Creation of new fund. Approximately S/.120
million of new loans through banking system.
Production can be used as collateral
It took up to 8 months to obtain a permit to
extract wood from plantations No permit is now required
It took up to a year to register a plantation
property It takes 3 days to register plantation properties
Forestry ME: Key Achievements (Plantations)
40
No interest in forest plantations by foreign
investors
Some of the largest global forest funds are
coming. Launching of local forest funds

41. Before After
OSINFOR, national Entity in charge of
supervision, did not trust plans approved by
regional authorities: uncertainty for investors
OSINFOR has now accepted to accompany
regional authorities in early inspections (and
approvals). Budget is being allocated to
strengthen implementation
For 15 years there were no new concessions in
the Amazon Jungle
2 Million Hectares recently concessioned by
Ucayali and Loreto
Entities at different government levels (national,
regional and local) had different standards about
timber resources.
New Protocol with the same standards at
different levels of government has been
approved. It is now being utilized.
No guidelines reflecting productive reality of the
sector
12 new guidelines have been isused and have
been implemented
Forestry ME: Key Achievements (Concessions)
41
No traceability system. 25% of trees reported in
the operating plans did not actually exist
Significant improvements in traceability system.
Percentage has fallen to 10%.

42. Example 2: Agroexports Mesa Ejecutiva
• Peruvian agro-exports have grown from USD400 millions to USD
4,800 millions in the last 15 years.
• Continued high growth will require government support in
research (INIA), access to new export markets (SENASA) and
infrastructure (MTC)
• The Agro-export ME is made up by 5 Ministries, other public
entities and representatives of the private sector.
• The Agro-export ME worked in the Ministry of Production in
2016. Re-launched by the Ministry of Agriculture on May 2017.
42

43. Before After
Identification of products prioritized for the
opening of new export markets was in charge
only of SENASA (Agricultural Health Authority)
There is now a list (agreed in the ME by public
and private stakeholder) about the products
prioritized.
The agricultural Research Institute (INIA) had a
research agenda divorced from private sector
demand/information
Private and public participants of the ME have
agreed on the list of products to be investigated
in 2017 and 2018.
Restrictions to the chocolate and cocoa Peruvian
exports to the European Union because of the
presence of heavy metals (Cadmium)
National Plan for the Reduction of Heavy Metal
Pollution in the Productive Value Chain of Cocoa
– Chocolate
It is difficult to import genetic material Simplification of the management of genetic
material (because INIA is able to import it for
short periods). Priority list has been generated.
Agroexports ME: Key Achievements
43
The functional, technical and managerial
structure of SENASA is outdated. Draft bill to
strengthen it had been dormant for years
The ME/SENASA have finalized bill. It is now
being presented to Congress.

44. Example 3: Aquaculture Mesa Ejecutiva
• Peru has likely comparative advantages in Aquaculture due to
sunshine, cheap energy, extensive sea (and water abundance in the
jungle).
• Our largest shrimp producers are already getting (in intensive
ponds) TM100 per ha/year, by far the highest in the world
• Despite growth in previous years, aquaculture exports are still
small (USD270 mln). Ecuador, with very similar underlying
conditions, exports 10 times that amount.
• Aquaculture ME started operating on May 2015 until July 2016 .
The ME was made up by two Ministries, other public entities and
representatives of the private sector.
• It was relaunched in September by Ministry of Finance.
44

45. Before After
Many of the pre-requisites for aquaculture
operations were related to extractive fishing
No longer. All extractive fishing pre-requisites
have been eliminated
Triplicity (or more) of requirement by different
Government Agencies (Produce, OEFA, Sanipes)
They have been eliminated
It took up to 2 years to obtain an aquaculture
concession
It now takes 6 months
No National Fisheries Health Agency. There was a
low level direction in one government agency
Sanipes (the National Fisheries health agency)
was created in Nov 2015. Thanks to ME “it hit
the ground running”, including opening of
operations across the country
Aquaculture ME : Key Achievements
45
It was not possible to export shrimp to China Chinese markets has now been opened and first
exports within 6 months
An outdated regulation that had the same
requisites to export all products to all countries
Regulation tailor made to each product and
country. Significant reduction of requirements
Exports of scallops to EU were in danger partly
because of inadequate equipment
New equipment (MASA MASA) with much
quicker and accurate results was acquired.
Scallop exports to EU now ok.

46. 46
Example 4: Logistics ME
This resulted in:
• Additional charges by APMT.
• Increase of the freight of the ships,
by the delay of the stay of the ships.
• Increase in the cost of renting the
trucks and the waiting time of these
• Truck drivers exposure to citizen
insecurity while awaiting their
attention on the street.
• Low competitiveness of Callao port in
relation to other ports in the region.
PROBLEM OF ENTRY TO CALLAO PORT
The admission to the port concessioned to APM Terminals took between 5 to 6 hours.
Significant vehicular congestion outside the port

47. 47
One example of solving coordination issues: Logistics ME
ACTION TAKEN
. The Road Reordering Pilot Project was implemented to eliminate congestion of heavy
vehicles in the avenues close to the port.
• The Plan was promoted by a working group led by the National Port Authority (APN)
and made up of MININTER, PROVÍAS, UNT, PNP and MPC.
• It allowed the use of 3 lanes of entrance in the avenue Manco Capac.
• PROVIAS reprogrammed ill-calibrated traffic lights
• MININTER with the Transit Police established, in order to facilitate the flow of traffic, 3
control points, in:
I. Crossing Contralmirante Mora avenue with Atalaya,
II. Atalaya with Guardia Chalaca and,
III. In Manco Cápac avenue.
• APN created a WhatsApp group for urgent communications between members of the
ME, with the aim of quickly solving traffic problems
• The private sector (ASPPOR) has instructed its drivers regarding the Pilot Plan.

48. 48

49. 49
The results of coordinating:
Waiting time declined to less than 2 hours.

50. Less important / effective More important/effective
Did you pick the very best industries based on
comparative advantage, cluster centrality,
growth, or other technical metrics?
To have a commited group of people from both
the public and private sector.
Big-bang approach launching a large number of
Mesas Ejecutivas
To start slowly and accumulate “know how”.
Over time increase number of MEs. Sequential
Priorization.
Provide MEs with big budgets To have an effective ME dedicated team that
make things happen.
Long periods of consultation and study with the
private sector, thorough analyses, long reports,
etc.
To start solving 3 or 4 problems from the very
beginning to create “momentum”
Lessons from MEs
50
To have a clear road map from the outset that
simply has to be implemented (linear approach)
To start implementing and rapidly learn what
works and what does not, iterate, and improve
(recursive approach)

51. Other Lessons from MEs
 ME sessions need to have a clear periodicity. Weekly or biweekly
periodicity appears to be ideal to keep constant pressure to deliver.
 To have a dedicated team that makes sure there is continuous progress is
probably the most important determinant of success of MEs as a tool.
 It is important to secure that the public sector participants “own the
achievements” of the ME.
 Important to maintain the discipline of focusing on measures that increase
productivity. Deprioritize exemptions that, instead, compensate for low
productivity.
 Due to the mistrust that exists in society regarding public-private dialogue,
transparency is fundamental.
 MEs must receive support from the very top of the government.
Otherwise they will hit a wall. However, it is not an absolute necessity to
have them depending from the President or Primer Minister
51

52. Some additional points
 MEs are an invaluable tool for transparently obtaining information
from the productive private sector.
 MEs are very labor intensive. But the cumulative effect of many
"small" measures is often greater than that of a major reform.
 The MEs in Peru have solved many problems in the productive sectors.
That is important. But more importantly, the MEs have allowed to
learn how to identify and solve problems.
 There are not many successful and proven PDPs tools. The MEs are.
They could be progressively extended (on issues beyond PDPs) to the
entire State, which should be working with a “ME chip”
 Clear and stable rules are very important, but in a period of high
uncertainty and fast technological change, public policies may require
an iterative approach with continuous learning
52

53. MESAS EJECUTIVAS IN PERU
A Tool for Productive Development Policies
53
Piero Ghezzi, Former Minister of Production of Peru
Bogota, 9 November 2017