Andres Velasco writes: Productivity has been stagnant in Latin America for a half century.

What is to be done? The conventional prescription includes improving education (especially the technical kind), modernizing labor markets, reducing bureaucratic red tape, and facilitating foreign investment and technology transfer. To this standard tool kit the Inter-American Development Bank (IADB) now adds PDPs, which can be “horizontal” or “vertical.”

Horizontal policies are relatively uncontroversial.  But they have problems.  Rebuilding infrastructure may provide engineers who can build a road over a mountain but are not expert in a superhighway.  A lab built to certify beef can’t pass on fruit and vegetables.

This is where the controversial vertical policies come in.  But if you pick an industry to support, you are not just picking winners, you are making them.  This may be necessary, but it is important to insure transparency and to provide checks and balances.