LA FÁBRICA, a strategy for the economic transformation and social inclusion of Renca, a commune in Chile

Guest blog written by Gabriela Elgueta P 

This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. Participants successfully completed this 10-week online course in July 2020. These are their learning journey stories.

Photograph: Cerro de Renca, Matias Peralta @matias.fpl

In the midst of the pandemic, I began this course when Chile had 300 deaths and 27,219 infections. Today, at the end of this process, I have to regret a total of 7,186 deaths and a total of 321,205 infections, mostly affecting the most vulnerable population, amplifying the effects of the social inequality in which most Chileans live. 

For 10 weeks I have been inserted in a process of combined learning between the conceptualization of economic growth and global trends with the contrasting reality of a vulnerable commune in the metropolitan area of Santiago that was experiencing a triple social crisis: health, social and economic. 

As a reflection of Chile, the metropolitan area of Santiago (RM) is a highly segregated city, both socially and economically, generating a deep inequality in access to public goods and services for the poorest segments of the population, compared to the higher income groups located in the East of the city. 

The commune of Renca, with 147,151 inhabitants, is located in the pericentral area of the city, with a multidimensional poverty of 28% widely exceeding the regional average (14.9%), has a population of low socio-economic level, is part of that city that experiences social exclusion and the consequences of the undesirable outcome, of fragmented planning and unequal public investment, carried out by the State itself, affecting the daily life of its neighbors, in the quality of its infrastructure and its equipment, both public and private. 

At the same time, at the beginning of the course, I was commissioned by the Mayor of Renca to develop a proposal for an economic development strategy for the commune that would consider a short-term reactivation plan and enabling actions for the medium term. In this way, one of the greatest lessons learned from the course has been the possibility of reflecting on and establishing a different way of developing this strategy. 

Often, political times and the daily contingency to which local governments are exposed, demand to be in “mode” of the solutions, however, it is fundamental to understand the complexity of the growth challenges, investing time in better understanding the problem, deconstructing it and identifying the binding constraints. Undoubtedly, the fishbone tool allowed me to visualize a broader framework of the problem and to open multiple conversations with key actors, and it also showed us the enormous gaps in information and robust data for the decision-making process. 

After many iterations and with the exploration of the Atlas of Economic Complexity – where I understood the depth of the stagnation of the Chilean economy – the main problem of Renca’s growth arose: the low productive linkage that the companies of the commune present in relation to the territory they inhabit, generating 100,000 jobs for the region but of low impact for the commune in that the hiring reaches only 14% of renquinos/as1, nevertheless, another learning of LEG, the metaphor of scrabble, the homogeneity and lack of “letters” as a critical challenge to expand the frontier of productivity, is gaining strength

This also means targeting the inequality in productivity among firms, where 32 companies (less than 1%), which contain 80% of the enterprise sales of the commune and 54% of the dependent workers. 

The territorial configuration of Renca and some urban attributes make it distinctive from other poor communes and allow it to dream and project an endogenous development pole that transforms the commune, among them are, its natural geography, its privileged location adjacent to the political center of Santiago, its connectivity by highways, its strong historical identity and its high concentration of companies and industries. 

In this context, the economic development strategy must take advantage of its attributes and human capital to boost the entrepreneurial ecosystem. Precisely, the elements of the past, whose urbanization marked by the presence of the railroad around which, industries and houses were installed, today constitute again its narrative of future, as the main engines of economic reactivation: industries committed to the territory and the new mega infrastructures such as the subway and the train that will arrive in the next 7 years. 

Considering the social complexity of Renca caused not only by the pandemic, I have been experimenting with the approach called problem-driven iterative adaptation (PDIA), because we are in a context of constant change, where national and local political authorities such as the Mayor and the Municipal Council are pressured by social, business and political actors, to consider social relief and economic recovery measures for the neighbors. 

A multidisciplinary team was established to develop a growth strategy to transform the social and economic reality of Renca, as well as in the short term we already have a preliminary plan for post-pandemic recovery, which has not been exempt of differences within the team, because considering a development strategy for a commune with high levels of poverty, is a difficult and risky promise, if it is driven by a single agent, in this case the Municipality. It will be imperative to generate public-private partnerships to implement the plan. 

Part of the understanding, at the end of the course, has been to be able to break down complex economic ideas, analyze them, and synthesize them with territorial relevance, moving from the national and regional macroeconomic level to the reality of local management

During the process of ideation of the strategy, the question also arose on how the local institutionality would be organized to concretize the reactivation plan and be ready at the moment in which the national government announces lines of fiscal financing, constituting a team of public multiagents, led by the Corporation of Economic Development and Innovation. 

After several collective and bilateral meetings with the different areas of the municipality such as public works, economic development, taxes and innovation, today we have an economic recovery plan, whose focus, in the short term will be the creation of jobs and income generation for micro enterprises. 

Furthermore, in parallel to this process and based on the dialogue with actors other than the business sector, NGOs, academia and social leaders, we have reconsidered the role that the Economic Development Corporation should play, which was created for public-private articulation. 

In this way, we reorganized our organizational structure to create greater public value for Renca. Thus, in these 10 weeks, together with an economic reactivation plan, we also have an institutionality re-thought in function of the strategy of social and economic transformation of the commune that, provides greater prosperity to the Renca people, that can be replicated in other communes of the region: LA FÁBRICA. 

LA FÁBRICA as the “public-private-social agency”, which represents “the voice of the voiceless”, of the excluded, mediating the regional and national government in the generation of public offerings relevant to the development gaps that that particular community has. We will create a multi-stakeholder advisory council, community and noncommunity, to guide the strategy and help mobilize resources for its financial sustainability. In this way, “La Fábrica” will be a citizen entity, connected to the territorial and economic challenges of Renca. 

I would not like to end without referring to the current situation in the world, in Latin America and Chile, of the discussion on the scandalous inequality that affects so many people and that the pandemic has shown us in the levels of informality in the labour market, the lack of access to health systems, the low coverage of social protection systems and the poor quality of housing infrastructure, which is even more acute in populations that are also excluded due to racial, religious, ethnic or gender issues. 

Growth with inclusion will be the hallmark of many governments in the world who in the coming months will face great levels of poverty, regressing in the levels of development achieved, which today we see the fragility that they hid and their lack of resilience to face a shock like the one we are living. 

A pending subject, which in my opinion would further enrich this course, would be the incorporation of governance models in the management of metropolitan areas, considering the high levels of urbanization of cities, where for the first time in human history there are more people living there than in rural areas. Analyzing, its effects on productivity and on the generation of potential growth opportunities for the economy and the well-being of people. 

I close as I began, from a small commune in Santiago, with the conviction that we can change our reality and diminish the inequality that causes so much frustration in its inhabitants, excluded from development opportunities and living in that country and city of averages, that of the 2 Chiles and the 2 Santiagos

As the anti-poet Chilean said, Nicanor Parra, which describes inequality, as follows and let me put it in Spanish: 

“Hay dos panes. Usted se come dos. Yo ninguno. Consumo promedio: un pan por persona” 

Fishbone diagram Growth Economic Problem-Renca 

To learn more about Leading Economic Growth (LEG) watch the faculty video, and visit the course website.

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