Government Policy for Innovation in Latin America

A review of various innovation indicators for the Latin American and Carribbean countries suggests that these countries are underperforming in a number of dimensions when compared to others with similar levels of GDP per capita, especially in the area of business R&D and the contribution of universities and public research institutions to business innovation. The paper presents the arguments for government intervention in this area and reviews the available policy instruments such as tax credits and subsidies, drawing to some extent on the successful experience of the East Asian Tigers. However, the paper concludes that the current global environment may not be as hospitable as the one in which those countries developed due to the requirements of the TRIPS agreement with respect to patent policy.