Paper short abstract:

We present a working methodology for assessing the potential of different sectors within productive transformation strategies. The methodology aims to improve the effectiveness of industrial strategy by combining geopolitical variables and structural analysis of global value chains.

Paper long abstract:

Productive transformation strategy (a.k.a. industrial policy) is often maligned for 'picking winners' that don't always win. However, while fostering the development of specific industries always carries with it the risk of failure, it is also an indispensable task for countries with an insufficiently strong manufacturing sector. The question is not whether or not the state should 'pick winners', but how to ensure that the approach used to prioritize industries, analyze their potential and strategize their success is as thorough and rigorous as possible. It is from this perspective that we seek to construct a methodology that can serve as a foundation for the design effective industrial strategies in the context of the globalization of production.

Since this is a project that cannot be developed in abstract terms, our efforts have been applied to the case of Ecuador. In this first stage, we use our working methodology to analyze some of the sectors prioritized in Ecuador's 'strategy for productive transformation through government procurement.' We combine structural microeconomic and macroeconomic analysis with geopolitical variables. In other words, we seek to analyze potential prioritized sectors going beyond considerations such as trade complementarity and elasticities to introduce variables like the long-term strategies of global firms and the conflicts between global powers for the definition of standards and other regulatory mechanisms that shape the geography of trade in the long-run.