Fragile Governance and Local Economic Development

Theory and Evidence from Peripheral Regions in Latin America

Sergio Montero, Karen Chapple

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9780367665821
• eBook ISBN: 9781351589437
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Much of our understanding of local economic development is based on large urban agglomerations as nodes of innovation and competitive advantage, connecting territories to global value chains. However, this framework cannot so easily be applied to peripheral regions and secondary cities in either the Global South or the North.

This book proposes an alternative way of looking at local economic development based on the idea of fragile governance and three variables: associations and networks; learning processes; and leadership and conflict management in six Latin American peripheral regions. The case studies illustrate the challenges of governance in small and intermediate cities in Latin America, and showcase strategies that are being used to achieve a more resilient and territorial vision of local economic development.

This book will be of interest to students and researchers of local economic development, urban and regional studies, and political economy in Latin America as well as to policy-makers and practitioners interested in local and regional economic development policy.

1 Peripheral regions, fragile governance

Local economic development from Latin America

Sergio Montero and Karen Chapple

In 2015, the Brookings Institution published a report that identified and listed the three hundred largest metropolitan economies of the world. The front page was a world map with three hundred bubbles that showed how economic wealth concentrated not only in certain countries but specifically in particular metropolitan regions within those countries. With only 20 percent of the population and less than 2 percent of the planet surface, these bubbles accounted for nearly half of the world’s gross domestic product (Brookings Institution 2015).

Uneven development across regions, particularly the higher rates of economic growth in large urban regions compared with smaller cities and rural regions, has for a long time caught the attention of researchers and policy makers interested in local and regional development (Friedmann 1986; Hirschman 1958; Saxenian 1996; Storper and Walker 1989). Interestingly, the last few decades of globalization have heightened this dynamic. Since the 1990s, economists, geographers, and planners have repeatedly shown that despite the technological and transportation advances of the last decades that have significantly decreased the costs of moving information and goods around the world, firms still tend to cluster in large urban regions seeking the benefits of agglomeration economies (Krugman 1991; Porter 1998), dense labor networks (Saxenian 1996) and favorable local and regional institutional contexts (Amin 1999). However, this rediscovery of cities and regions as important sources of competitive advantage in the context of globalization draws mostly from studies of successful and highly dynamic large urban agglomerations (Amin 1999) or what Scott and Storper (2003) have called global city-regions.

In contrast to the burgeoning literature on large cities and global city-regions, the economic potential of cities and regions outside large metropolitan regions has caught the attention of fewer urban and regional researchers in the Anglophone world, apart from a plethora of cluster studies (Bell and Jayne 2009; Clancey 2004; Ketels 2013). While the literature on the Third Italy sparked interesting debates during the 1980s and 1990s on the economic development possibilities of smaller cities through small enterprise spatial systems (Bagnasco and Messori 1975; Bagnasco 1977), studies of innovation hubs, and how other cities can – or cannot – become the next Silicon Valley, have dominated recent local and regional economic development debates as well as the aspirations of urban policy makers (Bresnahan, Gambardella, and Saxenian 2001; Florida 2002; Parthasarathy 2004; Piscione 2013). In this context, ideas such as public–private collaboration, brain circulation, information spillovers, and global value chains have captured the imagination of many academics and policy makers of cities of both the global North and South, in the hopes of achieving global city-region status (Keating 2001; Stren 2001; Montero 2009; Saxenian 2007; Storper 2013).

We see this not only as a worrying gap in the literature but also as a problem for practitioners in small and intermediate cities. Theories and strategies that seek to support the ascent of global city-regions, such as export zones, high-tech clusters, and business and talent attraction, do not transfer well to the economic development reality of smaller cities and peripheral regions, where local officials are learning new administrative responsibilities and experimenting with policy models to promote economic development. As they strive to diversify their economic base in the face of youth migration to large urban centers, to improve public–private synergies in the context of low levels of trust and a weak private sector, or to manage the environmental consequences of extractive industries, these regional planners find little of relevance in the dominant theoretical and policy approaches to promote local economic development. Instead, stakeholders must develop new ways of organizing themselves, expanding networks and learning processes, and achieving more sustainable and endogenous development (Camagni 1991; Davoudi et al. 2008; Morgan 1997; Teitz 1993). While recent theoretical frameworks to study local econonomic development have tended to overrepresent the urban and regional dynamics of large cities of the global North (Robinson 2002; Roy 2009), it is imperative to better conceptualize the challenges of smaller cities in either the North or the South, which are following different development trajectories and modes of insertion to the global economy while still subject to all the forces of globalization, financialization, and planetary urbanization that affect large urban agglomerations (Soja and Kanai 2007; Brenner and Schmid 2013). Similarly, the vast empirical experience on the failure of “one-size-fits-all” regional development policies (Pike, Rodríguez-Pose, and Tomaney 2006), or what Chien (2008) has called “isomorphic approach to development,” require a renewed place-based approach to local economic development theory and practice that emphasize institutional diversity as well as a detailed attention to the “soft” or informal institutional aspects that make places different from each other (Barca, McCann, and Rodríguez-Pose 2012; CAF 2010). This book seeks to address this gap in theory and practice by analyzing how six peripheral cities and regions in Latin America – Arauco, Chile; Córdoba, Argentina; Mompox, Colombia; Espíritu Santo, Brazil; Lurín, Peru; and Quetzaltenango, Guatemala (see Figure 1.1) – are experimenting with different governance mechanisms to promote local economic development.

Figure 1.1 Location of case studies

Developing new theories and policy strategies that fit better with the challenges of small and intermediate cities in Latin America is important at the moment for several reasons. First, intermediate cities in Latin America are projected to grow rapidly in the coming decades (Dobbs et al. 2012). Recent Latin American studies show that the population growth of the largest cities in the region is stabilizing (Dureau et al. 2015), while intermediate cities continue to grow (Roberts 2015; Sassone 2000), thus diminishing the urban primacy of capital cities that has characterized the region during most of the twentieth century (Cuervo González 2010).

Second, small and intermediate cities are important not only because of their population growth but also because of the role these cities play in connecting the most peripheral, and often poorest, regions of a country (Frick and Rodríguez-Pose 2017). Recent studies have argued that in developing countries, poverty is more widespread and deeper in small cities and rural areas than in large cities (Ferré, Ferreira, and Lanjouw 2012). Latin America, the most unequal region in the world, is no exception, and its rural areas and smaller cities have lower income levels, less sectoral diversification, and fewer job opportunities than large urban centers, causing the outmigration of much of their youth workforce (Aide and Grau 2004; CEPAL 2010). In addition, the presence of armed conflict and violent land appropriation in rural areas in some Latin American countries (Ibáñez and Vélez 2008) has triggered significant rural–urban migrations within the country or to Europe and North America. Reviving an earlier argument that small and intermediate cities represent the “economic heart” of many rural areas of Latin America (Hardoy and Satterthwaite 1986), Berdegué et al. (2015) have shown that the presence of small and intermediate cities in Chile and Colombia can explain decreases in poverty in peripheral and rural regions.

Third, several researchers in the Spanish-speaking world have argued that the increasing role of informal institutions and networks in the context of globalization brings new possibilities for local and regional development for small and intermediate cities (Méndez, Michelini, and Romero 2006; Michelini and Davies 2009; Vázquez Barquero 2010). And yet, while many smaller cities are developing their own vibrant local economies, little infrastructure exists to support entry in the twenty-first-century economy. Not only do many peripheral regions lack transportation and communications networks, they also lack the “soft” infrastructure that enables governance and institutional assets (Rodríguez-Pose 2013; CAF 2010).

Finally, the last few decades of government decentralization in Latin America are enabling the emergence and consolidation of local and regional institutions, but not all regions are successfully building the capacity to govern their own economic development (Montero 2015). A “quiet revolution” (Campbell 2003) of government decentralization from the national to the subnational level has taken place in Latin America since the 1990s (Falleti 2010; Montero and Samuels 2004). This meant not just political and fiscal decentralization, but also administrative decentralization, which has forced localities to develop capacities for policy making, even when new local and regional institutions were still quite fragile (Wilson et al. 2008). In this context, public officials, sometimes working with nongovernmental organizations (NGOs) and the private sector, have experimented with a variety of practices to help localities develop new capacities to participate in markets (Post 2014). The new role for the subnational scales of governance in the formulation and implementation of public policies and planning has empowered smaller cities in Latin America even if their institutional capacities and governance structures were often fragile compared with capital cities and large urban centers (Chapple and Montero 2016; Grindle 2007). While flirting with the dominant menu of policies – providing direct assistance to businesses, supporting clusters, connecting to global value chains – localities, and particularly small and intermediate cities, have become aware of the critical need to strengthen territorial governance so that local and regional development policies can be effective (Daughters 2012; Barca et al. 2012).

Peripheral regions, fragile governance

There are two important categories of analysis that we introduce in this book to examine local economic development processes: peripheral regions and fragile governance. Many authors interested in studying smaller cities, in Latin America (Jordan and Simioni 1998) and elsewhere (Lang et al. 2015), have argued that giving a universal definition of what constitutes a small or an intermediate city is not possible. We use the concept of peripheral region rather than small or intermediate city to emphasize that the possibilities of development in these urban and regional spaces are not defined merely by their population size or location but also by broader and parallel social, economic, and cultural processes such as isolation, dependency, or migration pull factors in relation to larger cities. Latin American dependency theorists and Marxist geographers have long understood the core-periphery dynamic as shaped by processes of capital accumulation, which draw from the differential economic environments of core and periphery in a perpetual search for higher rates of return (Harvey 1975; Prebisch 1976; Wallerstein 1979). In recent years, several authors have returned to the idea of periphery as a useful term to analyze political economy and cultural changes in cities in the context of globalization (Lang et al. 2015; Caldeira 2017). In these new interpretations, however, peripheries are considered dynamic and socially constructed processes rather than geographical or structural characteristics of particular spaces. For instance, Lang et al. (2015) have used the idea of peripheralization as a wider and multidimensional process that can produce different kinds of inequalities, not only economic ones and not only at the global nation-state level but also within countries and regions. In this book, we concur with these recent conceptualizations of peripheries. One key characteristic that all the cities and regions in this book share is that many of their young residents are moving to larger cities, either within their country or in other countries, in search not only of better job opportunities and livelihoods but also of the urban amenities, diversity, and consumption patterns of our increasingly urban-centered representations of culture. This out-migration of young people for economic, social, or cultural imperatives is, for us, a key marker of whether a city or region is peripheral in local economic development (LED) terms, more so than its size.

Our notion of peripheral region seeks also to bridge two debates that have often remained separate despite the increasing connections between cities and rural areas: local and regional economic development studies and rural development studies. In a world in which the boundaries between the rural and the urban are increasingly blurring (Woods 2009; Brenner and Schmid 2013), recent advances in rural development that emphasize the importance of creating new viable livelihoods (Bebbington 1999) and how existing social networks can facilitate new processes of innovation and learning in rural areas (Murdoch 2000) have much to offer to researchers and practitioners of LED. Decentralization processes are empowering local actors and creating new interdependencies and joint action between local and national institutions, and thus also may strengthen the rural periphery (Ward, Wilson, and Spink 2010). Our preference for conceptualizing our case studies as peripheral regions rather than small or intermediate cities follows logically. The concept of region allows us to emphasize the complex connections between urban and rural dynamics that take place in these territories against the urban bias that involves calling them small, intermediate, or second-tier “cities.” Bringing together these debates through the notion of peripheral region opens up new ways of thinking about LED and brings to the stage a different and more diverse set of concepts, actors, and city models beyond the agglomeration economies, dense networks, and venture capitalists of Silicon Valley and other global city-regions. This then allows us to better understand the development bottlenecks and opportunities of smaller cities and regions, which are simultaneously affected by rural, urban, and global forces.

We argue that peripheral regions in Latin America are often characterized by fragile governance dynamics. By governance we mean the “process of co-ordinating actors, social groups and institutions in order to reach objectives which have been collectively discussed and defined in fragmented, even nebulous environments” (Bagnasco and Le Galès 2000, 26). As much as the region has been rediscovered in recent years, so have institutional approaches to explaining regional disparities and local and regional development out...

Table of contents

• Cover Page
• Fragile Governance and Local Economic Development
• Regions and Cities
• Title
• Copyright
• Dedication
• Contents
• Notes On Contributors
• Acknowledgments
• 1 Peripheral Regions, Fragile Governance: Local Economic Development from Latin America
• 2 Governing Local Economic Development in Latin America: Situating the Debate
• 3 From Learning to Fragile Governance in Lurín: Rural Economic Development in Rural Peru
• 4 Learning Via Communities of Practice: The Experience of Grupos Gestores in Guatemala
• 5 CóRdoba, the Argentinian Silicon Valley? Common Narratives, Institutional Experiments, and Mutual Adjustments to Develop A Regional Innovation System Outside Buenos Aires
• 6 Against the Grain: Networked Governance and Local Economic Development in Linhares, Brazil
• 7 from Individual to Shared Leadership in Arauco, Chile: Elements of an Emergent Process
• 8 Intergenerational Leadership and Local Economic Development: Towards a New Kind of Artisan Association in Mompox, Colombia
• 9 Fragile Governance and Local Economic Development Policy: Concluding Thoughts
• Index