Priorities for Private Investment in the Andean Countries

The Andean countries are traditionally highly exposed to inter- national prices, primary exports, and foreign investment flows from developed economies. Since 2014, the global downturn has affected the regions productivity and growth. This scenario is ongoing, especially after the COVID-19 shock, and the country-specific factors have not acted as robust buffers to prevent the growth slowdown; the region needs a growth agenda. This paper explores the nine categories of the standard growth diagnostic framework in clustering results using private investment and GDP per capita over 129 countries in the past two decades. We also carry out a gap analysis and use a generalized ordered probit model to identify mean advantages, clusters dissimilarities, and investment priorities to scale up from one cluster to another in search of higher GDP per capita. We identify nine clusters. During the period 20162019, Bolivia and Venezuela were in Cluster 5, Ecuador and Peru in Cluster 6, and Colombia was in Cluster 7. The main findings by clusters suggest prioritizing infrastructure, the reduction of microrisks, andin parthuman capital and local savings. Nevertheless, heterogeneity in the impact on transition and intraclusters prevails. So, even though the priority agenda might be similar, policy making might be more demanding for some countries than others.