Big bets and change

In Uruguay, we’re reimagining development with an eye on transformational results

Stefan Liller, UNDP Resident Representative in Uruguay
Milica Begovic, UNDP Global Innovation Adviser (a.i.)
Marco Steinberg, Founder & CEO, Snowcone & Haystack

Governments face increasingly complex challenges that defy singular solutions. In many cases, what worked in the past may no longer suffice. To address this, UNDP is exploring emerging, integrated approaches that are better aligned with the development needs of governments and citizens.

In Uruguay, we’re working with the government to devise new approaches aimed at transformational change — prompted by a major new foreign investment in the pulp industry.

In July 2019, Uruguay and the Finnish multinational UPM signed a US$3.3 billion agreement to build a greenfield eucalyptus pulp mill near the city of Paso de los Toros. Some investment will go toward upgrading a port facility and railway tracks, for which Uruguay has taken a US$1 billion loan. Three forestry areas in northern Uruguay are also under development.

Workers at the site of the future UPM2 pulp mill in the region of Durazno, Uruguay.

Depending whom you ask — investors, activists, or government officials — you’ll find a range of views on the potential benefits and impacts of this investment. Some say it will increase economic output by 1.5 percent during the three-year construction phase, raise the annual value of exports by roughly 12 percent as pulp overtakes beef and soybeans, and employ more than 6,000 people during construction. Others say it will produce only 400 new permanent jobs, degrade the environment, and yield too few social and economic benefits to justify the government’s concessions to its private sector partner.

Inarguably, though, the UPM deal reinforces Uruguay’s longstanding economic model — based on extractive, commodity-led growth, foreign direct investment, and the export of primary products. And that’s risky.

Addressing these challenges is a strategic bet for the government, as it seeks to create conditions for long-term development based on diversification, local knowledge, and sound environmental policies.

Working with citizens to better understand people’s lives and needs in the town of 18 de Mayo.

UNDP’s role

With less than a decade to achieve the Sustainable Development Goals (SDGs), UNDP is working with partners to devise innovative, integrated solutions to such complex challenges.

The last two years have seen investments in a range of potentially game-changing initiatives – such as our network of 60 Accelerator Labs, Finance Sector Hub, and Digitization Strategy, among others. The aim is to help governments address unprecedented development challenges in an era of destabilizing climate change and seismic shifts in technology.

Our work in Uruguay and elsewhere highlights our new approach to development, with a broad pivot toward systemic change. We’re helping Mongolia prepare for a post nomadic future, for example, Serbia address massive depopulation, Zimbabwe build urban resilience, and Asia-Pacific countries tackle plastic pollution.

The studio approach is based on a small multidisciplinary team working for a week, immersed in the challenge-landscape delivering a framework for strategic improvements.

Redesigning our approach

The limitations of traditional, centrally led planning are well known. So, in Uruguay, we set out to find a better way, putting well-being and environment at the center.

We borrowed from Sitra, the Finnish Innovation Fund, and applied its studio approach — deploying a team of eight people with expertise ranging from strategic design and impact investment to land-use planning, social protection, water conservation, climate economics, complexity, forecasting, and extractive industries.

Railway in Paso de los Toros.

Our hunch was that a portfolio approach, premised on a set of reinforcing interventions that act on different risks and opportunities, would be most likely to accelerate learning, make the most of existing assets, and help deliver systemic change.

For seven days in December 2019, we worked together to devise a new framework for strategic improvement that outlined the ‘architecture of the problem’ and identified a top 10 list of implementable opportunities to shift the economic base from extractives to knowledge. These were presented to the government and other national counterparts on the final day.

What will a sustainable future look like in the city of Canelones? UNDP helps convene partners to strategize around big bets and change for the coming 50 years.

We didn’t consider pulp mill construction and railway upgrades in isolation but in a much broader context — from extraordinarily low high school graduation rates to the rising number of cities where retirees outnumber workers. We asked above all how to leverage this new investment to deliver profound transformation toward a sustainable, digital, knowledge-based economy.

For UNDP the calculated bet was: could a studio intervention help support the country deliver on a new kind of transformative agenda? Here we were inspired by Harvard’s Growth Lab, MIT’s Atlas Of Economic Complexity, and Climate KIC "directional innovation” work, shifting from single-point solutions to much broader, system-wide innovation.

A lot of well-intentioned ideas don’t add up to a great idea. Such is the challenge of change. It requires a portfolio of interventions designed to create positive sum and a systemic tipping point towards change.

Our portfolio of interventions cuts across multiple domains — government, business, academia, and society — and addresses scale, time, and resources. A few examples:

  • Transforming Paso de los Toros into a more inclusive city friendly to all ages, a sort of urban laboratory aimed at better serving its fast-changing population, with solutions that could be scaled and replicated elsewhere.
  • Launching a large-scale civic engagement CoDesign Forum, which takes a page from the Chilean Sustainable Reconstruction Plan after the 2010 earthquake. This would analyze and aim to meet the needs of communities impacted by Uruguay’s UPM investments.
  • Implementing so-called future-proof procurement to stimulate new markets and create new jobs and opportunities through procurement of local, sustainable, healthy, and low-carbon food to all public schools—largely from female-led or low-carbon businesses.

Other interventions included the idea of a ‘Fiscal Stabilization Fund’ business support structure of ‘Mujeres Innovadoras’ and ‘Municipal Tech Booth camps’ and regional R&D partnerships ‘Tacuarembo and Durzano Technology Hubs.

In the coming weeks and months, we will work with the Government to take forward these proposed interventions, with the aim of integrating solutions across multiple sectors and domains.

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The country has had a good run, but it now faces diminishing returns. Both internal and external dynamics increasingly demonstrate that the easy phase of extractive, commodity-led growth based on large foreign direct investment is over. Don’t interpret the current slowdown as the end of a cycle; we believe this should be seen as the end of an era. This is not just about a company’s investment in the country—it’s about building Uruguay’s future.”

- UNDP Future Uruguay studio team -

The largest foreign direct investment in Uruguay’s history marks an opportunity to lay out a more sustainable and inclusive future for the country.

Implications for development organizations

The studio approach seeks to respond to development challenges that are increasingly complex, interdependent, and ambiguous. More than ever, the unit of innovation in this class of challenges resides in small, integrated, multidisciplinary teams. That is not necessarily how most organizations work, which means rethinking our own internal dynamics.

We’re making a strategic bet that deep, transformational change requires a fundamental organizational renewal. In Uruguay and other UNDP teams globally, we’re interrogating what this new way of working may entail.

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The UNDP ‘Future Uruguay Studio’ Team were (alphabetically):

  • Justin W. Cook, Director, Center for Complexity, Rhode Island School of Design
  • Martín Delgado, Territorial Studies Project Leader, ITU-FADU, Universidad de la República
  • Fernando Filgueira, Sociologist, Universidad de la República
  • George Gray, Chief Economist, UNDP Global Policy Network
  • Pippa Howard, Director, Fauna & Flora International
  • Nathalie Molina Niño, President & CEO, OÑ, author of Leapfrog
  • Marco Steinberg, Founder, Snowcone & Haystack
  • Dimitri Zenghelis, Wealth Economy Project Leader, University of Cambridge

Photo credit: Martín Illescas/UNDP Uruguay
Diagrams: Marco Steinberg