Trade and Productivity in Latin America: Capstone Field Research in Colombia

Class of 2017 MIEF students Simon Staley and Valentin Sierra spent their 2017 spring break in Bogotá, Colombia, interviewing ministers, senators, presidential advisors, bank presidents and think tank directors as part of their capstone project. The team is investigating the drivers of low productivity in Latin America under the guidance of Dr. Nicholas Coleman, SAIS lecturer and senior economist at the U.S. Federal Reserve. The team has especially focused their research on Colombia, as the nation currently faces a unique opportunity to improve its productivity and growth after ending decades of armed conflict with a powerful insurgent group.

Productivity growth has been identified by leading multilateral organizations like the World Bank, IMF, OECD and the Inter-American Development Bank (IADB) as key to sustainable, long-term economic growth in Latin America. Historically productivity (total factor productivity in economics jargon), has been low in Latin America compared to other emerging market regions. According to these multilaterals, increasing productivity could yield an economic windfall for the region, improving growth and livelihoods for millions.

Decreasing TFP has been at the heart of slow productivity growth ... GDP per worker in Colombia shows that slow growth since the 1980s is largely because of a reduction in TFP.”

OECD, 2013

The key drivers of productivity growth include socioeconomic factors like labor informality, poor education, inadequate infrastructure and weak application of the rule of law, in addition to various indicators of development. The team is conducting a comprehensive econometric analysis of 18 countries in Latin America, applying well-documented methodology in the context of the region and expanding existing literature by investigating the effect of trade openness on productivity.

“... productivity growth is the key to unlocking sustainable growth [in Latin America].”

The Economist, 2014

Taken together with the expert testimonies of the Colombian practitioners, the results of this econometric analysis will quantify the contributions of the various drivers to productivity growth in Latin America and help inform policy recommendations for post-conflict Colombia.

The team plans to make their findings public through a new Greater Washington-based nonprofit called Consulting Peace and will present the report in both English and Spanish to contacts in the Colombian government.

Making The Best Investments

My name is Alexander Avramov and I was part of the inaugural MIEF program. I graduated in 2015 and I now work at NERA Economic Consulting as an Analyst. I’ve been with NERA for just over a year.

I chose the MIEF program because of the great curriculum designed by the outstanding faculty and staff and the strong emphasis on economics and quantitative methods. I chose the program because I knew I would be challenged and that it would bring out the best in me. It has been a year and a half since I graduated and I apply many of the things I learned during the MIEF program to my daily responsibilities at work. While I learned several valuable skills during the program, I will narrow it down to the four main ones.

First, the MIEF degree drastically improved my critical thinking skills. In particular, Professor Marquez’s classes were instrumental in reinforcing the mentality of always questioning what I am reading. This has proved extremely valuable in my ability to think critically about an opposing expert’s report, where finding holes in the opposing side’s analyses is key. 

Second, the MIEF degree taught me to be extremely detail oriented. The degree provided me with the flexibility not only to take the required courses, but also to take on other opportunities, where possible. In particular, I was a Research Assistant during the majority of the MIEF program, for Professor William Lincoln. Not only did the work force me to think critically, but much of it also required me to pay attention to the smallest details and point out errors. This ability is vital in my line of work.

Third, the program gave me the freedom to think on my own instead of just following directions from my professors. This may be the most valuable of all and this is where the capstone project comes in. It allowed me and my partner to work on a topic, which we were very passionate about, while being given the freedom to be as creative as we wanted. At my job, it’s critical to be able to synthesize information and be creative in devising strategies and plans of best action. 

Last but not the least, the program teaches teamwork. Much of the program is based on learning to work in teams and being able to manage projects in a group environment. I cannot emphasize how valuable this skill is at my job.

I strongly encourage anyone who is reading this to learn more about the MIEF degree. For me, it was one of the best investments I have ever made.

MIEF at work

Since I graduated more than a year ago, the global capital markets were defined by risk-on and risk-off around a few events- the RMB’s unpredicted depreciation, the Fed’s first hike in a decade and Brexit. What the market did not know would happen happened, what the market knew would happen happened, and what the market knew would not happen happened. But there is one thing in common- predicting and reacting to each of them has proven difficult for me. For example I am still unable to see why the BOJ’s negative interest policy backfired, while the same policy worked for the ECB. In each case what I learned in SAIS has enhanced my ability, and improved my odds in dealing with the complexities and uncertainties of these events.


Theoretical framework

I used to be easily persuaded by news and sell-side research, whose arguments are usually made without evaluating the opposite relevant aspects. Having no prior framework to check against, I was naturally confused and not confident. SAIS changed this. Here, I learned that the federal funds rate does not simply follow what the Taylor rule suggests. A low interest rate environment in other developed markets must put a cap through the exchange rate channel. Facing the increase in global interest rate, monetary tools in emerging markets are not limited to just raising the interest rate. These theoretical frameworks improved the quality of my analysis.

Quantitative tools and presentation skills

The most interesting part of my work involves collecting data, running analyses and communicating the findings. Everyone can run regressions on excel, but many also run into difficulties when it comes to time-series analysis. GARCH and cointegration are things I learned in class but did not really know how to apply in real life. That is, until they came back to me in forecasting volatilities and constructing pair trading strategies. Living on the macro side of the market, the most valuable skills I learned in private equity is how to write recommendations and deliver presentations that are powerful, something I am still trying to follow every day.

Appreciate economic issues in a broader context.

Having not taken any IR course makes me less credible in this topic. I did however, immerse myself in SAIS and its neighborhood, I learned that many economic policies are rooted in politics and international relations. Just before I graduated, I predicted against Grexit solely based on economic reasoning. While the outcome happened to be so, the referendum process revealed a much more complex picture at the grassroots, and a real possibility for the opposite result. One year later, as many pundits and market players underplayed the possibility of Brexit even as the polls started to turn in favor of the opposite, I stayed cautious, remembering the lesson that politics and international relations are much harder to predict than economics.


I spent this Independence Day at West Point, watching a great army band performance and beautiful fireworks taking off the Hudson river. On the wall of one of the academy’s six churches, I found the following cadets’ prayer. “Make us choose the harder right instead of the easier wrong, and never to be content with a half-truth when the whole can be won”. It reminded me of Professor Marquez’s question, “how do I know”, his early mornings and “the path less traveled”. In the market or in life, truth always needs to be won by the few with courage and perseverance. As grateful I as I am for the many things SAIS taught me, I pray that one day these qualities, which are nurtured in this intellectually free and physically intense program, will lead me to my truth.