The Creative Economy Turns up the Volume

When musician Carlos Vives sang “Colombia, I love you so much” in “Encanto,” the Disney movie that premiered in late 2021, he invited listeners around the world to learn more about the country where he was born and raised.  Vives’ uplifting tune, which reached the top spot on the Billboard albums chart, showed a side of Colombian families, traditions, and settings uncommon outside of Latin America. 

Exporting positive images of Colombia’s cultural, musical, and natural diversity, as “Encanto” did, can have a significant impact on the national economy. The Oscar-winning movie is a “game-changer” for the tourism industry, according to one Latin American publication, because people all over the world “will be able to see Colombia as a future travel destination, which can bring a boost to the Colombian economy.”

But what about the nations of Latin America and the Caribbean without a blockbuster production to call their own?

Most of the economies of the region are already relying on home-grown cultural and creative industries to strengthen their bottom line, according to Mónica Ayala from Asociación Latinoamericana de Integración (ALADI), a regional trade organization. ALADI bets on trade among Latin American countries as a powerful driver for economic recovery and believes the creative industries are "among the region’s most rapidly growing sectors,” Ayala said. 

The products and services generated by the creative and cultural industries—which together make up the creative economy—span a wide range. It can include weavings and other traditional crafts produced by local artisans; restaurants reinterpreting national cuisine; start-ups feeding a hunger for mobile gaming and cloud gaming; fashion houses creating tomorrow’s trends; tourism, especially eco-tourism; and television and film, including a wave of new productions commissioned by streaming services like Netflix and Amazon.  The common thread is an almost unlimited ability to contribute to the regional economy and offer long-term development benefits, according to Martin Spicer, IFC’s Regional Director for Latin America and the Caribbean.  

In some countries, growth of the creative economy has been dramatic, especially compared to traditional sectors.  In Colombia in 2019, for example, the creative and cultural industries experienced growth of 7.7 percent, according to the Inter-American Development Bank (IADB), which noted that over the same time period, traditional sectors like mining and quarrying saw a decrease in growth of 6.6 percent and electricity, gas, and steam decreased 3.3 percent.  This aligns with research from the United Nations Conference on Trade and Development (UNCTAD), which for over 20 years has consistently found that the growth rate of creative economy exports outpaces that of other industries.

Across the Latin American and Caribbean region, the creative and cultural industries generate revenues of $124 billion, or approximately 2.2 percent of regional GDP, according to the IADB.  While in some countries the sector appears to represent only a small proportion of economic activity, its importance is increasing, achieving double digit per annum growth, the IADB noted.   In Brazil, the creative industries now account for over 10 percent of GDP. In Argentina, Colombia, Mexico, and Peru, the overall contribution to GDP is between 2 percent and 7 percent.  UNCTAD research puts the Creative Economy’s contribution to global GDP at about 3 percent, roughly in line with its contribution to world trade.

“In Latin America and the Caribbean, the Creative Industries play a fundamental role in the economy,” Spicer said. “By boosting the economy, promoting knowledge, nurturing talent and creating purpose and inspiration for their societies, the creative industries can become a development tool for emerging nations. Culture and creativity have untapped potential to deliver social, economic, and benefits for cities and communities.”

Fueling sustainable growth

Turning that untapped potential into products and services has been a decades-long effort.  The Orange Handbook, published by the IADB in 2013, helped mainstream the concept of the creative industry throughout the region. Grounded in the premise that the creative economy is “a valuable development opportunity that Latin America, the Caribbean and the world at large cannot afford to miss,” it recommended that governments construct frameworks and policies to take advantage of its social and economic development opportunities to generate wealth and employment. 

Though a high level of informality in the creative economy makes accurate data hard to come by, the sector is an important provider of employment in the Latin America and Caribbean region. The cultural and creative industries generate around 1.9 million jobs annually, and employ more people aged 15 to 29 than any other sector, Ernst & Young Global found.  Employment opportunities for young people is among one of the region’s greatest challenges, the UN has said, and their inclusion in the economy is key to attaining the 2030 Sustainable Development Goals.

Such findings should factor into officials’ long-term strategies for economic growth, according to Margarita R. Seminario, Deputy Director and Senior Fellow at the Americas Program of the Center for Strategic and International Studies. “If governments were able to meaningfully invest in the inclusion of women and youth in the job market, the creative economy would be likely to grow even more and spur increased economic development,” she has written.  The link between the creative economy and development is significant because the region has one of the world’s highest levels of income inequality. 

How digitization “changed everything”

Just as digitization has revolutionized other fields, it has jump-started the creative industries.  Chief among the benefits of digitization is adaptability, which “gives the creative economy an advantage in economic development, as it is able to react to the ever-changing global supply and demand for creative goods and services,” Seminario said.

Mexican screenwriter Daniel Krauze has experienced the industry-strengthening effect of digitization first-hand: “It changed everything,” he said.  For many years, he explained, screenwriting jobs in Mexico were scarce because “there was no industry to help” screenwriters who did not personally know film directors.  “[But] when Netflix and Amazon started working in Latin America, I started to get work on shows. Film and TV industry work is not easy, it has its obstacles, but it’s easier right now because of streaming services that are buying and selling so many shows.” Krauze has been a writer and executive producer of Netflix’s Luis Miguel: La Serie for five years, as well as a writer for Amazon Prime´s Un extraño enemigo. He is also a bestselling novelist.

In 2021, Latin America became the second fastest-growing streaming market in the world. It is expected to grow 21 percent for video streaming and 20 percent for audio, according to the consultancy Netscribes, which attributed growth to greater Internet penetration and the arrival of 5G technology. Brazil and Mexico are the two largest video and audio streaming markets in the region, followed by Argentina, Chile, and Colombia, Netscribes researched showed. 

Kevin Lyttle, a singer from St. Vincent and the Grenadines who has popularized Soca music, a local offshoot of Calypso, credits music streaming services for bringing Caribbean music to a worldwide audience. “Our culture is looked at as ‘niche’ by the international market, so it’s not easy to cross over,” he said.  But the internet and peer-to-peer music sharing and streaming services “has opened more doors so you don’t necessarily have to sign with a major label…to be super-successful in music anymore.” 

Streaming accounted for 85.9 percent of the recorded music market in Latin America, one of the highest proportions in any region, according to IFPI, the organization that represents the recorded music industry worldwide. Recorded music revenues in Latin America grew 31.2 percent in 2021 – one of the highest growth rates globally.

Why regulation matters

But for many artists and creative economy advocates, lack of regulation in an era of digitization is a familiar, sad tune.

Government regulation, including copyright laws and intellectual policy frameworks, is key to strengthening nascent creative industries in an age of digitization, said Ayala, from ALADI. 

When policy leadership is strong, Ayala said, artists have rights to their digital performances and products and those rights are enforced—so they are paid for their work and protected against counterfeit or piracy. This inspires confidence in the industry, encourages investment, and demonstrates to aspiring artists that a viable career path is possible.

Since regulation is inconsistent across the region, ALADI is helping its 13 member countries standardize, classify, and organize their creative goods and services so they can create, sell to, and tax new markets while also protecting the intellectual property rights of creative products. 

Progress has been slow in some places. Government regulation throughout Caribbean is “a work in progress,” acknowledged Lyttle, the musician from St. Vincent and the Grenadines.  He believes that governments can support the islands’ developing music industry by creating and enforcing copyright and intellectual property laws so that musicians receive royalties.

In the Caribbean, “The collection of royalties is not properly organized yet,” he said. “There are artists in the Caribbean who have tons of hits, but it means nothing. You still see them doing a day job. If the radio isn’t paying royalties and venues do not pay licensing fees, you find yourself in a situation where you cannot grow [as an artist]. You get whatever you get from shows, and that’s that.”  It can be “demotivating,” Lyttle said, to watch international artists receive awards, recognition, and money for sampling local songs without attribution.

The protection of intellectual property is a contributor to economies and can enhance progress across Latin America and the Caribbean for all creators, said Bill Sonneborn, Senior Director of Disruptive Technologies at IFC. “Copyright and trademark laws can power productivity growth, innovation, and export sales,” he said. “As governments develop their digital economies, it’s important to establish legal frameworks that codify protections for creators, just as there are guidelines for data privacy and cybersecurity.” 

 International and regional support

Though each country pursues creative industry initiatives tailored to local demand, history, and culture, smaller developing countries, and those that are just beginning to regulate their creative industries, can’t go it alone. International organizations such as UNESCO’s Creative Cities Network  and regional support networks such as ALADI offer resources to boost the economic impact. “Regional cooperation has created a unity of purpose,” said Ayala, from ALADI.

Deepening regional cooperation also opens the door to economic growth—which is especially important following the early waves of the pandemic in 2020 and 2021. MERCOSUR Cultural, part of the South American trading bloc MERCOSUR, creates programs, commercial corridors, and festivals to promote creative economies across Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Uruguay, Peru, and Paraguay.

Mercosur Cultural’s survey about the effect of COVID-19 on the creative and cultural industries, conducted with a number of other development institutions, found that half of the workers and companies in the cultural and creative industries that participated in the survey estimated an 80 percent loss in income and sales.  Across Latin America and the Caribbean, at least 2.6 million jobs in the cultural and creative industries—many informal, part-time, or freelance—were affected by COVID-19-related restrictions. 

That’s why it’s important for the region’s creative industries continue to grow in a sustainable way, according to Marisa Henderson, Creative Economy Program Chief at UNCTAD, which recently published Creative Industry 4.0. Creative industries "have overwhelming long-term potential to preserve employment and create new, sustainable job opportunities by opening markets and increasing production," she said. "For some countries, this is the way out of the pandemic.”  

Gessye Ginelle Safou-Mat, Gregory James Felder and Mauricio Gonzalez Lara contributed to this story.

Layout and production by Julia Schmalz.

Photo illustrations by IFC and Shutterstock.

Published June 2022