Global Value Chain Growth Forges Ahead Without Latin America, Caribbean, Say Experts
Latin American and Caribbean nations are struggling to break into global value chains and attract foreign investment due in large part to downward economic trends, export decreases and poor transportation and logistics infrastructure, said a number of trade scholars and analysts at a Woodrow Wilson International Center for Scholars event on Oct. 27 (here). The region’s geographic isolation increases the already-critical need for transportation and logistical improvements, the panelists said. “When you are thinking about the logistics infrastructure area, it is not only about the big public works like, you know, ports and airports,” said Inter-American Development Bank (IDB) trade economist Juan Blyde. “It’s also about the ‘soft’ policies like, for example, improving the efficiency of a customs office.” The Pacific Alliance, a 2011 trade pact comprised of Chile, Colombia, Mexico and Peru, is a relative paradigm for how harmonized rules of origin can help facilitate regional supply chains, arguably more important than globally supply chains, said some of the speakers.
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Latin American and Caribbean nations must figure a way boost and diversify production in order to compete globally, despite those infrastructure and economic obstacles, said Antoni Estevadeordal, an IDB Integration and Trade Sector Manager who oversaw the writing of a new IDB book on the subject. Europe averages a roughly 40 percent added value on exports, and Asia averages roughly 35 percent, but Latin America only registers about 21 percent added value on an average export, said Blyde.
The region continues to lose trade and investment opportunities to Asia, Europe and elsewhere globally, but there is still a window for Latin American and the Caribbean to strengthen its infrastructure and value-added capacity, Blyde said. Companies are increasingly diversifying sourcing away from China, and many places globally still have a chance to develop a role in global supply chains, said Blyde. “Countries are constantly assessing what their sourcing needs are going to be in the future,” Blyde said.
The U.S. is aiming to strengthen its integration in the global market through the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, said Francisco Sánchez, a Brookings Institution fellow and former undersecretary for international trade at the Commerce Department. More focus on integration in the Western Hemisphere specifically will help U.S. businesses thrive, Sánchez said. “This issue of integrated supply chains in the Americas is not just a concern to Mexico, Central America and South America and the Caribbean,” he said. “This needs to be a concern for the United States because if we want to remain competitive going forward vis-à-vis Asia, we need to have more Bombardier supply chains that start in Canada, pass through a U.S. city and end up in a Latin American city.”