Intraregional trade is stagnant, CAF experts recommend creating economies of scale

In a new report for this year 2021, experts from the Development Bank of Latin America (CAF) reveal that intraregional trade in Latin America and the Caribbean remains stagnant since the last three decades, despite the opening and trade agreements assumed by these countries.

The report “Pathways to integration: Trade Facilitation, Infrastructure and Global Value Chains” (RED2021), suggests to the LAC region increase their intra-regional trade, through integration and the creation of economies of scaleIn view of the fact that although in the last 30 years the majority have adopted open policies, the results in trade and investment have been very modest.

According to CAF experts, regional share of global exports is modest and it does not even meet the expectations that were generated from the opening and in some cases due to its geographical proximity.

As an example of internalization, the experts observed that in the case of Central America and Mexico, increases in trade are registered in relation to their gross domestic product (GDP), in more open economies of the Central American bloc such as Honduras, Nicaragua and El Salvador.

In the case of Mexico, it indicates that this country almost triples the internationalization of its economy, basically due to the share of its exports to the North (United States).

Outside of Mexico, it indicates, the share of exports from Latin America and the Caribbean falls one percentage point, falling from 4% to 3%.

According to the report, “eIntraregional trade remains close to 15% of total exports since the mid-nineties, with little variation over time, according to the Economic and Development Report (RED2021) of CAF -development bank of Latin America ”.

Global trade
According to a CAF press document, contrary to the Latin American and Caribbean region, in Europe intraregional trade has values ​​close to 60% of the total, while in North America it reaches 45% and in the East and Southeast of Asia 35%.

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“These not so encouraging results are partly explained because the regional market has not yet been a space that companies, especially medium and small ones, have been able to take advantage of to integrate commercially and productively, and that this provides opportunities to expand their sales and employment.

The reasons for these failures are due to incomplete progress in several of the trade liberalization policies, ”said Pablo Sanguinetti, vice president of Knowledge at CAF, and co-author of the report.

Proposes reengineering
RED2021 proposes a three-pillar reengineering on the paths for the integration of Latin America and the Caribbean, according to the document. First reduce one-sided, which in some cases are still high (notably in Caricom and Mercosur); and lower border and customs costs through trade facilitation initiatives. The second pillar lies in have the necessary transport infrastructure to improve physical integration between countries, including that which favors energy integration; and the third refers to domestic and regional regulations that promote productive integration between economies, promoting the participation of companies in regional value chains.

Findings
The report explains the need for facilitate foreign trade operations and border procedures, because while in Latin America and the Caribbean and in Asia they take between 80 and 100 hours, the times are reduced to less than 10 hours in North America and the European Union, to reduce costs transport and advance to interconnection energy.

Commercial participation of the Dominican Republic
As a percentage of its gross domestic product (GDP), the share of the Dominican Republic’s foreign trade was 19% and 28%, respectively, with a total trade of 48% between 1980 and 1984, while between 2015 and 2019 its exports increased but it kept imports the same.

Between 2015 and 2019, the participation of Dominican exports as a proportion of GDP was 24% and imports were 28%, for 51% of its total trade, according to the RED2021 CAF report, presented in Panama City this Thursday 18 .

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