“Nearshoring” would add US$78 billion in exports from Latin America and the Caribbean

According to calculations by the Inter-American Development Bank (IDB), the potential gain for Latin America and the Caribbean from “nearshoring” opportunities in the short and medium term could represent an increase of up to US$78 billion in new exports of goods and serviceswith important opportunities for the region in the automotive, textile, pharmaceutical and renewable energy industries, among others.

   Mexico and Brazil would have the greatest opportunitiesalthough all countries would benefit, according to advance data from a study to be published soon.

The US$78 billion figure is made up of US$64 billion in trade in goods and US$14 billion in trade in services.

The information was delivered to high-ranking representatives of governments and companies from the hemisphere who met for the Summit of the Americas to analyze options to take advantage of the opportunities that are opening up due to the reconfiguration of global supply chains, trends in the area of ​​sustainability of the trade and climate change and the growing digitization of the economy.

The ministerial meeting, which preceded the start of the Summit of the Americas, represented an important effort promoted by the Inter-American Development Bank to promote economic recovery in the region through the collective action of the countries and in close collaboration with the private sector.

“The growing environmental concerns, added to the health crisis and the recent Russian war in Ukraine, have created a context where the region can contribute to the global economy and the fight against inflation through greater participation in global supply chains, in a sustainable and equitable manner,” said IDB President Mauricio Claver Carone. Support for the reconfiguration of global value chains (GVCs) is one of the priorities of the Vision 2025 of the IDB to accelerate economic recovery and growth in the region.

“This meeting is a demonstration that leaders from both the public and private sectors can put aside their differences to find ways to generate the employment and well-being that our peoples yearn for, and trade is one of the main vehicles to accelerate our prosperity,” he added.

Private sector participation

The event sought to promote an exchange on key issues on the trade agenda. The dialogue was attended by more than 100 companies, with the intervention of representatives from companies such as Gap Inc., UPS, Cintora, Citibank, Amazon Web Services, Stripe, and Microsoft.

Myron Brilliant, the executive vice president and head of international affairs for the United States Chamber of Commerce, outlined the private sector’s view of trade as part of the Americas Business Dialogue(ABD, in English), an entity that brings together companies from all sectors and countries of the Western Hemisphere, and which has the support of the IDB as coordinating entity.

The ABD is presenting a report to the heads of state with concrete recommendations and specific indicators to measure the progress of its implementation.

global value chains

Recent studies indicate that the participation of firms in global value chains (GVC) brings multiple benefits. In addition to the traditional benefits provided by more trade and investment, participating in a GVC contributes to greater productivity through knowledge and technology transfers, and the generation of more and better jobs, with new opportunities for women. A 10% increase in a country’s share leads to increases of between 11% and 14% in GDP per capita.

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So that the Region can take advantage of the opportunity that is opening up to increase participation in GVCs, The IDB proposes that the countries work on what it calls a “3Is” strategy: Investment, Infrastructure and Integration:

Investment: Countries must increase their efforts to attract investment and open new markets. This implies both improving the business environment and the capacities and institutions for attracting investment and promoting exports in the region. IDB estimates indicate that US$1 invested in investment promotion generates up to US$41.7 of additional foreign direct investment.

Infrastructure: It is key to improve the infrastructure of trade, connectivity, transport and logistics in the region, to ensure that investment companies in the region have more competitive costs. A 10% reduction in international freight costs would increase export values ​​by at least 30%.

Integration:The region must deepen and modernize its regional integration, in order to offer an enlarged, frictionless and more competitive market.

This includes redoubling efforts to advance the pending convergence agenda of more than 33 preferential trade agreements. This convergence and harmonization would result in an annual increase in intra-regional trade close to 12%.

In addition, the region must increase the availability of productive financing for companies in the region and in particular for MSMEs, in order to allow them to successfully integrate into international markets.

Climate change and digital trade

Ministers also discussed the importance of sustainability in trade. IDB calculations estimate that domestic emissions for external consumption contribute to 20 percent of greenhouse gas emissions in Latin America and the Caribbean – a significant number, but somewhat less than global emissions related to trade. . Countries must work together to protect the environment while keeping trade open.

On digital commerce, attendees discussed the importance of agreeing on a regulatory framework that can facilitate the creation of a digital market and attract investment. Digital transformation will make it easier for more companies to export the services that consumers demand – such as distance learning and telehealth. To enhance this market, it is also key to improve the actions of government entities such as customs and investment promotion agencies.

The IDB Group has the potential to act as a catalyst to attract complementary financing, including co-financing from other multilateral organizations, and mobilize resources from the public and private sectors, as well as the deployment of innovative financial and non-financial products and instruments such as blended financing, guarantees, technical assistance and other resources from public or private sector donors.

“From the IDB, you can count on our support for the path you chart here and in future meetings, in the implementation of policies that contribute to inclusive and equitable growth,” said Claver-Carone. “What is discussed here creates jobs, creates wealth, and most importantly, hope for millions of our citizens who have a better future ahead of them.”

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