Nearshoring could add an annual $78 billion in exports of goods and services in Latin America and the Caribbean in the near and medium term, with opportunities for quick wins in the auto industry, textiles, pharmaceuticals, and renewable energy, among others, according to the InterAmerican Development Bank (IDB).
The estimate was provided to senior government officials from Latin America and the Caribbean, including ministers of trade and foreign affairs, and senior executives from companies of the Western Hemisphere, who recently gathered to analyse options for taking advantage of the opportunities provided by the reconfiguration of global supply chains, trends in trade sustainability and climate change, and the increasing digitalization of economies.
“Increased environmental concerns, along with the health crisis and the recent invasion of Ukraine by Russia, has presented an opportunity in which the region can contribute to the global economy and the fight against inflation by taking a more active role in global supply chains in a way that is sustainable and equitable,” IDB President Mauricio Claver-Carone explained in a statement.
It added that supporting the reconfiguration of global value chains is a priority of the IDB’s Vision 2025 plan to accelerate the economic recovery and growth of Latin America and the Caribbean.
Additionally, for the region to take advantage of opportunities that come with increased participation in global value chains (GVC) the IDB recommended that countries focus on a “3i” strategy: investment, infrastructure and integration.
It explained that countries should increase efforts to attract investment by making improvements in the business climate and in investment.
The IDB estimates that each dollar in investment promotion produces almost $42 in direct foreign investment.
Further, it said improving infrastructure in trade, connectivity, transportation and logistics in the region is key to ensure firms are cost-competitive.
A 10 per cent reduction in international shipping costs increases the value of exports by at least 30 per cent, the IDB estimated.
Also, the IDB advised that the region must deepen and modernize its regional integration to lower trade friction and boost competitiveness.
This includes redoubling efforts to converge and harmonize more than 33 preferential trade agreements in the Americas, the IDB noted.
It added that this harmonization would result in an increase in intraregional trade of nearly 12 per cent.