SÃO PAULO, Brazil, Friday April 13, 2018 – The Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, has called on the region’s countries to reinvigorate the process of integration and bolster intraregional trade to confront new global challenges.
The most senior representative of the United Nations regional organization says Latin America and the Caribbean has reacted to a complex trade scenario by intensifying its ties with partners outside the region, in particular with China and other economies in Asia, highlighting for example the recent signing of the CPTPP, which she described as positive.
However, she said, reinvigorating integration and trade with partners inside the region is much better, because it integrates small and medium-sized enterprises in value and export chains, even if this continues to be a pending matter.
Bárcena underscored the great potential of a regional market with more than 630 million people, which nonetheless continues to be underexploited. She recalled that, while some important progress has been made, in particular the agreements reached within MERCOSUR to define common systems for foreign investment, in April 2017, and for public hiring, in December 2017, the region still has much to do in terms of deepening its economic integration.
“Unfortunately, intraregional trade continues to be very low in comparison with international standards, representing just 17 per cent of the region’s total exports,” she specified.
The ECLAC official indicated that these low levels of intraregional trade can be explained by the region’s vast size, covering more than 20 million square kilometers, and its difficult geography; by a deficient transportation infrastructure; overlapping endowments of natural resources in many South American countries; and the gravitational pull that the United States’ economy has on Mexico and Central America.
“However, all of these difficulties are aggravated by the great fragmentation of the regional market. Several integration agreements coexist, each one with its own rules on issues from production standards to public procurement and the handling of foreign direct investment. The integration schemes still lack measures that favor the mobility of people, of their capacities, talents and their insertion in labor markets from one country to another,” she stated.
Bárcena added that these regulatory discrepancies impose high costs on companies, especially the small and medium-sized ones that export or invest in regional markets, and also hinder the development of regional value chains.
“Latin America has to turn toward diversifying its trading partners within this very region and strengthening initiatives for trade facilitation and for the development of regional digital markets. In this sense, the convergence between MERCOSUR and the Pacific Alliance is very good news and we must continue fostering it,” she stated.
She highlighted that 80 per cent of Latin America’s exports come from South America, but that they are basic products lacking much value-added. For that reason, she said, “it is very important that we see the complementarities between countries, but also the capacities that we have to add value to what we are doing, the incorporation of greater levels of knowledge and technology.”