Trade, FDI and Fragmentation of the Global Market. Is Latin America being left behind

BERNARDO KOSACOFF, ANDRES LOPEZ, MARA PEDRAZZOLI

Conferencia; The New Agenda for International Trade Relations as the Doha Round Draws to an End; 2007

This document has the purpose of contributing to the analysis of trends and prospects of Latin America’s insertion into the new global scenario, characterized by a growing integration of national economies – through trade, investment, finance, etc. – and the increasing expansion of the so-called global value chains (GVCs).   The opportunities and challenges presented by this GVC phenomenon are variegated and their effects not always homogeneous. The insertion into the GVCs may help diversify exports, create new jobs and acquire new technological capabilities in keeping with the best international practices, which will strengthen the competitiveness of lagging countries. However, distributive effects and spillovers to domestic economies – and therefore, in more general terms – their impact on development – are less clear.   In this paper we study the nature and impacts of the insertion of Latin American countries in the GVCs. Admitting that we are speaking of a heterogeneous reality, the present situation proves to be “unsatisfactory”, taking into account that some countries play a minor role in the GVCs, while others, more integrated into them, reap, in general terms, relatively small spillovers from that insertion. Factors behind these trends are evaluated and some political lessons that could help improve the region’s positioning in today’s global scenario are drawn.