- Global supply chain shocks can have a substantial growth cost, equivalent to about $85 million per year for the median economy in the region.
- However, exposure alone does not determine vulnerability: countries that combine high exposure with weak logistics suffer the largest losses, while those with similar exposure but stronger logistics are hit much less.
- This makes logistics performance a key policy lever: it can improve in the short and medium term, with some of the largest gains coming from smoother, more reliable supply chains, not just better ports.
In recent years, the world has learned that a container stuck in a distant port can eventually be felt in a country’s growth. The pandemic, port blockages, and geopolitical tensions demonstrated that global supply chains are not only a trade issue; they are also a source of macroeconomic risk.
For the countries of Central America, Haiti, Mexico, Panama, and the Dominican Republic, this problem has a particular dimension. Their economies are closely connected to world trade, but their logistics systems are not always equally prepared to absorb external disruptions. This raises a concrete question: when global supply chains get stuck, why do some economies suffer more than others, and what can governments do to cushion the impact?
A forthcoming empirical analysis by the Inter-American Development Bank of how global supply chain shocks affect the Central America, Panama, and the Dominican Republic (CAPDR) region shows that exposure to world trade is only part of the story. Logistics quality matters even more.
How Much Do Supply Chain Shocks Cost the Region?
An average increase in global supply chain pressures has a significant and persistent effect on economic activity. In CAPDR countries, such a shock can lead to a cumulative loss of close to 0.5 percentage points of GDP after three years, equivalent to about $85 million per year for the median economy in the region. The pattern is similar across Latin America and the Caribbean (LAC), although the estimated loss is somewhat smaller (Figures 1A and 1B).
Why is the impact larger in CAPDR? These economies are slightly more exposed to global supply chains than the LAC average (0.23 vs. 0.21), but no more than other emerging or advanced economies (0.24 and 0.26, respectively). Exposure is measured by the weight of imported inputs and transport embodied in the economy.
The key difference is weaker logistics performance: CAPDR scores -0.04, compared with 0.1 in LAC and 0.5 in advanced economies, on an index measuring supply chain efficiency, including ports, transshipments, and delivery times.
Vulnerability, then, comes not simply from being connected to global supply chains, but from facing disruptions with logistics less prepared to absorb them.
Not Every Country Takes the Same Hit
The impact of global supply chain shocks varies sharply across countries. The largest losses, around 0.20 to 0.25 percentage points per year, are concentrated in economies that combine high exposure with relatively weak logistics. By contrast, countries with lower exposure and stronger logistics experience much smaller effects, statistically indistinguishable from zero.
Figure 2 maps each CAPDR country by its exposure to global supply chains and logistics quality. Bubble color shows the estimated impact of the shock, while the dotted lines mark the regional averages and divide the chart into four quadrants.
The most revealing comparison is among countries with similar levels of exposure. Those with stronger logistics suffer a much smaller impact. Exposure itself does not determine vulnerability; what matters is how well logistics systems can absorb disruptions.
This distinction also matters for policy. Unlike exposure to world trade, logistics performance is something governments can improve in the short and medium term.
It Is Not Just the Ports: The Whole Chain Must Work
Better logistics can substantially reduce the impact of global supply chain shocks. For the average CAPDR country, a one-standard-deviation improvement in logistics quality is associated with a reduction of about 0.16 percentage points per year in the shock’s impact on GDP. Logistics quality therefore supports not only competitiveness in normal times, but also resilience when global supply chains come under stress.
But not all dimensions of logistics matter equally. One component captures port infrastructure and efficiency; another reflects how fluid and predictable the entire chain is, including punctuality, traceability, and end-to-end service quality.
Considered separately, both components are associated with greater resilience. When assessed together, however, chain fluidity retains a clear cushioning effect, while the port component loses explanatory power (Figures 3A and 3B). Good ports remain essential, but resilience depends on goods moving efficiently, predictably, and in coordination across the entire logistics chain.
An Agenda Within the Region’s Reach
Improving logistics can make regional integration more resilient and reduce the macroeconomic cost of global disruptions. Not every improvement requires a major infrastructure project: while modernizing ports remains important, some of the largest gains can come from better management, coordination, and smoother movement across the entire logistics chain.
At the same time, priorities will differ across countries, with the largest gains likely where logistics weaknesses most amplify exposure to external disruptions. In those cases, improving logistics is not only a competitiveness agenda; it is also a macroeconomic resilience policy.
Global supply chain disruptions are likely to remain a recurrent risk. The policy challenge is therefore not to eliminate exposure, but to strengthen the systems that allow economies to absorb shocks and keep goods moving when disruptions occur.
Learn more about the IDB's work on logistics, trade facilitation, and regional integration.