• Strengthening regional value chains could increase exports to the United States by $70 billion

BARRANQUILLA, Colombia – The Inter-American Development Bank will make available a series of financial and non-financial tools to Latin American and Caribbean countries and companies to support their international insertion and boost their economic recovery after the pandemic, IDB President Mauricio Claver-Carone announced today.

The package includes loans, with and without sovereign guarantees, non-reimbursable financing for technical cooperation programs, and financial advisory services.

The announcement was made in a seminar on regional value chains at the IDB's Annual Meeting, being held in a virtual format in Barranquilla, Colombia.

“Latin America and the Caribbean must strive to achieve greater regional integration, which will then allow it to insert itself more efficiently into the global economy,” Claver-Carone said. “Colombia is already a destination for the relocation of activities in technology services, food and beverages, and plastics and resins, and has a great potential in the pharmaceutical, manufacturing, and supplies for footwear, apparel and textiles, and the automotive sectors.”

“The IDB will act as a strategic partner to provide support for Colombia and the rest of Latin America to integrate further into regional and global value chains and create the opportunities and employment that our citizens need,” he added.

The seminar, “Investment and strengthening of Regional Value Chains as an Engine for Economic Recovery,” was also attended by the President of Colombia, Iván Duque; the Secretary-General of the Organization for Economic Co-operation and Development (OECD), Ángel Gurría; Colombia’s Minister for Trade, Industry, and Tourism, José Manuel Restrepo; the manager of the IDB’s Integration and Trade Sector, Fabrizio Opertti; and private-sector executives.

Latin America and the Caribbean have low participation in global value chains, both in their percentage share and in the stages in which they are involved – mainly concentrated in exporting raw materials or derivatives. For example, the foreign value-added included in exports from countries of the region has fluctuated between 18 and 19 percent over the last 30 years, compared to 33 percent for Asia and 43 percent for the European Union countries.

This low level of participation is due to several factors, including the persistence of restrictive trade policies, high transportation costs and lags in logistics performance, high information costs, and poor connectivity infrastructure. Limited access to financing also influences the lack of insertion of companies in regional and global value chains.

Significant participation is critical as countries seek out paths to economic recovery that generate high-quality jobs in the aftermath of the COVID-19 pandemic. The IDB estimates that by strengthening its regional value chains in the hemisphere, Latin America and the Caribbean could increase their exports to the United States by $70 billion through gradual increases in sectors such as textiles, medical products, and automotive.

The tools developed by the IDB seek to strengthen Investment Promotion Agencies, improve the physical and digital infrastructure of trade, and make progress toward the pending agenda of modernization and harmonization of trade agreements and regulatory and normative frameworks.

Every dollar invested in export promotion programs generates up to $45 in additional exports. IDB studies indicate that a 10 percent reduction in international freight costs from Latin America and the Caribbean would boost export values by at least 30 percent and increase exported products by 25 percent within the region and to the United States.