Pragmatic and Productive Regional Integration to Harness Latin America’s Trade Potential

Trade policies implemented in Latin America over the past decades have helped the region tap into global markets, but they have not led to significant increases in exports. Logistics deficits—along with other obstacles—affect the swiftness required by trade flows.

Achieving pragmatic and productive regional integration to overcome these and other bottlenecks requires a joint vision and action to eliminate barriers that block financial, energy, and trade interconnectivity, said Luis Carranza, executive president of CAF Development Bank of Latin America during his keynote address at the 3rd Ibero-American the Pacific Alliance Integration Meeting.

“Increasing the region’s productivity is the cornerstone of all development goals. In this sense, the dynamics of global value chains (GVCs) driving the production-based regional integration vision, become more important than trade-focused schemes. We can harness productive potentials of economies through stronger insertion into GVCs, promotion of production chains and intra-regional trade in intermediate and final goods,” Carranza explained.

The activity was opened by the President of Peru, Pedro Pablo Kuczynski, and was attended by Josep Piqué, president of the Ibero-American Business Foundation; Rebeca Grynspan, Secretary General of the Ibero-American General Secretariat, and Mario Mongilardi, president of the Lima Chamber of Commerce, in their capacity as the highest representatives of the organizations co-organizing the event.

CAF Proposal

CAF proposes a roadmap towards pragmatic and productive regional integration based on three pillars: infrastructure and logistics corridors, digital transformation and institutional structures, in order to boost productive potentials of economies and build capacities for creating new markets and productive sectors.

Given its importance to productivity, Latin America’s current infrastructure gap presents a great opportunity to take a qualitative leap. CAF is committed to promoting integration logistics corridors through interventions in areas such as infrastructure, quality of services, customs processes, international shipments (cost time), traceability and timeliness.

CAF’s proposal for digital transformation is based on promoting the expansion of the digital ecosystem and economy in the region to promote productive transformation and regional integration, by developing broadband infrastructures that enable the provision of digital services to households, governments and businesses, especially those with a significant impact on productive sector competitiveness.

CAF’s institutional initiative for increasing intra-regional trade is composed of strategic diagnostics for governments, the private sector and society; a map of border connections and identification of binational integration niches; a database of regional good practices; identification of restrictions or bottlenecks and non-tariff barriers; databases for greater productive integration and facilitate policymakers’ decisions.

Keeping in mind that the Latin American and Caribbean market becomes more important and scalable when viewed as a whole, and the underutilized potential for intra-regional trade, CAF proposes the Productivity Route: infrastructure – logistics corridors, digital transformation and institutional structure, which, together with effective, representative and legitimate governance, will foster regional development in this context of globalization.