Posted: Wednesday, June 8, 2022. 11:26 a.m. CST.
Photo credit: IDB
By Ruben Morales Iglesias: The Inter-American Development Bank (IDB) said Belize could increase its annual exports by $44 million through offshoring.
According to an IDB report, Latin America and the Caribbean could add an additional US$78 billion per year in additional exports of goods and services in the short to medium term, using nearshoring. The IDB said opportunities for quick wins lie in the automotive industry, textiles, pharmaceuticals and renewable energy, among others.
Nearshoring occurs when a company hires the services of a team or another company in a neighboring country to provide specific services from that location. Both parties benefit from one or more of the following dimensions of proximity: geographical, temporal (time zone), cultural, linguistic, economic, political or historical ties.
According to the IDB, the whole region would gain US$78 billion. Exported goods would represent 64 billion US dollars and exported services 14 billion US dollars. Because of their size, Mexico and Brazil would reap the greatest benefits. Mexico could increase its exports by US$35.278 billion and Brazil by nearly US$7.844 billion.
Neighboring neighbor Guatemala is expected to earn US$786 million. Honduras would gain US$1.243 billion, El Salvador would improve its exports by US$1.050 billion, while Caribbean countries such as Barbados and Jamaica would gain US$61 million and US$139 million respectively.
The IDB said it presented the report at a meeting of trade and foreign ministers and senior business executives from the Western Hemisphere that took place ahead of the Ninth Summit of the Americas. The bank said the nearshoring “represents an important effort by the IDB to promote economic recovery through collective action by countries, in close cooperation with the private sector.”
The officials gathered to consider “options for taking advantage of the opportunities presented by the reconfiguration of global supply chains, trends in trade sustainability and climate change, and the increasing digitalization of economies”, said the IDB.
The IDB said business participation in global value chains (GVCs) results in multiple benefits in addition to the traditional gains from trade and incremental investment. Benefits include job creation and more opportunities for women. According to the IDB, if a country increases its participation in GVCs by 10%, its gross domestic product per capita increases by 11-14%.
The IDB recommends that for countries to take advantage of GVCs, they focus on what it calls a “3i” strategy: increasing investment, improving infrastructure, and deepening and modernizing its regional integration.
The IDB said the ministers also discussed the importance of sustainability and trade in the face of climate change and digital trade. The bank said countries should work together to protect the environment and undertake digital transformation. Digital transformation can enable the export of services sought by consumers, such as distance learning and telemedicine. Additionally, it can enhance the ability of government entities to facilitate trade, the IDB said.
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