Posted: Wednesday, June 8, 2022. 11:26 am CST.
Photo Credit: IDB
By Rubén Morales Iglesias: The Inter-American Development Bank (IDB) said that Belize could increase its annual exports by US$44 million through nearshoring.
According to an IDB report, Latin America and the Caribbean could add an annual US$78 billion in additional exports of goods and services in the near and medium term, by using nearshoring. IDB said the opportunities for quick wins lie in the auto industry, textiles, pharmaceuticals, and renewable energy, among others.
Nearshoring occurs when a company hires the services of a team or another company in a neighbouring country to provide it with specific services from that location. Both parties benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, linguistic, economic, political, or historical linkages.
According to IDB, the entire region would gain US$78 billion. Exported goods would account for US$64 billion and exported services for US$14 billion. Because of sheer size, Mexico and Brazil would see the biggest benefits. Mexico could increase its exports by US$35.278 billion and Brazil by nearly US$7.844 billion.
Next door neighbour Guatemala stands to gain US$786 million. Honduras would gain US$1.243 billion, El Salvador would improve exports by US$1.050 billion, while Caribbean countries like Barbados and Jamaica would gain US$61 million and US$139 million respectively.
IDB said it presented the report at a meeting of ministers of trade and foreign affairs, and senior executives from companies of the Western Hemisphere that took place ahead of the Ninth Summit of the Americas. The bank said nearshoring “represents an important effort by the IDB to promote economic recovery through the collective action of countries, in close cooperation with the private sector”.
The officials gathered to look at “options for taking advantage of the opportunities provided by the reconfiguration of global supply chains, trends in trade sustainability and climate change, and the increasing digitalization of economies”, said IDB.
IDB said that the participation of firms in global value chains (GVC) results in multiple benefits aside from traditional gains from additional trade and investment. The benefits include the creation of jobs and more opportunities for women. According to IDB, if a country increases its participation in GVC by 10%, its per capita Gross Domestic Product increases by 11-14%.
IDB recommends that for countries to take advantage of GVC, they should focus on what it calls a ‘3i’ strategy: increasing investment, improving infrastructure, and deepening and modernizing its regional integration.
IDB said the ministers also reviewed the importance of sustainability and trade in the face of climate change and digital trade. The bank said countries should work in collaboration to protect the environment and take in digital transformation. Digital transformation can enable the exportation of services consumers want, such as remote learning and telemedicine. Additionally, it can boost the capacity of government entities to facilitate trade, said IDB.
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