IDB announces measures to strengthen Latin America and Caribbean’s global trade insertion

The Inter-American Development Bank (IDB) 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 novel coronavirus pandemic.

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

According to IDB, 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, which is mainly concentrated in exporting raw materials or derivatives.

The foreign value-added included in exports from countries of the region has fluctuated between 18 and 19 per cent over the last 30 years, compared to 33 per cent for Asia and 43 per cent 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,” the organisation said.

“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 US by US$70 billion through gradual increases in sectors such as textiles, medical products, and automotive,” IDB said.

IDB studies further indicate that a 10 per cent reduction in international freight costs from Latin America and the Caribbean would boost export values by at least 30 per cent and increase exported products by 25 per cent within the region and to the US.