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Trade Integration in Latin America and the Caribbean

By Federico Mazzella ,
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Overview and opportunities for equitable development in the region.

Based on 12 analytical studies, the International Monetary Fund’s cluster report Trade Integration in Latin America and the Caribbean examines the factors that determine trade, explores the potential for enhancing trade integration in Latin America and the Caribbean, and assesses the associated economic and social effects of this.

One novel aspect of this report is that, to “deepen understanding of the region’s policy options and trade strategies, [it] also incorporates the views of LAC country authorities [and] provides an opportunity to examine the alignment of recommendations based on the analytical findings with the region’s current trade policy priorities.” However, it is worth pointing out that the surveys in question were conducted between mid- and late 2016 , “prior to the most recent developments in the global trade landscape.”

Findings

“The report finds that LAC can reap important growth benefits from further trade integration. With trade integration below that of other regions, there is scope for LAC to increase trade as an engine of growth and help offset the weaker economic outlook without adversely affecting overall income inequality.”

The report distinguishes between inter- and intraregional integration, arguing that although it would be possible to improve trade integration on both fronts, the current political momentum behind greater trade openness may provide particular impetus to intraregional trade integration.

Trade could be promoted through “a regional trade agreement, convergence of trade rules and regulatory standards, and measures to support trade facilitation.”

Furthermore, “strategies to bolster the region’s interregional integration could be centered on unilateral liberalization as a complement to existing efforts to expand LAC’s network of trade agreements.”

The report also stresses the importance of complementary policies, arguing that “continued regional efforts to strengthen infrastructure and human capital would be useful as part of a broad growth strategy.” Such policies may also “enhance trade integration, including by facilitating participation in global value chains which may offer new opportunities for technology transfer, and are critical to diversifying and upgrading the complexity of LAC’s exports.”

Finally, the report argues that “strengthened social safety nets can help lessen adjustment costs linked to further integration and promote an equitable distribution of gains from trade.”

Trade Integration in Latin America and the Caribbean. IMF, 2017.

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