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What can be said of Latin America and the Caribbean's experiment with regional integration? Did it live up to the expectations? What does this experience say about the regional integration agenda moving forward? Do the tectonic changes undergone by the world economy in the last quarter of a century matter for policy design? This report offers answers to these pressing questions. It argues that while the "new regionalism" was in general effective to promote international trade, it failed to boost the region's competitiveness abroad. Fragmentation is seen as the original sin, and convergence the path to redemption. The policy recommendations offer different routes to convergence, from a cautious, cumulation of rules or origin approach to a non-stop sprint to a LAC-FTA. But they all come with a warning: in the current challenging trade environment, the benefits of caution might be too little, too late.

This paper uses the sudden surge in Chinese competition faced by Brazil's manufacturers in the 2000s to revisit the findings from the literature on how productivity, innovation, and employment were impacted by the Great Liberalizationa period of massive trade opening in the early 1990s in Latin America. Using manufacturing firm-level data and sectoral variation of Chinese competition, we focus on the most intense period of the shock -2000 to 2013- and on its procompetitive and employment effects. The results reinforce some of the key findings of the earlier literature, notably the positive, procompetitive effect of trade on total factor productivity (TFP). However, as in the 1990s, these gains do not seem to have been robust enough to prevent the countrys TFP performance from being dismal. Likewise, they seem to be more consistent with level effects than growth effects. Inconclusive results on innovation also seem to point in this direction. The estimated effects on employment point to a relatively small negative shock, not unlike that of the early 1990s, that was centered on low-skilled labor and was consistent with the countrys relative abundance of natural resources. Overall, the results seem to underline the limits of trade policy in boosting employment and long-term productivity growth. Policymakers should manage their expectations accordingly.

Effectively fighting the pandemic requires thorough understanding of the gaps in public policies that governments must address. To this end, Bank experts have recently drafted two documents aimed at helping to diagnose the situation each government in the region is facing and identify immediate actions to mitigate the consequences (Public Policy to Tackle Covid-19: Recommendations for Latin America and the Caribbean'', IDB 2020), as well as identify actions in public policies necessary to face the period of economic recovery once the severe health crisis has been overcome (''Exiting the pandemic tunnel with growth and equity: A strategy for a new social compact in Latin America and the Caribbean'', IDB 2020). This document complements the Bank's vision with respect to actions needed for post-pandemic economic recovery, focusing on investment in infrastructure as a mechanism to drive job creation, regional integration, and inclusive environmentally sustainable economic growth.

While the pandemic lasts, Latin America and the Caribbean (LAC) will go through a tunnel full of uncertainty. It is not known especially how long it is: how long until therapies or a vaccine emerge, or until best practices are known to control the pandemic to live with a virus of unknown lethality. This note describes policy options on how countries can expand their possibilities to meet the economic challenges of the crisis, with an emphasis on growth and equity. These options are based on the assumption that the fiscal situation of the region and its access to sovereign credit markets are much more restricted than in previous crises, which forces to think about policy reforms beyond fiscal ones to accelerate the Economic recovery. The options are ambitious, but the ambition meets the need. This document is part of a series of 3 IDB monographs on public policies in the context of COVID-19. The other documents can be consulted at the following links: Public Policy to Tackle COVID-19: Recommendations for Latin America and the Caribbean: https://publications.iadb.org/en/public-policy-to-tackle-covid-19-recommendations-for--latin-america-and-the-caribbean From Lockdown to Reopening: Strategic Considerations for the Resumption of Activities in Latin America and the Caribbean within the framework of Covid-19 https://publications.iadb.org/en/from-lockdown-to-reopening-strategic-considerations-for-the-resumption-of-activities-in-latin-america-and-the-caribbean-within-the-framework-of-covid-19

The aim of this document is to examine the public policy options available to LAC countries and provide inputs for discussion by their governments. It focuses on the public policy challenges of managing the health and economic crises of the first two stages of the pandemic: (1) the health emergency and general confinement of the population and (2) the transition toward partial restrictions and a gradual restarting of economic activities. It does not address the third stage: economic recovery once the pandemic has been controlled. Specifically, the paper (1) discusses the important policy tensions or trade-offs that governments are attempting to reconcile; (2) describes the limits and restrictions they face in responding to the health and economic crises and how they vary among LAC countries; and (3) recommends measures and interventions and their sequencing over time. This document is part of a 3-monograph IDB series on public policies in the context of COVID-19. The other documents may be downloaded using the following links: From Lockdown to Reopening: Strategic Considerations for the Resumption of Activities in Latin America and the Caribbean within the framework of Covid-19 https://publications.iadb.org/en/from-lockdown-to-reopening-strategic-considerations-for-the-resumption-of-activities-in-latin-america-and-the-caribbean-within-the-framework-of-covid-19 Emerging from the Pandemic Tunnel with Faster Growth and Greater Equity: A Strategy for a New Social Compact in Latin America and the Caribbean https://publications.iadb.org/en/emerging-from-the-pandemic-tunnel-with-faster-growth-and-greater-equity-a-strategy-for-a-new-social-compact-in-latin-america-and-the-caribbean

As Latin America and the Caribbeans “Great Liberalization” reaches its 30th anniversary, we revisit the trade and growth debate by updating and expanding Estevadeordal and Taylors 2013 paper. To better understand the regions heterogeneity of policies and outcomes, we extend this analysis to include a larger sample of countries, a new and more disaggregated bilateral product-level tariff dataset; a longer timespan; and a country-sector analysis. The results indicate that liberalization is likely to have made a significant contribution to the acceleration in growth observed in the postliberalization periodan extra 0.6 to 0.7 percentage points on annual per-capita growth-driven by lower tariffs on capital and intermediate goods (as suggested by Solows growth model) and by the manufacturing sector.

Thirty years after the region embarked on large-scale liberalization, trade policy could have been expected to become all but irrelevant. Instead, a mismatch between expectations and what could realistically be delivered set the stage for much of the disappointment, skepticism, and fatigue regarding trade policy in the region, particularly in the early 2000s. By setting the bar unrealistically high, governments and analysts made trade policies an easy target for special interests that were hurt by liberalization and for those ideologically opposed to free trade. The most immediate victims were the more tangible growth and welfare gains, whose relevance was lost amid the noise of grandiose visions. Liberalization made most countries better off, on the back of substantive productivity gains. The growth results are also impressive. On the other hand, the employment and inequality outcomes fell short of expectations. Acknowledging these lessons on the limits of trade and investment policies and the need for complementary action is important, but putting together an effective policy agenda for the future involves other challenges—some old, some new—brought on by geopolitical and technological changes. Trade is a hot issue in today’s world, and this book provides informed suggestions on how Latin America and the Caribbean can successfully confront this heat.

To study how trade liberalization has impacted Latin Americas extensive and intensive margins between 1990 and 2015, we estimated the random growth first-difference model proposed by Baier, Bersgtrand, and Feng (2014), replacing their economic integration agreement dummy with a tariff-change variable. We found that in the short run (over five years), lowering bilateral country tariffs increases the value of trade and the intensive margin, but not the extensive margin. For the long-term analysis (over 25 years), we estimated an extended version of Debaere and Mostasharis (2010) methodology, finding that the range of products that Latin American countries exported increased only 4.61% due to tariff reductions between 19902015.

More than thirty experts from India and Latin America imagine the future of cooperation between the two regions. They point to South-South integration as the inevitable path to export diversification and a key factor in achieving balance in global governance. The issues analyzed in this report include the opportunities that come with industry 4.0, new value chains, e-commerce, microfinance, and synergies in agricultural production, the vehicle sector, and the orange economy. Through concrete proposals on how to move forward with trade negotiations, facilitate investment and trade, and expand diplomatic ties, the specialists brought together by INTAL/IDB suggest ways to strengthen a partnership that is key to the development of Latin America’s economies.

This paper assesses the LAC's import substitution response to the recent wave of currency devaluations. For this purpose, this document uses both descriptive data and a simple econometric model to establish the short-term relationship between exchange rate movements and import penetration (total and within manufacturing sector) in the region, with a special focus on those countries that had experienced the largest depreciations. The results suggest that there is a significant relationship between depreciation and the decrease in import penetration, indicating that a 1% increase in the local currency depreciation reduces the IP by 0.41% to 0.69% and varies in those sectors with a stronger presence of domestic production.

The book looks into recent development and economic trends in India and their possible impact for Latin America and the Caribbean. The study argues that India has the potential to mirror the recent economic performance of China, which has become a major market for Latin American and Caribbean exports but also poses a challenge for the region's manufacturing and service sector.

How to build a convergence within the diversity of integrationist experiences? How can global efforts converge with regional and national realities through a glocal (global + local) governance that supports a productive integration and generates sustainable jobs? In this context of new challenges, Latin America must face the transformation of the Chinese economic model. After years of keeping prices of raw materials high, an exponential growth and an active investment policy in the region, Chinese economy grows at a slower rate, shows greater financial volatility, and shifts the focus from production to consumption. How will this metamorphosis impact on Latin-American development? What are the ways to overcome the stage of mere exchange of commodities for industrial products? How to move forward to a technology transfer that fosters innovation and facilitates export diversification? World-class authors, diplomats, negotiators, academics and private sector representatives analyze here the outlook of the linkage with the Asian giant. From an interdisciplinary approach, the Institute for the Integration of Latin America and the Caribbean (INTAL), a unit of the Department of Integration and Trade of the Inter-American Development Bank (IDB), makes through this volume a contribution to building a regional agenda to jointly address the questions of the current scenario.

This document contains the appendices to the study "Infrastructure and Export Performance in the Pacific Alliance". It includes: a) Theoretical Setup, b) Estimation Strategy, c) Transport Costs, d) Estimation Results, e) Selected Projects, f) Simulations, and g) Regional Groupings.

For Latin America and the Caribbean (LAC), Asia has gone from an afterthought to a centerpiece of economic relations over the last decade. Seemingly out of nowhere, fast-growing Asian economies became major trade partners, snapping up the region's mineral and agricultural exports at a breathtaking pace, while providing a steady stream of low-cost manufactures and consumer products to its expanding domestic markets.

This current study considers a large sample of LAC firms and analyzes in more detail how their strategies follow distinct patterns in different sectors. In doing so, we shed new light on how firms in the region have come to establish themselves in the Chinese market and draw policy recommendations for supporting private sector initiatives to penetrate the Chinese market. This report takes one step further in trying to fill a gap in our understanding of a potentially important avenue for achieving a more balanced LAC-China economic relationship. It proceeds as follows. Part I gives a brief macro overview of LAC-China trade and investment. The following section analyzes the presence of Latin American firms in China using an original dataset of 98 firms from the region and presents a typology of internationalization strategies employed. To conclude, Part III offers policy recommendations for supporting the private sector's efforts to enter the Chinese market, and area of increasing interest among LAC governments.

In spite of the fact that they make up more than 90% of firms and account for a substantial portion of employment in these countries, rather little is known about the role of small- and mid-size enterprises (SMEs) in Latin American and the Caribbean (LAC) trade. In particular, there are a series of pending yet pivotal questions, such as: To what extent and how do SMEs contribute to their countries exports? How internationalized are LAC SMEs compared to SMEs in other world regions? How diversified are LAC SMEs exports across products and destinations? What are the key bottlenecks to LAC SME internationalization? This issue of the Journal intends to drive a holistic, thoughtful and targeted discussion of patterns of SME internationalization and its major bottlenecks and how they can be (or not) mitigated most effectively.