From independence, Latin American countries’ dream of a more united continent was on the horizon – where it remained stuck for two centuries. Today, deepening trade ties are finally advancing the integration so long frustrated by the politics of national narcissism.
It is hard to think of a region that has more to gain from deeper interregional economic ties. Latin America’s cultural and linguistic affinities should make it a natural single market – with a scale large enough to compensate for the cost of overcoming the continent’s big natural barriers. But this ambition long fell foul of inward-looking and misguided governments.
As a Financial Times report on Latin American trade points out, however, this has now changed. The days of import-substitution have given way to an avid hunger for trade, spurred in no small part by China’s reconfiguration of the global trading system. China now vies with the US as the region’s most important trading partner.
As important, if less noticed, is the growth of intra-Latin American trade. Only partial credit can go to the proliferation of bilateral deals: these are as likely to divert trade that otherwise would be conducted with non-partner countries as they are to create new trade. Many bilateral relationships are in any case uncovered by trade deals.
Rather, the brisk climb of intra-regional trade – 8.9 per cent yearly in the past decade – reflects physical infrastructure and private business networks making the continent smaller. This year will see the completion of the inter-Oceanic highway, the first paved road to cross Latin America coast to coast. More energy is generated in cross-border projects. Large nationally-based companies increasingly treat the whole region as their home.
All this is both a cause and a consequence of the efficiency gains that come with scale. A population of nearly 600m and annual output of $3,000bn makes the regional market a worthy rival to China.
And a useful one, too. Latin American-Chinese trade is largely based on selling raw materials in exchange for manufactures. This makes sense given the two regions’ resource endowments. In contrast, Latin America’s trade with itself is less driven by resource differences and more by the scaling up of similar markets. This benefits services and manufacturing industries that the region, overdependent on commodities exports, must cultivate.
Latin America still trades much less with itself than do Europe and Asia. This reflects how much more work remains to be done – but also how much more is to be gained.
Source: www.ft.com
It is hard to think of a region that has more to gain from deeper interregional economic ties. Latin America’s cultural and linguistic affinities should make it a natural single market – with a scale large enough to compensate for the cost of overcoming the continent’s big natural barriers. But this ambition long fell foul of inward-looking and misguided governments.
As a Financial Times report on Latin American trade points out, however, this has now changed. The days of import-substitution have given way to an avid hunger for trade, spurred in no small part by China’s reconfiguration of the global trading system. China now vies with the US as the region’s most important trading partner.
As important, if less noticed, is the growth of intra-Latin American trade. Only partial credit can go to the proliferation of bilateral deals: these are as likely to divert trade that otherwise would be conducted with non-partner countries as they are to create new trade. Many bilateral relationships are in any case uncovered by trade deals.
Rather, the brisk climb of intra-regional trade – 8.9 per cent yearly in the past decade – reflects physical infrastructure and private business networks making the continent smaller. This year will see the completion of the inter-Oceanic highway, the first paved road to cross Latin America coast to coast. More energy is generated in cross-border projects. Large nationally-based companies increasingly treat the whole region as their home.
All this is both a cause and a consequence of the efficiency gains that come with scale. A population of nearly 600m and annual output of $3,000bn makes the regional market a worthy rival to China.
And a useful one, too. Latin American-Chinese trade is largely based on selling raw materials in exchange for manufactures. This makes sense given the two regions’ resource endowments. In contrast, Latin America’s trade with itself is less driven by resource differences and more by the scaling up of similar markets. This benefits services and manufacturing industries that the region, overdependent on commodities exports, must cultivate.
Latin America still trades much less with itself than do Europe and Asia. This reflects how much more work remains to be done – but also how much more is to be gained.
Source: www.ft.com
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