Inter-American Development Bank
facebook
twitter
youtube
linkedin
instagram
Abierto al públicoBeyond BordersCaribbean Development TrendsCiudades SosteniblesEnergía para el FuturoEnfoque EducaciónFactor TrabajoGente SaludableGestión fiscalGobernarteIdeas MatterIdeas que CuentanIdeaçãoImpactoIndustrias CreativasLa Maleta AbiertaMoviliblogMás Allá de las FronterasNegocios SosteniblesPrimeros PasosPuntos sobre la iSeguridad CiudadanaSostenibilidadVolvamos a la fuente¿Y si hablamos de igualdad?Home
Citizen Security and Justice Creative Industries Development Effectiveness Early Childhood Development Education Energy Envirnment. Climate Change and Safeguards Fiscal policy and management Gender and Diversity Health Labor and pensions Open Knowledge Public management Science, Technology and Innovation  Trade and Regional Integration Urban Development and Housing Water and Sanitation
  • Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Beyond Borders

  • HOME
  • CATEGORIES
    • Asia – LAC
    • Innovation and Technology
    • Investment Attraction
    • Public-Private Alliances
    • Regional Cooperation
    • Regional Integration
    • Trade & Investment Agreements
    • Trade Facilitation
    • Trade Promotion
  • Authors
  • Spanish

The Challenge of Market Competition in the Digital Era

December 6, 2017 by Paolo Giordano - Alejandro Ramos Leave a Comment


Following 25 months of uninterrupted contraction, exports of goods from Latin American and the Caribbean are growing again. After shrinking by 3.3% in 2016, cumulative growth between January and June 2017 was 13.2%. Similarly, exports of services, which had already picked up in 2016, grew by 9.7% in the first quarter according to the Trade and Integration Monitor 2017, a recent publication from the Inter-American Development Bank (IDB).

The recovery of Latin American exports was mainly driven by a price increase that became less intense in the second quarter of 2017 (see figure). Consequently, this trade recovery still seems fragile. It is therefore worth asking how the determinants of the region’s export performance might change in the medium term and how disruptive technologies might affect the future of Latin American trade.

Source: Trade and Integration Monitor 2017

After the global financial crisis, world trade went into a phase of notable stagnation. During this “new normal,” any increases were far lower than was usual during the boom years at the start of the millennium. The region has not been unaffected by the characteristics of this new global trade regime. Between 2010 and 2015, global trade flows grew by 4.1% while Latin American exports increased by just 2.5%, so the region lost market share in global trade. Latin American exports went from representing 6.16% of global trade to 6.07%. If Mexico, whose exports grew markedly during this period, is excluded from the regional aggregate, Latin America’s global market share fell by 14.8%, which is equivalent to US$92.2 billion, with exports going from 4.12% of the global total in 2010 to 3.5% in 2015.

“Postcrisis Latin America lost global market share due to the erosion of its competitiveness”

This export behavior is due to external factors that depend on the structure and dynamics of demand for the products that the region exports, on the one hand, and to the competitiveness of its supply, on the other. External demand had a positive but tiny effect on total postcrisis exports from Latin America and the Caribbean: 0.3 percentage points (p.p.) of the total 2.5% growth. The competitiveness factor, however, had a negative effect on export growth, to the tune of -1.9% p.p.

Source: Trade and Integration Monitor 2017

Not only is the first time since the start of the millennium that competitiveness has had a negative effect on Latin America’s external sales, but its impact has also increased significantly. While between 2000 and 2005 competitiveness accounted for less than 10% of the export variation, between 2010 and 2015 the loss competitiveness was equivalent to 75% of the export growth rate. This downturn in competitiveness emerged in parallel with the end of the commodity price supercycle, which was largely sustained by external demand for over a decade.

The erosion in the region’s competitiveness was particularly seen in manufactures of industrial origin and the intraregional market. Latin America’s market share as a supplier of manufactures decreased mainly within its own market and this downturn not only benefited Asian competitors also suppliers from the US and EU operating in segments with greater value added. The region lost market share in practically every global market: the only exceptions were exports of primary agricultural products to Asia and the industrial manufactures that Mexico exports to the USA.

“E-commerce is an opportunity for Latin American trade in the future”

Looking to the future, in a context of fragile growth and low competitiveness, e-commerce is potentially a potential revitalizing force. It is still marginal in Latin America but has really taken off in recent years. Direct online business-to-consumer (B2C) sales in the region reached US$47 billion in 2015, a 24% increase on the previous year. Argentina, Brazil, and Mexico are the region’s main digital markets, but Colombia and Uruguay are examples of countries using effective strategies to develop this area.

Latin America has the potential to increase its presence in cross-border e-commerce, particularly in the business-to-business and business-to-consumer segments, which are growing at substantially higher rates than global trade in goods. To achieve this, it would have to overcome specific barriers that relate to the digital nature of e-commerce as well as certain longstanding barriers to trade, the costs of which are proportionally greater for operators in the new economy.

The Trade and Integration Monitor 2017 includes a detailed review of the international commitments that Latin American countries have taken on in relation to e-commerce and reveals the significance of a relatively incomplete, fragmented regulatory framework. Specifically, it identifies the wide margins available to governments wishing to implement reforms to facilitate and incentivize these flows. Several countries have put the issue at the top of their multilateral trade cooperation agenda and the upcoming World Trade Organization Ministerial Conference is an opportunity for further progress.

In short, having moved beyond the longest contraction in trade in its recent history, Latin America and the Caribbean is now facing a trade scenario that is substantially less favorable than the one that preceded the global financial crisis. What is urgently needed are productivity stimulus policies to improve the region’s competitive position in international markets so that it can take advantage of the opportunities that disruptive technologies represent for e-commerce.


Filed Under: Innovation and Technology, Trade Promotion Tagged With: International trade, Technology and Innovation

Paolo Giordano

Paolo Giordano es el Economista Principal del Sector de Integración y Comercio del BID, Coordinador del área de Diálogo de Políticas. En esta capacidad ha liderado la preparación de la nueva estrategia corporativa de integración regional y global, dirige programas de investigación orientados a políticas, coordina el dialogo regional de políticas, y desarrolla nuevos instrumentos programáticos y operativos. Es ciudadano italiano, titular de un Doctorado en Economía del Institut Études Politiques de Paris - Sciences Po, de una Maestría de la Universidad Bocconi, y ha completado su formación en la Kennedy School of Government de la Universidad de Harvard.

Alejandro Ramos

Alejandro Ramos se desempeña como Economista Senior del Instituto para la Integración de América Latina y el Caribe del Banco Interamericano de Desarrollo. Ha trabajado como consultor en Argentina, Belice, Bolivia, Chile, Costa Rica e Italia, para organismos internacionales como el BID, la CEPAL y UNCTAD. Es graduado en economía por la Universidad Nacional de Costa Rica y candidato a doctorado en la Universidad Complutense de Madrid.

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Follow Us

Subscribe

Search

Productivity and Trade

This space explores how trade, investment and sustainable development in strategic sectors can boost productivity and strengthen more dynamic, inclusive and resilient economies in Latin America and the Caribbean. From trade facilitation and export and investment promotion to entrepreneurship, the development of public-private synergies, agri-food systems and tourism, we address challenges and opportunities for growth in the region.

Related posts

  • How Competitive Are Latin American Exports?
  • Five Findings About the Impact of the Depreciations on Latin American Exports
  • Latin America Needs to Adapt to the Downshift in Global Trade
  • Why is export diversification so urgent?
  • Exports from Latin America: Is There Light at the End of the Tunnel?

Categories

Footer

Banco Interamericano de Desarrollo
facebook
twitter
youtube
youtube
youtube

    Blog posts written by Bank employees:

    Copyright © Inter-American Development Bank ("IDB"). This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives. (CC-IGO 3.0 BY-NC-ND) license and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed. Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC- IGO license. Note that link provided above includes additional terms and conditions of the license.


    For blogs written by external parties:

    For questions concerning copyright for authors that are not IADB employees please complete the contact form for this blog.

    The opinions expressed in this blog are those of the authors and do not necessarily reflect the views of the IDB, its Board of Directors, or the countries they represent.

    Attribution: in addition to giving attribution to the respective author and copyright owner, as appropriate, we would appreciate if you could include a link that remits back the IDB Blogs website.



    Privacy Policy

    Copyright © 2025 · Magazine Pro on Genesis Framework · WordPress · Log in

    Banco Interamericano de Desarrollo

    Aviso Legal

    Las opiniones expresadas en estos blogs son las de los autores y no necesariamente reflejan las opiniones del Banco Interamericano de Desarrollo, sus directivas, la Asamblea de Gobernadores o sus países miembros.

    facebook
    twitter
    youtube
    This site uses cookies to optimize functionality and give you the best possible experience. If you continue to navigate this website beyond this page, cookies will be placed on your browser.
    To learn more about cookies, click here
    X
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
    Non-necessary
    Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
    SAVE & ACCEPT