ECLAC Calls on Latin America and the Caribbean to Reinvigorate Integration and Bolster Intraregional Trade

The Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, called on the region’s countries to reinvigorate the process of integration and bolster intraregional trade to confront new global challenges, during the meeting of the World Economic Forum on Latin America 2018 in São Paulo, Brazil.

The most senior representative of the United Nations regional organization participated in various panels that addressed the region’s geopolitical reality and its prospects in the current global context; the state of regional integration; and the convergence between the Pacific Alliance and the Southern Common Market (MERCOSUR).

Bárcena gave her first presentation on the panel “Latin America Update,” where other speakers included Isabel de Saint Malo, Vice President of Panama; Daniel Zovatto, Regional Director of the International Institute for Democracy and Electoral Assistance; Denise Dresser, Political Analyst from the Autonomous Technological Institute of Mexico (ITAM); and Ricardo Villela, Executive Vice-President of Banco Itaú, with Gustau Alegret, NTN24’s U.S. news director, acting as moderator. There, ECLAC’s Executive Secretary addressed the regional scenario in the context of the numerous electoral processes that will take place in 2018 and 2019.

She warned that the 165 million young people living in the region “do not necessarily find their place in the national projects that are being designed for the future. There is a risk of a growing disconnect between the youth of the region and traditional government institutions and representatives, as well as a significant gap between the opportunities for well-being that are produced by the current, more favorable economic conditions and the real satisfaction felt by ordinary citizens, who do not perceive these benefits,” she affirmed.

In the context of the current digital revolution and of global geopolitical and trade-related changes, Alicia Bárcena urged countries to embrace “a paradigm shift and a new narrative, oriented toward a renewed public-private-citizen compact with an emphasis on continuing education, technology and innovation,” which allows for leaving behind the region’s structural inequalities and injustices, which affect first and foremost women, young people and ethnic and Afro-descendant minorities.

Furthermore, she called for ending impunity based on the culture of the privileges that characterize societies in the region and urged for the provision of public goods that are more collective, of better quality and less segmented, with the active participation of the private sector. In this vein, she called for forging a great regional compact between the public and private sectors to move ahead toward the fourth industrial revolution. “My proposal is for a major compact in favor of technological innovation,” she stressed.

Later in the day, Bárcena participated on the panel “Regional Integration: Full Steam Ahead?”, which was moderated by Alberto Bello, Editorial Director of Grupo Expansión, and where the other speakers were Ildefonso Guajardo, Mexico’s Secretary of the Economy; Nicola Calicchio, Managing Partner of McKinsey & Company for Latin America; Alejandro Ramírez, Chief Executive Officer of Cinépolis; and Marcos Troyjo, Co-Director of BRICLab at Columbia University.

During her presentation on this panel, ECLAC’s top representative indicated that Latin America and the Caribbean has reacted to a complex trade scenario by intensifying its ties with partners outside the region, in particular with China and other economies in Asia, highlighting for example the recent signing of the CPTPP, which she described as positive. However, she added, reinvigorating integration and trade with partners inside the region is much better, because it integrates small and medium-sized enterprises in value and export chains, even if this continues to be a pending matter.

Bárcena underscored the great potential of a regional market with more than 630 million people, which nonetheless continues to be underexploited. She recalled that, while some important progress has been made, in particular the agreements reached within MERCOSUR to define common systems for foreign investment, in April 2017, and for public hiring, in December 2017, the region still has much to do in terms of deepening its economic integration.

“Unfortunately, intraregional trade continues to be very low in comparison with international standards, representing just 17% of the region’s total exports,” she specified.

She indicated that these low levels of intraregional trade can be explained by the region’s vast size, covering more than 20 million square kilometers, and its difficult geography; by a deficient transportation infrastructure; overlapping endowments of natural resources in many South American countries; and the gravitational pull that the United States’ economy has on Mexico and Central America.

“However, all of these difficulties are aggravated by the great fragmentation of the regional market. Several integration agreements coexist, each one with its own rules on issues from production standards to public procurement and the handling of foreign direct investment. The integration schemes still lack measures that favor the mobility of people, of their capacities, talents and their insertion in labor markets from one country to another,” she stated.

Bárcena added that “these regulatory discrepancies impose high costs on companies, especially the small and medium-sized ones that export or invest in regional markets. They also hinder the development of regional value chains.”

“Latin America has to turn toward diversifying its trading partners within this very region and strengthening initiatives for trade facilitation and for the development of regional digital markets. In this sense, the convergence between MERCOSUR and the Pacific Alliance is very good news and we must continue fostering it,” she stated.

She highlighted that 80% of Latin America’s exports come from South America, but that they are basic products lacking much value-added. For that reason, she said, “it is very important that we see the complementarities between countries, but also the capacities that we have to add value to what we are doing, the incorporation of greater levels of knowledge and technology.”

In addition, on behalf of the United Nations Secretary-General, António Guterres, Bárcena participated in a debate about new opportunities for strengthening the region’s advantages with regard to its great endowment of natural resources, especially in the mining of copper and lithium, in view of a future with electric cars and the decarbonization of economies, bolstering alternatives sources of renewable energy.

She also presented the results of the recently released Social Panorama report regarding the future of the region’s pension systems in combination with issues of gender equality, particularly in reference to women’s economic autonomy.

At all of these events, ECLAC’s Executive Secretary reiterated the importance of concentrating efforts on fighting inequality in wealth, income, access to education and health. She cited the importance of achieving political compacts for the provision of public goods from an economic perspective, which is to say, showing that the inefficiencies of inequality are significant.

“More equal societies are more productive and innovative. This is the essential path for achieving the full integration of the region’s 165 million young people toward a sustainable and more egalitarian future,” she concluded.