“There is a very close relationship between industrialization, manufacturing and integration, because the creation of value chains helps to create high-quality jobs and foster productivity at the same time, while agriculture and natural resources-based sectors lag behind in terms of innovation and social protection,” Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), stated today during a high-level, virtual international event organized by the Development Centre of the Organisation for Economic Co-operation and Development (OECD).
Bárcena participated in the event entitled “Road to regional integration: what are the drivers and constraints?” as part of the DEV Talks series on reshaping development organized by the OECD, in which the other speakers were Anita Prakash, Director for Policy Relations at the Economic Research Institute for ASEAN and East Asia (ERIA); Ibrahim Assane Mayaki, Chief Executive Officer of the African Union Development Agency (AUDA-NEPAD); and Diene Keita, Deputy Executive Director for Programmes of the United Nations Population Fund (UNFPA) and former Minister for Cooperation and African Integration of the Republic of Guinea. The discussion was moderated by Mario Pezzini, Director of the OECD Development Centre.
In her presentation, Alicia Bárcena emphasized that the current process of weakening globalization is offering opportunities for regional productive integration while also posing a challenge, since the restructuring of the global economic geography is producing a realignment of value chains due to reshoring and nearshoring processes.
“The regionalization underway at a global level will probably revolve around three main regions: North America, with the United States at the center; Europe, with Germany at the center; and Asia Pacific, with China, Japan and Korea grouped around the Regional Comprehensive Economic Partnership (RCEP). How can Latin America and the Caribbean take advantage of this process?” Bárcena inquired.
According to the senior United Nations official, it is not possible to forge a single strategy, since there are three very different realities in the region, each with their own progress and setbacks in terms of integration. On the one hand, Central America, Mexico and the Dominican Republic have one of the most successful integration mechanisms: the Central American Common Market (CACM), created more than 60 years ago and which has managed to establish value chains with North America.
South America, meanwhile, has a very different reality, experiencing problems because its exports are mainly based on natural resources and its integration schemes are increasingly fragmented and are losing space, such as MERCOSUR and the CAN (Andean Community of Nations). In addition, a “lock-in” effect has occurred with China, its main trading partner, which has intensified with the pandemic, meaning that this subregion faces a very high risk of reprimarization.
And then there is the Caribbean, with the Caribbean Community (CARICOM) and the Organisation of Eastern Caribbean States (OECS), which has been the most successful such effort, but these countries face difficulties due to their insularity, their high levels of indebtedness, their extreme vulnerability to climate change, and their lack of integration with global markets.
Bárcena added that another serious problem confronted by the Latin America and Caribbean region lies in its low level of intraregional trade: this amounted to just 13% before the pandemic, compared with nearly 40% in Asia Pacific and 65% in Europe. Now, with the effects of the crisis unleashed by COVID-19, such trade has declined even further, to 11%.
Regarding the state of the region in light of the pandemic, ECLAC’s Executive Secretary indicated that everyone is aware of the world’s fragility and how important it is to act together. However, this has not translated into concrete joint efforts because each country is trying to escape the pandemic using a very individualistic approach, she added.
“We have options and challenges in the face of this. One of them is COVAX (the platform created for the production and distribution of the vaccines), digital technologies and markets, which are essential, and above all financing for development, which must be an opportunity for our region to participate with a single voice on many fronts, for instance, regarding the Special Drawing Rights of the International Monetary Fund (IMF) and regarding access to concessional funding for middle income countries (many of which are located in Latin America),” she stated.
Bárcena explained that middle income countries account for 96% of global debt. “So if those countries have a problem, the world will have a problem,” she said. She added that the G20’s Debt Service Suspension Initiative (DSSI) “falls very short” because it doesn’t include middle income countries or, even more importantly, Small Island Developing States (SIDS). In that sense, she praised Costa Rica’s proposal for the FACE fund (totaling $516 billion dollars), precisely because it can help countries regardless of their graduation status based on income level.
“What our region needs is: leadership from key countries, and here I call on Brazil and Mexico since they represent 55% of the region’s GDP and 53% of its population; platforms for debate, one of which is ECLAC itself; an integrated market; and the strengthening of strategic industries, such as pharmaceuticals and medical supplies, renewable energy, the circular economy, electromobility and, of course, the digital market,” she underscored.
“Latin America and the Caribbean is the world’s most unequal region – not the poorest, but the most unequal. Inequality conspires against development, it is inefficient and it does not allow the population to absorb technical progress. We need trade facilitation, infrastructure and logistics, digital cooperation, but most importantly, a social protection system that becomes universal,” Alicia Bárcena concluded.