Regional Public Goods in Finance, Trade, and Infrastructure: An Agenda for Latin America

This paper analyzes the potential for regional collective action in Latin America in the areas of finance, trade and infrastructure. First, regional cooperation within increasingly important global financial and trade institutions (such as the G20, the Financial Stability Board, the Basle Committees, the IMF and the WTO) may enhance the influence of the region in the pursuit of its common interests. Second, regional harmonization of financial markets regulations and cooperation in supervision could play a key role in achieving a safer and more efficient financial integration into the global economy. Integration of regional securities and insurance markets and setting up regional catastrophic insurance facilities may also bring significant efficiency gains. Third, some degree of collective pooling of reserves (through a Regional Monetary Fund) would also contribute to a safer and more efficient financial integration. Fourth, completing missing links in the “spaghetti-bowl” of regional (and extra regional) free trade areas (FTA´s), deepening trade liberalization within them and, especially, harmonizing rules of origin and other trade practices under current overlapping FTA’s, could render major efficiency benefits. Fifth, given that at present high freight costs are limiting trade expansion (especially intra-regional trade), even more than remaining tariffs and quotas, selected regional transport infrastructure initiatives and harmonization of regulatory frameworks can lead to significant efficiency gains. Cooperation in logistics and in maritime and air transport negotiations can also deliver large benefits. Sixth, regional infrastructure and regulation in telecommunications and energy may further lead to significant efficiency gains. Regional development banks can contribute to set up or strengthen specialized regional institutions required to solve the complex coordination, cost-allocation, financing and conflict resolution problems that are at present limiting regional collective action in these areas.