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Competitiveness in the Latin American manufacturing sector: trends and determinants

Author

Listed:
  • Alicia Garcia-Herrero
  • Enestor Dos Santos
  • Pablo Urbiola
  • Marcos Dal Bianco
  • Fernando Soto
  • Mauricio Hernandez
  • Rosario Sanchez
  • Arnulfo Rodriguez

Abstract

After analysing the evolution of exports from the large Latin American countries over the last decade, and examining on a case by case basis the determinants for each country’s performance, this study concludes that competitiveness in the manufacturing sectors of most countries in the region went down from 2007 to 2012, after relatively favourable progress in the previous five-year period between 2002 and 2007. This recent deterioration, which has been more noticeable in countries such as Brazil and Colombia, is related to the real exchange rate appreciation, high labour costs and insufficient progress in labour productivity. The main exception to these regional trends is Mexico, where gains in the manufacturing sector’s competitiveness continued beyond 2007, partly because the exchange rate stayed relatively depreciated and labour costs, as well as work productivity, performed better than in the South American countries. However, from 2011 onwards, the reversal of these trends has been making it difficult for the Mexican manufacturing sector to gain competitiveness. Case studies of each of the region’s main countries show that in general the exchange rate, labour costs and work productivity were the main determinants in the evolution of manufacturing competitiveness in the last decade. In fact, the countries and periods where these variables performed poorly coincide with losses of market share in international trade and deteriorating competitiveness. Nevertheless, the impact of the remaining variables affecting the manufacturing sector’s competitiveness is not insignificant either. In fact, gains in competitiveness have been greater (and losses in competitiveness smaller) in Chile and Peru, where the institutional framework has improved and logistics and energy costs reduced or kept under control.

Suggested Citation

  • Alicia Garcia-Herrero & Enestor Dos Santos & Pablo Urbiola & Marcos Dal Bianco & Fernando Soto & Mauricio Hernandez & Rosario Sanchez & Arnulfo Rodriguez, 2014. "Competitiveness in the Latin American manufacturing sector: trends and determinants," Working Papers 1411, BBVA Bank, Economic Research Department.
  • Handle: RePEc:bbv:wpaper:1411
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    References listed on IDEAS

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    1. Lall, Sanjaya, 2001. "Competitiveness Indices and Developing Countries: An Economic Evaluation of the Global Competitiveness Report," World Development, Elsevier, vol. 29(9), pages 1501-1525, September.
    2. Canuto, Otaviano & Cavallari, Matheus & Reis, José Guilherme, 2013. "The Brazilian Competitiveness Cliff," World Bank - Economic Premise, The World Bank, issue 105, pages 1-8, February.
    3. Canuto, Otaviano & Cavallari, Matheus & Reis, Jose Guilherme, 2013. "Brazilian exports : climbing down a competitiveness cliff," Policy Research Working Paper Series 6302, The World Bank.
    4. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, pages 366-420.
    5. Dos Santos, Enestor & Zignago, Soledad, 2012. "The Emergence of China and the Evolution of International Trade in Brazil," Revista Integración y Comercio (Integration and Trade Journal), Inter-American Development Bank, INTAL, vol. 35(16), pages 83-102.
    6. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, pages 366-420.
    7. Eckhard Siggel, 2006. "International Competitiveness and Comparative Advantage: A Survey and a Proposal for Measurement," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 137-159, June.
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    Cited by:

    1. Errea, Damián, 2012. "Tipo de cambio real multilateral en Argentina (1994-2007): un análisis sobre sus determinantes; su valor de equilibrio y su vinculación con el flujo neto de capitales," Nülan. Deposited Documents 1654, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    2. Jafarli, Said, 2017. "Moves Towards an Islamic Common Market: Evaluation of the Potentials," MPRA Paper 79179, University Library of Munich, Germany, revised 2017.
    3. repec:zbw:espost:163428 is not listed on IDEAS
    4. Jorge Mario Uribe & Natalia Restrepo López, 2015. "Dinámica del tipo de cambio, quiebre estructural e intervenciones de política en Colombia," REVISTA ECOS DE ECONOMÍA, UNIVERSIDAD EAFIT, vol. 19(41), pages 24-44, December.

    More about this item

    Keywords

    Latin America; competitiveness; manufacturing; exports;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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