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Global and Regional Value Chains in Latin America in Times of Pandemic

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  • Alviarez, Vanessa

Abstract

Global value chains (GVCs) provide countries with opportunities to diversify trade, and boost productivity and growth by specializing in one stage of the production process. However, for the most part, Latin America and the Caribbean participation in GVCs remains low (18 percent) compared to Asia (28 percent) and Europe (34 percent). The COVID-19 pandemic, plus concerns regarding protectionism and the more frequent occurrence of natural disasters, have provided incentives for countries and companies to reassess their positions in global value chains. This crisis has taken a huge toll on trade, but it could also be an opportunity to boost regional integration and value chains within the region. Despite the crisis, some firms have performed well, even in those sectors where global demand has fallen, while others have lost market share. This paper analyzes the performance of individual firms, drawing on the study of rich micro data, to understand their different capacity of trade creation and destruction over the crisis. Results suggest five firm characteristics play a key role in explaining export performance during the pandemic: i) firm size, ii) diversification of export markets, iii) importer status of the firm, iv) distance from foreign suppliers, and v) performance of the firms suppliers and customers. The results are then used to outline policies fostering firms participation in global value chains.

Suggested Citation

  • Alviarez, Vanessa, 2022. "Global and Regional Value Chains in Latin America in Times of Pandemic," IDB Publications (Working Papers) 12487, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:12487
    DOI: http://dx.doi.org/10.18235/0004524
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    References listed on IDEAS

    as
    1. Alviarez, Vanessa, 2019. "Multinational production and comparative advantage," Journal of International Economics, Elsevier, vol. 119(C), pages 1-54.
    2. Raphael Lafrogne-Joussier & Julien Martin & Isabelle Mejean, 2023. "Supply Shocks in Supply Chains: Evidence from the Early Lockdown in China," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(1), pages 170-215, March.
    3. Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 819-863.
    4. Jean-Noël Barrot & Julien Sauvagnat, 2016. "Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(3), pages 1543-1592.
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    More about this item

    Keywords

    global value chains; COVID-19; Production networks; Shock propagation;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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