Too Far to Export: Domestic Transport Costs and Regional Export Disparities in Latin America and the Caribbean

Driven by declining import tariffs, poor infrastructure and increasing specialization in transport-intensive goods, transport costs are arguably today’s most formidable obstacles to trade in Latin America and the Caribbean (LAC). However, little knowledge is available on their trade impacts in the region, both behind and beyond the border. This study, which is part of a broader IDB research effort to fill this gap, assesses the role of domestic transport costs (“factory-to-port”) in shaping the level and diversification of countries’ overall and subnational exports. The subnational dimension is particularly important given that LAC’s exports are heavily concentrated in a few municipalities. Resorting to a number of empirical strategies and using a novel database --which covers origin-destination and transport costs of municipal exports in five of the largest countries in the region (Brazil, Chile, Colombia, Mexico, and Peru)--the study shows that lower transport costs can have a significant impact, particularly on those municipalities that export the least.