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Latin America & Caribbean

What are trade blocs and how do two of Latin America’s largest compare?

Saulo Teodoro Ferreira's picture

Trade blocs are intergovernmental agreements intended to bring economic benefits to their members by reducing barriers to trade.

Some well known trade blocs include the European Union, NAFTA and the African Union. Through encouraging foreign direct investment, increasing competition, and boosting exports, trade blocs can have numerous benefits for their members.

In Latin America, Mercosur and the more recently formed Pacific Alliance blocs together represent about 93 percent of the region's GDP at 2014 market prices. Who participates in these trade blocs and how do they compare?

Size, membership and performance of Mercosur and The Pacific Alliance

​The Pacific Alliance is a Latin American trade bloc formed in 2011 among Chile, Colombia, Mexico, and Peru. Together the four countries have a combined population of about 221.3 million and GDP of $2.1 trillion. The Southern Common Market (Mercosur) created in 1991, includes Argentina, Brazil, Paraguay, Uruguay, and Venezuela. Together the five Mercosur countries have 285.0 million inhabitants and GDP of $3.5 trillion.

One of the areas intended to benefit from these agreements, trade within the blocs, accounts for about 4 percent of the Pacific Alliance's total trade and about 14 percent in Mercosur.

Five lessons of regional integration from Asia, America, and Africa

Sanjay Kathuria's picture
More than 50% of today’s international trade goes through regional trading arrangements.  While trade is a critical component of regional integration, integration has several other dimensions including energy cooperation and intra-regional investment, to name a few.  After carefully examining cases of regional integration in Southeast Asia, the Americas and Africa, we present five lessons for South Asia.

Lesson 1: Facilitate trade in goods and services

Despite falling tariffs, there is still a large gap between the price of the exported good and the price paid by the importer, largely arising from high costs of moving goods, especially in South and Central Asia. On a percentage basis, the potential gains to trade facilitation in South and Central Asia, at 8 percent of GDP, are almost twice as large as the global average. High trade costs have contributed to South Asia being the least integrated region in the world.

FIGURE 1: Intra-regional trade share (percent of total trade), 2012

In the ASEAN region, most countries have established either Trade Information Portals or Single Windows that have enhanced trade facilitation, reduced trade costs and enhanced intra-regional trade. A Trade Information Portal allows traders to electronically access all the documents they need to obtain approvals from the government. A Single Window (a system that enables international traders to submit regulatory documents at a single location and/or single entity) allows for the electronic submission of such documents. These single windows, using international open communication standards, facilitate trade both within the region and with other countries using similar standards.

In services, one barrier to trade involves the movement of skilled workers, accountants, engineers and consultants who may move from one country to another on a temporary basis. The Southern Common Market (Mercosur)’s Residence Agreement allows workers to reside and work for up to two years in a host country. This residence permit can be made permanent if the worker proves that they can support themselves and their family.

Bridging the Gap in LAC Infrastructure

Karin Erika Kemper's picture


The other day I had the opportunity to participate in the annual CAF conference on Infrastructure, this time held in Mexico City. The conference featured CAF's new IDEAL report on the state of infrastructure in Latin America and the conference, attended by many decision and opinion makers from across LAC, was organized around findings of the report.
 
I had a few takeaways from the discussions, notably that (1) there is convergence on a range of key issues and (2) there are some important Bank messages that are unique:

More people in the developing world are eating out. Measuring this well could change our understanding of poverty and inequality

Renos Vakis's picture
Most of you probably buy lunch during the week, but can you recall what you ate yesterday? How about last week, did you snack in the afternoon? How much did you spend? Answering these questions is not as easy as you think, is it? Food consumed away from home (‘FAFH’ in short) represents an increasing share of food consumption around the world, caused by various factors including increasing urbanization, female labor force participation and evolving food systems that have made food availability easier.

Will the Asian Infrastructure Investment Bank become the new musketeer?

Arturo Ardila's picture
On Monday, China officially launched the Asian Infrastructure Investment Bank (AIIB) in a ceremony with representatives from the bank's 57 founding-member countries. AIIB will have a capital base of US$100 billion, three-quarters of which come from within Asia.
 
Infrastructure is a growing need for Asia,
and collaboration is critical to filling
gaps. Photo: World Bank

At the inaugural ceremony in the Great Hall of the People, Chinese President Xi Jinping reaffirmed the new institution's mission, saying that "Our motivation [for setting up the bank] was mainly to meet the need for infrastructure development in Asia and also satisfy the wishes of all countries to deepen their co-operation."

Indeed, the AIIB is a major piece of China's regional infrastructure plan, which aims to address the huge needs for expanding rail, road and maritime transport links between China, central Asia, the Middle East and Europe. But the AIIB should also represent a huge opportunity for cooperation not only between countries in the region but also with other multilateral development banks.

Our experience working on transport mega-projects co-financed by several multilateral development banks (MDBs) already shows that this collaboration is much needed and critical for the success and viability of mega-projects. The most recent experience with the Quito Metro Line One Project, for example, shows that the co-financing banks – World Bank, Inter-American Development Bank, Andean Development Corporation and European Investment Bank –  brought not only their financial muscle but also their rich and diverse global knowledge and experience.  Incidentally, because of the Quito Metro project, all the MDBs involved in the project were dubbed as the  “musketeers, ” precisely due to the high degree of collaboration and team work that is making this project a success.

PPPs in the Caribbean: Filling the gap

Brian Samuel's picture
Prior to about 2005, for many tourists their Jamaican vacation was ruined at the last minute, by the hot and overcrowded conditions inside Montego Bay’s Sangster International Airport. Fast forward 10 years, and waiting for a flight at Sangster is an altogether more pleasant experience. The air conditioning actually works, and the whole environment is infinitely less stress-inducing than before.
 
A new waiting area at Montego Bay's
Sangster International Airport.
Photo: Milton Correa/flickr

What’s the difference? The private sector.

In 2003, the Government of Jamaica finally succeeded in doing what it had been trying to do for a decade: privatize Montego Bay Airport. A private sector consortium, led by Vancouver International Airport, quickly invested millions of dollars in expanding the terminal building, doubling the airport’s capacity and opening dozens of new retail spaces. Since then, the consortium has invested more than US$200 million on expansions and improvements to the airport, all of which has been entirely off the government’s balance sheet.

Jamaica has gone on to implement several more public-private partnerships (PPPs), with mixed results. The second phase of its ambitious highway construction program — the Mount Rosser Bypass — was recently opened, cutting a swath through miles of virgin territory. However, early indications are that traffic levels are not living up to expectations, probably due to the Bypass’ steep eight percent gradient, which is beyond the means of most Jamaican trucks and buses.

In the energy sector, Jamaica is completing three PPPs with a total of 115 megawatts of renewable energy (RE) capacity, putting the country on track to meet its RE target of 12.5 percent of generating capacity by the end of 2015. Lastly, the government is currently completing formalities for the sale of Kingston Container Terminal (KCT) to a consortium of CMA/CGM and China Merchant Marine, a transaction that is expected to result in a US$600 million capital expenditure program by the port’s new owners.

The World Bank’s Caribbean Entrepreneurship Program: One Woman’s Story of Growth

Michael Grant's picture

After managing businesses in television and tourism, Shirley Lindo returned to Jamaica with a desire to create a community-enriching enterprise. As the daughter of a St. Ann farmer, she chose natural products, free of additives, that could be grown on her "Outa Earth" plot in the old Bernard Lodge sugar lands.

Since castor beans grow fairly easily on Jamaica’s plains, she settled on the production of castor oil, a versatile commodity valued as a food additive, manufacturing element, cosmetic ingredient and healing agent. As a testament to the oil’s quality, it has won blue ribbons at the Denbigh Agricultural show, Jamaica’s largest, three years running.
 
Shirley discovered, after a few years of producing the oil using a laborious traditional process and selling to local and American customers, that her product generated large quantities of waste. Rising everywhere were piles of bean shells and leftover bean pulp, plus the leftover trash from another crop, the moringa seeds that were becoming a popular health food on the island.

After doing some research on uses for these agricultural byproducts, Shirley applied for a grant to use them to develop a sustainable soil conditioner and low-smoke briquettes.

From 300 entrants, Shirley was one of 11 winners selected from across the CARICOM (Caribbean Community and Common Market) region, and one of four women in that group. Her initial progress was slow, as she grappled with the cost of scaling up castor oil production in order to create the critical mass required for producing the newer products more efficiently.
 

​Environmental conservation, tourism and economic development: an avant-garde Brazilian solution through PPPs

Maria Emília Barbosa Bitar's picture
Note: This blog entry was adapted from an original submission for the PPIAF Short Story Contest. It is part of a series highlighting the role of Public-Private Partnerships (PPPs) in projects and other transformative work around the world.

For the most part, protected areas in Brazil are managed by the public sector. As a result, like other countries, these areas face conservation difficulties, including a lack of resources for maintenance and other initiatives.
 
Gruta de Maquiné, part of the Peter Lund 
Cave Route. Photo: Francisco Martins/flickr

Because of this lack of public-sector financial and human resources, the private sector has provided a significant portion of funding for managing protected areas. One of these cases is in Brazil’s Minas Gerais State. The Secretary of State for Environment and Sustainable Development (SEMAD), Forest State Institute (IEF) and Public-Private Partnership Central Unit collaborated to develop a PPP model focused on management, conservation and operation of three protected areas, located in the State’s Karst region: PPP Peter Lund Cave Route.

The PPP Peter Lund Cave Route aims to structure a single, singular national and international tourist track, aligning the unique natural and cultural elements of the karst region. This new management model is demonstrating results for conservation and sustainable development, including the mobilization of public policies that value one of Brazil’s greatest characteristics: biodiversity.

Can California’s earthquake preparedness experience help the Caribbean protect nutrition during natural disasters?

Carmen Carpio's picture



Anybody who has been through the California school system, like me, will immediately recognize the phrase, “Stop, Duck, and Cover” to mean one thing – EARTHQUAKE!  On a lucky day, it would be a drill, but we’d often get the real deal.  Not that we didn’t learn other things in school, but preparing for natural disasters, in our case earthquakes, was an integral part of our education in California.  As soon as I would hear this phrase, I knew to stop what I was doing, duck down under my school desk, and clasp my hands together and cover the back of my neck to protect it from falling debris.    


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