Weak links between exports and economic growth in Latin America and the Caribbean

Abstract

Export growth in Latin America and the Caribbean over the past 20 years (9% per year in volume terms); has enabled the region to regain part of the share of global trade that it had lost during the three preceding decades. This reversal in trend is due mainly to developments in Mexico, although in the last few years Brazil and several South American countries on the Pacific have been the most dynamic. However, this more dynamic performance does not seem to have had much effect on the pace of overall economic growth. This is in contrast to the experience of other countries -especially those of East Asia-, where exports played a major role in boosting economic growth. This paper analyses the characteristics of the region's export development over the past two decades and the reasons why spillovers to structural change and economic growth have remained limited. In particular, exports have had few externalities because of their small - albeit growing - aggregate contribution to economic growth, a process of product diversification largely based on export processing with little value added, few generated knowledge and technological externalities from trade and foreign direct investment, and weak competition in several countries.