Export Promotion in Latin America

Jaime GranadosLead Trade and Investment SpecialistIntegration and Trade Sector (INT)Vicepresidency for Sectors and Knowledge (VPS)

• Low levels of openness and diversification are not conducive to economic growth:• Sector shocks and volatility of export revenue• Less diversity implies lower export levels• High concentration limits productivity growth

• LAC focused on natural resources and primary products

• Despite recent increases in levels of openness, trade diversification is below what would be expected given sizes and levels of development

EP: setting the problem in Latin America

LAC: evolution of export diversification

Source: Volpe, Christian: Odyssey in International Markets (IDB, 2010)

Export Promotion as part of a broader set of public policies

Export Promotion as part of a broader set of public policies

Export-OrientedFDI Attraction

and Export Promotion

EP Main Policy Objectives

• Increase exports of goods and services• Add value to exports• Increase # of exporting firms• Diversify exports• Diversify export markets

EP Core Toolkit

(or how information gaps and other market and government failures are overcome)

• Automated on-line Trade Single Window• Customized market intelligence and couching for exporters• Analysis and knowledge dissemination• Fairs and trade missions• Linkages’ development• Trade antenaes abroad• Matching grants for export projects• Coordination of export incentive regimes

Other EP Tools and Functions

• Awards and recognitions• Support formation of export clusters• Supports export finance arrangements• Seeks correction of export and business climate

bottlenecks• Promotes trade facilitation measures

Key aspects of Planning and Executing EP

• Integration of strategic policy objectives in the implementation of the toolkit• Focus• Linkages with global value chains• Innovation and value-added• SME orientation

• Consultation with private sector• Sustainable financing

Organizational and Governance features of EP Agencies in LA (1)

• Varying public envolvement.

• Trend towards integration: exports, investment, tourism.

• Many models: In ministries/secretariats; separate legal entities of public, private or mixed nature.

• Absolute budgets are smaller than in developed countries, which generates suboptimal scale and scope. Correcting for size, however, some TPOs are well endowed (Proexport, Prochile, Procomer).

Organizational and Governance features of EP Agencies in LA (2)

• Manager appointed by Governments, usually after competitive processes.

• No performance-based retribution, except for Proexport (and some specific IDB-financed proyects in NI, ES, CO and UR)

• Presence abroad varies: none, limited, specialized.

United States & Central America United States & Central America EFFECTIVENESS OF EP IN LA

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(stylized facts out of econometric studies, Volpe 2010)

1. Effects are larger on the extensive margin of firms’ exports: new products, new markets.

2. Export gains are larger the more differentiated is the product.

3. Gains are larger the smaller the firm and the less it has been exposed to international markets

4. The more support through the export process, the better: bundling services are better than individual actions.

Impact of EP Agencies on Firm’s Performance

Source: Volpe, 2010.Note: Data are treatment effects for varying periods between 2000 to 2007

CONCLUSIONS

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1. Despite some EP success stories in Latin America, a lot remains to be done.

2. EP is nested in a complex setting of institutional and policy variables and constraints.

3. EP is not given the appropriate level of priority in many countries, although some countries do a good job.

4. Performance self-evaluations are fraught with methodological defficiencies. Technical assistance is needed in most TPOs.

5. EP is just a building-block in a pyramid that must be carefully built. Export development, competitiveness require strong planning, development and finance institutions to help a country move quickly and capture global market needs by adjusting local capabilities to meet those needs. EP alone does not do that…!

Inter-American Development Bank / www.iadb.org