Georgetown Americas Institute

The global economy is in flux. From China’s unexpected slowdown to the return of industrial policy in major economies like the United States, the world is experiencing a dramatic transformation in its economic structure. This has clear effects and implications for Latin America, where there is increasing optimism about the potential of countries like Mexico to benefit from the nearshoring of manufacturing shifting to the region from Asia to the Americas. Challenges also abound, reflected by internal divisions in the Mercosur trading bloc and Latin America’s continued lackluster economic performance. 

To discuss these dynamics, GAI hosted a conversation with Antoni Estevadeordal, GAI resident fellow; Barbara Kotschwar, professor at Georgetown University’s Center for Latin American Studies; Antonio Ortiz-Mena, partner at Dentons Global Advisors; and Alejandro Werner, founding director of GAI, who moderated the event. 

Latin America in a “Slowbalized” World 

Antoni Estevadeordal began the discussion with a presentation of his research for GAI’s Latin America in the Global Economy program. 

For Estevadeordal, the key transformation has been the transition from “hyperglobalization” to “slowbalization” which took place following the financial crisis of 2008. Since then, the global economy has been defined by rising protectionism, the return of industrial policy in major economies, and the implementation of sustainability policies throughout the world. The ongoing fourth industrial revolution has also transformed whole industries and sectors, creating new challenges and opportunities. Latin America has been particularly affected in this period, lagging behind comparable regions such as Southeast Asia in global integration. 

“In the 1990s Latin America experienced a great liberalization in which trade as a share of GDP ballooned. The region dismantled tariffs and opened itself to trade. Now, however, the region has struggled to enter global value chains and has remained primarily as a supplier of natural resources for economies like China.” -Antoni Estevadeordal

In Estevadeordal’s assessment, Latin American economies have failed to integrate themselves with each other and with the emerging global trade system. The prevalence of strict rules of origin for manufactured products and the proliferation and fragmentation of trade agreements have rendered the region uncompetitive. Critical trade links are also missing such as between Mercosur and Mexico, or between Central and South America. 

To reverse this situation, Estevadeordal proposes three “Cs” for a comprehensive regional integration agenda. First, the region must “complete” the aforementioned missing links in Latin America’s network of trade agreements. Second, it needs to generate “convergence,” focusing on the complex set (which he compared to a bowl of spaghetti) of rules of origin and regulations that are an obstacle to integration. Third, Latin America must generate “complementarity” by improving its limited physical connectivity between countries, as well as by facilitating trade and logistics.