Competitiveness in the Latin American Manufacturing Sector: Trends and Determinants

BBVA Working Paper No. 14/11, March 2014

79 Pages Posted: 30 Apr 2018  

Alicia García-Herrero

Natixis ; BBVA Research; Bruegel

Enestor Dos Santos

Grupo Banco Bilbao Vizcaya Argentaria (BBVA) - Research Department

Pablo Urbiola

Independent

Marcos Dal Bianco

Independent

Fernando Triana Soto

Triana, Uribe & Michelsen

Mauricio Hernandez

Independent

Arnulfo Rodriguez

Independent Scholar

Rosario Sánchez

Independent

Date Written: March 1, 2014

Abstract

After analysing the evolution of exports from the large Latin American countries over the last decade, and examining on a case by case basis the determinants for each country's performance, this study concludes that competitiveness in the manufacturing sectors of most countries in the region went down from 2007 to 2012, after relatively favourable progress in the previous five-year period between 2002 and 2007. This recent deterioration, which has been more noticeable in countries such as Brazil and Colombia, is related to the real exchange rate appreciation, high labour costs and insufficient progress in labour productivity. The main exception to these regional trends is Mexico, where gains in the manufacturing sector's competitiveness continued beyond 2007, partly because the exchange rate stayed relatively depreciated and labour costs, as well as work productivity, performed better than in the South American countries. However, from 2011 onwards, the reversal of these trends has been making it difficult for the Mexican manufacturing sector to gain competitiveness. Case studies of each of the region's main countries show that in general the exchange rate, labour costs and work productivity were the main determinants in the evolution of manufacturing competitiveness in the last decade. In fact, the countries and periods where these variables performed poorly coincide with losses of market share in international trade and deteriorating competitiveness. Nevertheless, the impact of the remaining variables affecting the manufacturing sector's competitiveness is not insignificant either. In fact, gains in competitiveness have been greater (and losses in competitiveness smaller) in Chile and Peru, where the institutional framework has improved and logistics and energy costs reduced or kept under control.

Keywords: competitiveness, Latin America, manufacturing, exports

JEL Classification: F10, L60, O14, O54

Suggested Citation

Garcia-Herrero, Alicia and Dos Santos, Enestor and Urbiola, Pablo and Dal Bianco, Marcos and Triana Soto, Fernando and Hernandez, Mauricio and Rodriguez, Arnulfo and Sánchez, Rosario, Competitiveness in the Latin American Manufacturing Sector: Trends and Determinants (March 1, 2014). BBVA Working Paper No. 14/11, March 2014. Available at SSRN: https://ssrn.com/abstract=3160617 or http://dx.doi.org/10.2139/ssrn.3160617

BBVA Research ( email )

C/ Azul,4. Edificio La Vela. Planta 4
Madrid, 28050
Spain

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium
Belgium

Enestor Dos Santos

Grupo Banco Bilbao Vizcaya Argentaria (BBVA) - Research Department ( email )

Paseo de Recoletos, 10
Madrid
Spain

Pablo Urbiola

Independent ( email )

No Address Available

Marcos Dal Bianco

Independent ( email )

No Address Available

Fernando Triana Soto

Triana, Uribe & Michelsen ( email )

Bogota, D.C,
Colombia

Mauricio Hernandez

Independent ( email )

No Address Available

Arnulfo Rodriguez

Independent Scholar ( email )

Mexico City, DF 06100
Mexico

Rosario Sánchez

Independent

No Address Available

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