Constraints on Trade in the LAC Region

43 Pages Posted: 22 Feb 2024

See all articles by Rina Bhattacharya

Rina Bhattacharya

International Monetary Fund (IMF)

Samuel Pienknagura

International Monetary Fund (IMF)

Abstract

This paper studies Latin America and the Caribbean’s (LAC) trade performance in recent years and estimates the salience of key country-specific factors in explaining underperformance in some sub-regions within LAC. First, the paper documents that, while the average country in the region displays aggregate trade values that are consistent with a standard gravity model, there is substantial heterogeneity across sub-regions and product-types. The paper then estimates an augmented gravity specification that includes proxies for the quality of infrastructure, the availability and quality of factors of production, and governance. Results point to infrastructure and customs regulation as key factors explaining undertrading in manufacturing in most sub-regions. Factors of production partly explain South America’s underpeformance in manufacturing while governance explains undertrading across most product groups, but neither set of factors play a significant role in other sub-regions.

Keywords: Trade, Constraints, Latin America and the Caribbean

JEL Classification: F10, O24, O54

Suggested Citation

Bhattacharya, Rina and Pienknagura, Samuel, Constraints on Trade in the LAC Region. IMF Working Paper No. 2024/032, Available at SSRN: https://ssrn.com/abstract=4734059 or http://dx.doi.org/10.5089/9798400269479.001

Rina Bhattacharya (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Samuel Pienknagura

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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