Corporate competitiveness in Latin America and the Caribbean

This article looks at the evolution of international competitiveness in the countries of Latin America and the Caribbean in the 1990s, focusing on the microeconomic and sectoral aspects. It evaluates the competitive performance of the region’s countries, contrasting it with that of their main competitors in the developing world; it analyses the corporate actors involved, including the subsidiaries of transnational enterprises and large locally owned firms; and it sets forth some political considerations. Although progress has been made with competitiveness in the region, this has been largely confined to just a few countries, sectors and firms. Differences in the institutional conditions under which the countries participate in the world economy, and in their comparative cost advantages, have resulted in the emergence of two distinct trading styles. In Mexico and the Caribbean Basin, exports of manufactures assembled for the United States market predominate. In South America, on the other hand, natural resource production and processing activities prevail, with more technologically advanced manufactures having some presence in intraregional trade, especially within Mercosur. Both sectoral specializations present opportunities and problems. Improvements in the competitiveness of large companies (whether transnational or locally owned) have enhanced their efficiency. But the same is not true of other agents in the countries’ economies, whose production structures have thus become more polarized. This polarization needs to be dealt with by policy initiatives. Four areas of action are important: increasing efforts to attract selected foreign direct investment (FDI); strengthening the links between leading companies and the other firms in each country; supporting the creation of global knowledge networks; and enhancing the ability of domestic companies to enter into joint ventures and strategic alliances with their global competitors.