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Global Value Chains and World Trade

Prospects and Challenges for Latin America

image of Global Value Chains and World Trade

The analysis of how Latin American and Caribbean economies participate in different segments of GVCs is at the heart of the current work agenda of the Economic Commission for Latin America and the Caribbean, which focuses on how structural change and productivity gains can promote economic development with equality. This volume builds on the relevant literature and suggests that the movement of firms to higher value added activities in GVCs requires them to step up their innovation efforts and develop new products and processes. Success in improving market shares and value added will depend, however, on which firms innovate most. Hence, innovation is a necessary but insufficient for increasing value added and market shares. Evidence suggests that since the 2008 economic crisis, the participation of Latin America and the Caribbean in global production networks has increased.

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Introduction

Over the last few decades, two fundamental changes have transformed the face of global production and world trade. The first is the increasingly integrated nature of world markets, which can be explained to a large extent by trade liberalization, regional integration agreements (RIAs), agglomeration and location economies, falling transportation and transaction costs and rapid technological advances, especially in information and communication technologies. The second is the “disintegration” of the production process, in particular the increasing presence of intermediate goods in global trade, which essentially entails the fragmentation of the Fordist vertically-integrated model of production and allows for the strategic global dispersion of different value added activities in value chains or global production networks.

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