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Rising Concentration in Asia-Latin American Value Chains

Can Small Firms Turn the Tide?

image of Rising Concentration in Asia-Latin American Value Chains

Dynamic Asia has overtaken the European Union as Latin America and the Caribbean's second largest export market, after the United States. However, the region's exports to Asia remain concentrated in few commodities involved a small number of large firms. This book explores the present and future scope for the participation of small- and medium-sized enterprises (SMEs) in biregional trade and value chains and the measures that can be taken to make those chains more inclusive and sustainable. It encourages governments in Latin America to improve the business environment in order to encourage multinational firms to invest, upgrade and innovate in the region.

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Introduction

Trade and, to a lesser extent, foreign direct investment (FDI) have been increasing at staggering rates between Asia and Latin America since the beginning of the twenty-first century. However, the region’s booming exports to Asia are concentrated on a few commodities, whereas its imports consist mainly of medium- and high-technology manufactures. As a result, the region displays an overall growing trade deficit with Asia. This is mostly explained by a rising deficit in the trade in manufactures, which is not being compensated by a growing surplus in commodity trade. The region’s sales to the Asian region are also dominated by a few large firms. This export concentration in terms of products and firms has increased over the past decade and is expected to continue. With Asia being the most dynamic trading partner of Latin America, the above trends have a growing impact on the overall economic and social structure of the region. The growing concentration of total export earnings could not only have a negative impact on income distribution, but also increase the volatility of these earnings and reduce productivity growth in the export sector. Both trends could, in turn, affect overall economic growth and stability.

English

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