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.



The role of small and medium-sized enterprises in Latin American exports to Asia

The fast growth of exports from Latin America to Asia over the last decade has been widely documented, together with the predominance of commodities in these flows, but little is known about the behaviour of firms that produce these exports. This chapter contrasts the behaviour of large firms versus small and medium-sized enterprises (SMEs) that export from Latin America to Asia. The analysis is based on microdata from customs agencies in Mexico, Chile and six smaller countries in the region for the period 2007 to 2011. Examples of successful exporting companies in the region are also provided. The evidence presented here leads to several conclusions. First, exporting companies in Latin America represented less than 1% of total companies in the region in the period. Second, the share of SMEs in Latin American exports to Asia was lower than their share in Latin American exports to the rest of the world. Third, more than half of all SMEs exported a single product to one destination in Asia. Fourth, the rotation of SMEs exporting to Asia was higher than those exporting elsewhere. However, as the rate of entry of SMEs into the Asian market was greater than the number of firms leaving, the number of exporters to this region increased. The fifth finding, which is linked to the previous one, is that a relatively high share of the annual variations in SME export revenues is due to the entry of new firms to the Asian market and exit of existing ones. Finally, the case studies suggest that support from export promotion agencies was crucial for several SMEs that exported for the first time to Asia.


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