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16/12/2004 - How can Argentina, Brazil and Chile boost their export competitiveness to support sustained economic growth? The question is at the centre of a new OECD study: Trade and Competitiveness in Argentina, Brazil and Chile: Not as Easy as A-B-C.
The report argues that foreign trade has traditionally constrained economic growth in these three countries as imports have risen faster than exports during boom periods. It explores which policies can help to strengthen and diversify the tradable goods sector - both for exports and for the domestic market open to foreign competition. Some of the main findings are as follows:
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The rigid exchange rates of Argentina and Brazil in the 1990s hindered their trade performance, in contrast to Chile which managed its exchange rate more flexibly.
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For primary goods, such as agricultural commodities, Argentina, Brazil and Chile (A-B-C) face high trade barriers to entering markets in OECD countries. For more sophisticated, non-primary, goods there are both policy and market access barriers. The comparison of A-B-C with Ireland, Mexico and Korea, already in the OECD group, shows that economic integration is a powerful mechanism to promote diversification and development.
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So far, foreign direct investment (FDI) has been mainly channelled to the service and traditional export sectors such as agriculture and mining, so it has not fully contributed to the diversification of the export base in South-America. But over the long-run, FDI is the main engine to enhance export performance by boosting productivity through transfers of technology to domestic firms.
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To seize the growth potential of agricultural and food exports, all three countries have room to increase labour and land productivity as well as to expand trade in processed foodstuffs. To achieve this, the cost of logistics must come down, access to credit must be facilitated and coordination among those working in different areas of the food chain must be improved. Moreover, policies have to be better coordinated to create this favourable environment.
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Argentina, Brazil and Chile need to strengthen their competition laws further. A more competitive service sector would in turn increase the competitiveness of the export sector. Better regulatory frameworks would also encourage additional private investment in the electricity industry and in other infrastructure sectors.
A summary of the study, together with several papers presented at an OECD seminar in November on the same themes, can be found on the OECD website at www.oecd.org/eco/abc.
Journalists may obtain a copy of Trade and Competitiveness in Argentina, Brazil and Chile: Not as Easy as A-B-C from the OECD’s Media Relations Division (tel: +33 1 4524 9700). For further information contact Joaquim Oliveira Martins (tel. + 33 1 4524 8853) or Nanno Mulder (tel: +33 1 4524 9578) of the OECD’s Economics Department, or contact the Media Relations Division.
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