Session on "Investment and Strengthening of Regional Value Chains as an Engine for Economic Recovery" of the Annual Meeting of the Boards of Governors of the Inter-American Development Bank, 19 March 2021

 

Remarks by Angel Gurría,

Secretary-General, OECD

Paris, 19 March 2021

Dear President Duque, President Claver-Carone, dear friends,

It’s a pleasure to join you today in this event on Investment and strengthening of regional value chains as an engine for economic recovery.

The experience of the pandemic and the stresses on supply chains have prompted many businesses to re-evaluate and rearrange their supply chains. This presents a great opportunity for countries in Latin America and the Caribbean to strengthen their regional integration and economic diversification—in 2015, only 16% of total LAC exports were destined for the regional market, compared to 49% in the NAFTA market or 47% in ASEAN+5.

A crucial element to achieve a strong and lasting recovery is economic diversification. Diversification helps to manage volatility, expand market opportunities and promote more inclusive outcomes for SMEs, women, and underrepresented groups. It is also a crucial driver of productivity growth, which is of particular interest given that total factor productivity in Latin America is only about 37 per cent that of the United States.

Several countries have already promisingly targeted diversification in the recent past. For instance Colombia with its 2016 national policy for productive development. And Costa Rica, which now exports over four thousand products, has a long haul in integration in global markets.

Allow me to share four elements that we believe are crucial to achieve a successful economic diversification: 1.) incentive frameworks that encourages trade and effective competition; 2.) investments and reforms that reduce trade costs; 3.) support for the adjustment and reallocation of resources; and 4.) government interventions targeting policy and market failures.

While there are many routes towards greater diversification, they all hinge on trade and investment. Successful diversification strategies keep in mind the adoption of new technologies, the ‘servicification’ of production and the reallocation of resources across sectors, as well as between high and low productivity firms.

In addition, efficient incentive frameworks requires looking at policies across a range of fields.

In this regard, the OECD can help governments with designing policies to avail themselves of this opportunity for diversification. Among other things, the OECD Services Trade and FDI Regulatory Restrictiveness Indices highlight areas for further liberalization to facilitate investments and integration into international production networks. The STRI identified 115 policy changes across 26 countries last year, most restricting the inflow of foreign investment, including in many Latin American countries.

The OECD’s Policy Framework for Investment and the Guidelines on Due Diligence and Responsible Business Conduct, help ensure that investment policies are not only open and non-distortionary but also generate sustainable and inclusive outcomes.

Ladies and gentlemen,

Now that our economies are on the path to recovery, it is the moment to lay the groundwork for them to be better, more resilient, and more inclusive, through diversification and integration.

To do this, you can count on the support of the OECD.

 

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