This chapter examines how Latin America and the Caribbean can strengthen its positioning in the global economy through deeper integration. It explores how greater participation and upgrading in global value chains can support export diversification, domestic value creation and productive upgrading, including the role of foreign direct investment in supporting these processes. The chapter examines regional integration as a platform for this transformation, helping firms reach greater scale and building on existing capabilities to deepen regional value chains. It also considers the role of productive development policies and intraregional investment, together with financial, digital and electricity integration, to reinforce productive capabilities and support long-term development.
Latin American Economic Outlook 2026
Abstract
In a changing global context, stronger integration into the global economy can support long-term development in Latin America and the Caribbean (LAC). While the region has become increasingly open, its integration has yet to deliver sufficient diversification, domestic value creation and productive upgrading. Stronger regional integration, underpinned by effective partnership agreements, can help LAC economies strengthen productive linkages, move up value chains and compete more effectively in global markets.
Increasing LAC’s participation and upgrading into higher-value segments of global value chains (GVCs) can support this transformation. GVC participation can connect firms to international markets, capital, technology and knowledge, creating opportunities to diversify exports, strengthen productive capabilities and generate more productive and higher-quality employment. Yet LAC remains weakly integrated into GVCs, and its participation is concentrated in commodities and upstream activities, with limited domestic linkages and value addition. Foreign direct investment (FDI) can support GVC participation by strengthening connections with international production networks and facilitating access to knowledge, technology and markets.
Regional integration can provide a platform for stronger participation and upgrading in the global economy. Regional markets can help firms reach greater scale, internationalise and develop capabilities before competing globally. Although intraregional trade within LAC remains limited, it is more diversified and manufacturing-intensive than trade with external partners and trade potential exists. Yet limited productive integration constrains the scope for deeper regional integration. Strengthening productive connections across countries is therefore key to realising this potential.
A more catalytic form of regional integration can build on existing capabilities to develop production networks in strategic sectors. Existing patterns of intra-industry trade reveal networks and activities where productive linkages and opportunities for cross-border specialisation are already present. Deepening and extending these networks could integrate more SMEs and local suppliers, spread technology and productivity gains, and strengthen LAC’s participation in global value chains. There is also significant potential to deepen regional value chains and increase the value generated within LAC and embodied in its exports. Greater intraregional investment and better co-ordination of productive development policies (PDPs) can support these processes by strengthening productive linkages and directing investment towards strategic sectors and regional production networks.
Deeper integration also extends beyond trade and investment. Greater financial integration can facilitate cross-border investment and access to finance, while digital and electricity integration can expand regional markets, improve connectivity and support cross-border production. Together, these dimensions can reinforce LAC’s integration into the global economy.
This chapter is structured in four sections. The first examines LAC’s integration into the global economy. The second explores how stronger participation and upgrading in GVCs can support domestic value creation, including the role of FDI. The third examines regional integration as a platform for stronger global positioning, focusing on the potential of regional markets, production networks and regional value chains, as well as the role of investment and PDPs in supporting these processes. The final section considers broader dimensions of regional integration, focusing on financial, digital and electricity integration.
LAC is increasingly integrated into global markets, but diversification and productive upgrading remain limited
LAC has deepened its integration into global trade over the past two decades. Trade openness, measured as total trade as a share of gross domestic product (GDP), rose from 39% in 2000 to 50% in 2024, reflecting the region’s growing participation in international markets (Figure 2.1). This progress has been supported by trade liberalisation measures, including reduction of average tariff rates from 10% to 6% from 2002 to 2022 (World Bank, 2026[1]), and an expanding network of preferential trade agreements that have improved market access. Nevertheless, LAC’s trade openness remains below that of East Asia and the Pacific (58%), sub-Saharan Africa (55%), and the European Union (EU) (92%). Important heterogeneity persists across countries, reflecting differences in export composition, productive capabilities and integration into global markets. For many LAC economies, significant room remains to expand trade and capture greater benefits from it. This greater openness can promote competition, expand market size, facilitate technology transfer and allow firms to benefit from economies of scale, thereby improving efficiency and productivity (IMF, 2017[2]; Onafowora and Owoye, 2024[3]). However, the development benefits of trade ultimately depend on what countries trade and on whether their export structures foster diversification, value creation and movement towards more productive activities.
Source: Authors’ elaboration based on World Bank (2026[1]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
Limited export basket diversification constrains productivity and growth
Low diversification and limited technological upgrading shape LAC’s export profile of goods. The region’s export basket remains concentrated in commodities, as well as resource-based and low-technology manufactures. Between 2022 and 2024, these products accounted for 62% of total exports of goods, reflecting persistent challenges in industrial upgrading, technological adoption and participation in more sophisticated segments of global production networks (OECD et al., 2025[4]). In contrast, high-technology manufactures represented only 17% of goods exports in the region, well below the shares observed in members of the Association of Southeast Asian Nations (ASEAN) (33%) and the European Union (28%) (Figure 2.2).
Note: ASEAN = Association of Southeast Asian Nations; EU = European Union.
Source: Authors’ elaboration based on UN Comtrade (2024[5]), UN Comtrade, https://comtradeplus.un.org/.
Limited export diversification remains a key constraint on productivity growth and competitiveness in LAC. Upgrading production and diversifying export structures are key for stronger growth and competitiveness. Strengthening diversification and upgrading production therefore require increasing value added, knowledge content and productivity across both existing and emerging sectors. This involves expanding technologically sophisticated manufacturing and modern services, while strengthening innovation and productive capabilities in areas where the region already has competitive advantages. Goods and services with higher technological and skill content can support productivity gains, innovation spillovers, higher-quality employment and faster income growth, particularly in economies below the technological frontier (Hausmann, Hwang and Rodrik, 2007[6]; OECD, 2025[7]).
Trade in goods has gradually shifted towards new partners
LAC’s export destinations reflect both growing diversification and significant heterogeneity across subregions over the past two decades. North America remains the region’s main export market, representing 47% of its exports in 2024, although its share declined from 61% in the year 2000 (Figure 2.3, Panel A). Trade with this market remains particularly important for Mexico and Central America, reflecting their strong integration into North American production networks (UN Comtrade, 2024[5]). The European Union has remained a key trading partner for the region, accounting for around 9% of LAC’s exports. These comprise primary and resource-based products, alongside manufactured goods such as machinery and transport equipment (European Commission, 2026[8]). At the same time, Eastern Asia, including the People’s Republic of China (hereafter “China”), increased its share from 5% to 17% (Figure 2.3, Panel A), becoming LAC’s second-largest export market and surpassing intraregional trade (ECLAC, 2025[9]). China has become the largest single trading partner for South American countries such as Chile, Peru and Brazil. China accounts for 13% of the region’s total exports with LAC supplying primarily commodities such as copper, soybeans and iron ore (UN Comtrade, 2024[5]; Zhang, 2024[10]). ASEAN and Africa accounted for only 2.9% and 1.7% of LAC’s goods exports, respectively. By contrast, intraregional trade declined from 18% of total exports in 2000 to 14% in 2024, highlighting the growing importance of extraregional markets. Import patterns have also shifted. North America remains the region’s main supplier, accounting for 31% of total imports, although its share declined from 51% in 2000 (Figure 2.3, Panel B). The European Union has maintained a stable import share of around 12%, supplying mainly pharmaceuticals, machinery and capital goods. Eastern Asia increased its share in LAC’s imports from 10% in 2000 to 28% in 2024, mainly driven by the expansion of imports from China, which rose from 2% to 21% over the same period. This reflects the region’s growing imports of manufactured goods from Asia, including electronics, vehicles and industrial machinery (UN Comtrade, 2024[5]).
Note: North America comprises Canada and the United States.
Source: Authors' calculation based on UN Comtrade (2024[5]), UN Comtrade, https://comtradeplus.un.org.
Asia has emerged as a key trading partner for LAC. Since 2005, China has signed and brought into force free trade agreements in the region with Chile, Peru, Costa Rica, Ecuador and Nicaragua, while negotiations are ongoing with Honduras and El Salvador (Orbach, 2024[11]). Economic ties have also expanded beyond merchandise trade to include infrastructure investment, digital services and financing (Prazeres, Bohl and Zhang, 2021[12]; Zhang, 2024[10]). Other Asian partners have also strengthened their bilateral ties. The Republic of Korea (hereafter “Korea”) has free trade agreements with Chile, Peru, Colombia and Costa Rica, while Japan has agreements with Chile, Mexico and Peru (Ministry of Foreign Affairs of Japan, 2005[13]; Japan Customs, 2012[14]). Chile, Mexico and Peru also participate in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), further deepening the region’s institutional integration with Asia-Pacific economies (Murakami, 2025[15]). The CPTPP already includes Japan, Australia, New Zealand, Singapore, Viet Nam and Malaysia. Within the LAC region Ecuador and Uruguay are in the process of joining.
The European Union has strengthened economic ties with LAC, primarily through the EU-MERCOSUR interim trade agreement (provisionally applied from May 2026 following approval). The trade agreement, between the European Union and Argentina, Brazil, Paraguay and Uruguay, creates one of the world’s largest free trade areas and extends preferential access of EU countries to economies representing around 95% of LAC’s GDP (Banco de España, 2026[16]). The agreement includes the gradual elimination of tariffs on over 90% of bilateral trade, in line with agreed implementation schedules, and extends beyond trade in goods to include services and investment. As such, it is set to enhance the competitive position of both EU and MERCOSUR countries relative to other global partners.
The European Union has also deepened its bilateral ties with other partners in the region. In May 2026, it signed a modernised global agreement with Mexico, updating their trade and investment framework after more than two decades (European Commission, 2026[17]). Its association agreement with Central America, covering Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, has been fully in force since 2024 (EEAS, 2024[18]). In addition, exports from LAC to the European Union are associated with more skilled employment compared to other destinations, suggesting further benefits in terms of job quality and human capital development (Banco de España, 2026[16]; ECLAC, 2026[19]).
Services exports are concentrated in less skill- and knowledge-intensive activities, with gradual modernisation
Services exports offer significant opportunities for LAC to diversify its export basket, strengthen competitiveness and support long-term growth. Beyond generating an additional source of foreign demand, services play a critical role in enhancing the competitiveness of goods exports. Efficient transport, logistics, finance, telecommunications, engineering, software and business services facilitate participation in GVCs, improve firms’ productivity and support the production and export of more sophisticated goods (Nordås and Kim, 2013[20]; Heuser and Mattoo, 2017[21]). Services are also increasingly embodied in manufactured exports, contributing value through activities such as design, research and development, engineering, marketing, data processing and after-sales support. As a result, economies with stronger services sectors tend to be better positioned to diversify exports, move into activities with higher value added and capture a larger share of value within global production networks (Nordås and Kim, 2013[20]; Miroudot and Cadestin, 2017[22]).
Digital technologies have further expanded opportunities in knowledge-intensive and digitally deliverable services. Software, business, professional and financial services, and other digital technologies have created avenues for export diversification and productivity growth (Giordano and Ortiz de Mendívil, 2021[23]; ECLAC, 2026[24]). These activities tend to rely more intensively on skilled labour, creating opportunities for higher-quality employment and productivity gains through greater knowledge and technology intensity (ECLAC, 2025[25]). Costa Rica illustrates this potential, with digitally enabled services accounting for around 27% of total exports and 10% of GDP in 2023, well above regional averages (Giordano et al., 2024[26]). Expanding both the export of services and their use as inputs into goods production could therefore help LAC diversify its export structure, increase domestic value creation and strengthen resilience to external shocks.
Services exports are growing in the LAC region, although they remain a relatively small component of external trade. Services exports accounted for around 4.1% of GDP in 2025, up from 3.3% in 2005. This share has remained broadly unchanged over the past two decades. LAC’s services exports remain below those of Africa (5.8%), ASEAN (16.7%) and the European Union (17.4%). This contrast points to scope for services to play a greater role in diversifying LAC’s export base and complementing its integration through merchandise trade (UNCTAD, 2026[27]).
Services exports in LAC remain less skill-intensive than in other regions. Skill-intensive services, including telecommunications, computer and information services, and professional business services, account for just over one-third of the region’s total services exports (Figure 2.4). This remains well below the shares observed in global leaders in modern services, where these activities represent 65% of services exports in the United States, 60% in Japan and 58% in the European Union. By contrast, 64% of LAC’s services exports remain concentrated in activities demanding lower skill levels. Such activities, such as travel and transport, are more vulnerable to external shocks and offer fewer opportunities for productivity gains and knowledge spillovers (ECLAC, 2026[24]).
Source: Authors’ calculation based on OECD-WTO (2025[28]), The OECD-WTO Balanced Trade in Services (BaTIS), https://www.oecd.org/en/data/datasets/oecd-balanced-trade-statistics.html.
LAC’s services export basket is highly heterogeneous across economies, reflecting diverse specialisation patterns. Low-tech activities, particularly travel and transport, dominate in most countries, accounting on average for 57% of total services exports. However, the composition varies significantly across country groups. Commodity-based economies show the widest variation. Activities requiring low levels of tech account for over 84% of service exports in the Plurinational State of Bolivia (hereafter “Bolivia”) and 87% in Jamaica, while Belize stands out for its relatively stronger presence in knowledge-intensive services (Figure 2.5). Services-oriented economies such as Grenada and Dominica are largely concentrated in tourism-related exports, reflected in the large share of activities classified in the “other” category. Among more diversified economies, Costa Rica and Mexico have a stronger presence of services requiring medium and high levels of tech, while Honduras, Guatemala and Nicaragua remain heavily concentrated in services requiring lower levels.
Source: Authors’ calculation based on OECD-WTO (2025[28]), The OECD-WTO Balanced Trade in Services (BaTIS), https://www.oecd.org/en/data/datasets/oecd-balanced-trade-statistics.html; Galindo-Rueda and Verger (2016[29]), OECD Taxonomy of Economic Activities Based on R&D Intensity, https://doi.org/10.1787/5jlv73sqqp8r-en, mapped from EBOPS 2010 to ISIC Rev. 4.
Realising the potential of services exports requires strengthening the region’s capacity to produce and export competitive modern services. Priorities include stronger science, technology and innovation systems, digital infrastructure, skilled human capital, trade promotion and FDI, supported by effective PDPs and institutional capacities (ECLAC, 2026[24]). Reducing regulatory restrictions and promoting greater regulatory convergence would also facilitate cross-border services trade and improve the competitiveness of firms that use these services as production inputs (Blyde, 2026[30]).
Diversification of services export markets has changed little over time
Services export markets have changed little over time. The United States remains the main destination for services exports from LAC, although its share declined slightly from 41% to 38% in Latin America and more markedly from 48% to 37% in the Caribbean (Figure 2.6). The European Union gained importance as a destination for Caribbean services exports, with its share rising from 13% to 22%. Meanwhile, its role in Latin America declined slightly from 21% to 17%. China expanded its presence, with its share rising from around 2% to 5% over the period. At the same time, the share of other destinations increased from 24% to 28%, reflecting only gradual diversification of export markets for Latin America. Intraregional services exports remain limited and broadly stable, accounting for 12% of exports in Latin America and 7% in the Caribbean in 2024.
Source: Authors’ calculation based on OECD-WTO (2025[28]), The OECD-WTO Balanced Trade in Services (BaTIS), https://www.oecd.org/en/data/datasets/oecd-balanced-trade-statistics.html.
Services are a driver of value creation in manufacturing trade
Services contribute to shaping manufacturing competitiveness. As goods and services become more intertwined, activities such as transport, logistics, finance, information and communication technology, and professional services contribute value at multiple stages of production. In particular, services such as research and development, licensing and digital support the effective integration of physical production of high value added activities (ECLAC, 2026[24]). As a result, a substantial share of the value embodied in manufacturing exports originates in services. In LAC countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru), services account for almost 30% of the value embodied in manufactured exports, in line with US and EU levels (31% and 36%, respectively) (Figure 2.7). Most of this contribution comes from domestic services (18%), followed by foreign services (9%) and commercial presence abroad (3%). As services become more deeply embedded in manufacturing, competitiveness in goods increasingly depends on the quality and efficiency of supporting service activities. Better services can improve product quality, support differentiation and facilitate access to international markets, particularly in technology-intensive industries (Miroudot and Cadestin, 2017[22]; OECD, 2024[31]).
Percentage of gross manufacturing exports
Note: ASEAN = Association of Southeast Asian Nations. Domestic refers to services value added of domestic origin embedded in manufactured exports, capturing the services content generated within the exporting economy itself. Mode 1/4 (MOS1/4) covers services supplied cross-border or through the movement of natural persons, corresponding to Modes 1 and 4 of the General Agreement on Trade in Services classification. Mode 3 (MOS3) refers to services supplied through commercial presence abroad, i.e. value added generated by foreign affiliates established in the exporting economy. Values represent simple averages across available countries within each group. LAC7 countries are Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru.
Source: Authors’ calculations based on OECD (2025[32]), Trade in Value Added (TiVA): Services Value Added Embodied in Manufacturing Exports, https://www.oecd.org/content/dam/oecd/en/data/datasets/trade-in-value-added-indicators-for-services-by-mode-of-supply/MFG_EXGR_SVC_VA.csv.
Deepening integration and reaping its benefits require greater diversification, domestic value creation and productive upgrading
Increasing participation and moving into higher-value segments of GVCs can help LAC diversify its exports, strengthen productive capabilities and increase domestic value creation. By connecting firms to new markets, technologies, knowledge and production networks, GVC participation can support the development of more sophisticated activities and facilitate productive upgrading. Moving into higher-value segments can also support more productive and higher-quality employment, contributing to stronger productivity and long-term economic growth (Hausmann, Hwang and Rodrik, 2007[6]; Kozul-Wright and Fortunato, 2020[33]).
More diversified export structures broaden opportunities across global markets
Greater export diversification can broaden opportunities for integration across global markets. As countries diversify exports and upgrade technologically, they develop production structures that are better aligned with global demand, supporting participation in value chains and deeper industrial integration (Hausmann, Hwang and Rodrik, 2007[6]; UNCTAD, 2023[34]). By contrast, countries with similar export baskets, particularly those concentrated in primary commodities and low-technology manufactures, tend to compete in the same markets rather than trade complementary products (Bhattacharya and Pienknagura, 2024[35]; ECLAC, 2026[24]). Greater complementarity across export structures can create opportunities to expand extraregional and intraregional trade and develop regional value chains. However, realising this potential requires adequate productive capabilities, connectivity and infrastructure (Bhattacharya and Pienknagura, 2024[35]; Murakami, 2025[15]).
Note: ASEAN = Association of Southeast Asian Nations. Each cell reports the export complementarity index between a regional economy’s export basket and the import needs of the external economy, averaged over 2020 to 2024. The index captures the structural alignment between export and import baskets rather than actual trade flows; countries with broader and more diversified export baskets tend to exhibit higher complementarity across multiple partners.
Source: Authors’ calculations based on World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org/.
Trade complementarity points to opportunities for LAC to deepen trade with established partners and expand into markets with untapped potential. On average LAC’s export basket matches 22% of import demand in the European Union, 20% in the United States and 18% in China, which are already major trading partners for the region. Complementarity levels are similar with ASEAN (19%) and Africa (21%), despite much weaker trade ties, pointing to opportunities to expand into these markets (Figure 2.8). These opportunities span agrifood, critical minerals, industrial inputs, digital services and more technologically sophisticated manufacturing, including vehicles, machinery, chemicals, pharmaceuticals and medical devices (Acosta et al., 2026[37]; Giordano and Ortiz de Mendívil, 2019[38]). Strengthening trade with these partners could support export diversification and productive upgrading, particularly in economies with more diversified manufacturing capabilities.
Export complementarity with major external partners varies across LAC. Mexico records the highest complementarity scores with the United States (64) and the European Union (58), reflecting its deep integration into North American and global manufacturing networks (Figure 2.8). Brazil also displays relatively strong complementarities, particularly with China (45), consistent with its role as a major supplier of commodities. Several Central American economies, Colombia and the Dominican Republic exhibit intermediate levels. Conversely, most South American and smaller economies show lower scores, reflecting narrower export baskets (Figure 2.8). Overall, countries with more diversified export structures tend to display stronger complementarities across a wider range of trading partners. This suggests that export capabilities are a key determinant of trade integration potential.
Note: Stacked bars sum to the export complementarity index between each regional economy's exports and the import needs of external economies, averaged over the four external partners. The trade complementarity index (Michaely, 1996[39]) measures the degree to which country j’s export structure matches country i’s import needs. Letting mᵢₖ denote sector k’s share in country i’s total imports from the world and xʲₖ its share in country j’s total exports to the world, the index is defined as cⁱʲ = 100 [1 − Σₖ |mᵢₖ − xʲₖ| / 2]. Calculated values range from 0 (no complementarity) to 100 (perfect match). The dashed line marks the median.
Source: Authors’ elaboration based on UN Comtrade (2024[5]), UN Comtrade, https://comtradeplus.un.org/.
The composition of export complementarity matters for the type of integration it can support. For most economies in the region, complementarity with external markets is driven mostly by primary and resource-based products (Figure 2.9). Mexico stands out, with medium- and high-technology manufactures accounting for the largest share of its complementarity, reflecting its diversified manufacturing base and integration into GVCs. The Dominican Republic, Guatemala, El Salvador and Costa Rica also display a relatively stronger manufacturing contribution, albeit at lower overall levels of complementarity. By contrast, Brazil’s comparatively high complementarity is largely supported by primary and resource-based exports.
Strengthening participation and upgrading in global value chains
GVC participation can support diversification, productive upgrading and greater domestic value creation
GVCs reflect the increasing international fragmentation of production, whereby the production of a good or service is divided into multiple stages carried out across different countries. Rather than producing an entire final product domestically, countries and firms can specialise in specific tasks within the production process, linked through cross-border trade in intermediate goods and services. At each stage, inputs are transformed and additional value is created before moving to the next phase of production until the final good or service is completed. Countries participate in these networks through backward and forward linkages. Backward participation reflects the extent to which exports rely on imported inputs, while forward participation captures the contribution of domestic value added to other countries’ exports through intermediate goods and services. Both forms of participation can support upgrading and productivity growth, although their relative contribution depends on countries’ productive capabilities, sectoral specialisation and stage of development (Turan, Yanıkkaya and Özer, 2026[40]).
Participation in GVCs can generate significant economic benefits, although these are not automatic. Integration into GVCs is associated with higher productivity, increased income per capita, export diversification, technology transfer and job creation, while also supporting learning, innovation and industrial upgrading (Montalbano, Nenci and Pietrobelli, 2018[41]; Raei and Ignatenko, 2019[42]). However, the extent of these gains varies across countries and depends on domestic conditions. Factors such as the quality of infrastructure, effective contract enforcement, efficient logistics, and policies that promote trade and investment openness play a critical role (Fernandes, Kee and Winkler, 2020[43]) (see Chapter 3). Strong industrial capacity, access to finance and a supportive innovation environment further enhance the ability of firms to benefit from GVC participation. Ultimately, the objective is not participation alone, but rather participation that enables upgrading and increases the share of domestic value added.
GVC participation can also support more productive employment, although labour-market gains depend on how countries and firms integrate into production networks. GVCs can generate more productive jobs through productivity and scale effects as firms expand output and employment, although these gains can be unevenly distributed across and within countries, including between skilled and unskilled workers and between men and women (World Bank, 2020[44]). Evidence for seven LAC countries shows that GVC-linked activities generate stronger domestic employment linkages than traditional trade, with an estimated 1.5 indirect domestic jobs associated with each direct job, compared with 0.5 in traditional export activities. GVC-linked jobs also record higher average wages than employment associated with domestic demand across all seven countries analysed, although greater GVC participation is not associated with higher average wages once differences across countries and sectors are considered. Employment outcomes also vary according to the sectors, occupations and modes through which countries integrate into GVCs (Lalanne, 2025[45]).
LAC’s participation in GVCs remains below that of other regions
LAC remains less integrated into GVCs than other regions. The region’s backward and forward participation stand at 3% and 5% of GDP, respectively, below East and Southeastern Asia (13% and 9%) and the European Union (21% and 14%) (Figure 2.10). This reflects the region’s specialisation in commodities, limited presence in complex manufacturing activities, weak regional productive linkages that constrain the development of nearby supplier networks, and fragmented trade policies and non-tariff measures that continue to limit market integration (Blyde and Trachtenberg, 2020[46]; Fernandes, Nievas Offidani and Winkler, 2021[47]).
Note: LAC comprises 28 countries for which data are available: Argentina, Antigua and Barbuda, the Bahamas, Barbados, Belize, the Plurinational State of Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela. Africa comprises 48 countries for which data are available. The European Union comprises the United Kingdom (EU member in 2018). East and Southeastern includes ASEAN-10 economies plus China, Japan, Republic of Korea, Hong Kong (China), Macau (China), Chinese Taipei and Mongolia.
Source: Authors’ calculations based on Casella et al. (2019[48]), UNCTAD insights: Improving the analysis of global value chains: The UNCTAD-Eora Database, https://doi.org/10.18356/3aad0f6a-en; World Bank (2026[1]) World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
GVC participation patterns in LAC vary across countries in both linkages and sectoral composition. In economies such as Argentina, Chile, Peru and Colombia, forward linkages are more prominent than backward linkages. This reflects the role of these countries as suppliers of primary and intermediate inputs into other countries’ exports. By contrast, Mexico exhibits stronger backward linkages, consistent with deeper integration into manufacturing value chains (Figure 2.11, Panel A). The sectoral composition also differs markedly. The participation in GVCs of Chile, Peru, Brazil and Colombia is largely driven by primary sectors, while medium- and high-technology manufacturing plays a more important role in Mexico and Costa Rica, supporting more diversified integration. Services are also significant, particularly in Costa Rica and Argentina, where they contribute to a broader engagement in GVCs (Figure 2.11, Panel B).
Note: Panel A: Backward linkages refer to foreign value added as percentage of gross exports and forward linkages to domestic value added in foreign final demand. Panel B shows domestic value added as a percentage of gross exports. The remaining share, up to 100%, corresponds to foreign value added embodied in exports.
Source: Authors’ calculations based on OECD (2024[31]), Trade in Value Added (TiVA), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html.
LAC’s GVC participation is oriented towards extraregional partners
LAC’s participation in GVCs is mainly oriented towards extraregional partners, with limited intraregional integration. In backward participation, the United States, Canada and the European Union are the main sources of intermediate inputs, while inputs sourced from within LAC account for a relatively small share across countries (Figure 2.12, Panel A). In forward participation, patterns are more varied. China plays a stronger role for several countries, largely reflecting the region’s exports of commodities and other intermediates that are further processed abroad and embodied in other countries’ exports. LAC also plays a limited role as a destination for domestic value added embodied in other countries’ exports, although its importance varies across countries. Mexico stands out for its deep integration with the United States and Canada through North American production networks (Figure 2.12, Panel B). The region’s strong orientation towards external partners highlights both its openness and the limited development of regional value chains that could better support domestic linkages and value-added generation.
Source: Authors’ calculations based on OECD (2024[31]), Trade in Value Added (TiVA), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html.
FDI can support GVC participation and productive upgrading
FDI supports global value chain integration by connecting host economies to international production and distribution networks. Multinational enterprises provide capital, technology, management expertise and access to foreign markets that domestic firms often lack, enabling their participation in fragmented production processes (OECD, 2025[7]). Through direct linkages with local suppliers, FDI increases demand for domestic inputs and encourages firms to upgrade their operations to meet international standards (OECD et al., 2022[49]). These interactions facilitate the transfer of knowledge and technology, which improves productivity, product quality and compliance with global requirements (IMF, 2017[50]). Exposure to more demanding markets and competition further drives learning and adaptation, as firms adjust to the expectations of global lead companies (Sanfilippo et al., 2018[51]). As a result, FDI helps firms integrate into GVCs and can also support their progression towards more sophisticated and higher value-added activities within these networks.
LAC remains one of the world’s most attractive destinations for FDI. In 2025, FDI net inflows represented 2.7% of the region’s GDP, compared to 0.9% in South Asia and 1.3% in East Asia and the Pacific (World Bank, 2026[1]). Reinvested earnings remained the largest component of inflows, accounting for 51% of the total in 2025, followed by equity capital (34%) and intercompany loans (15%) (ECLAC, 2026[52]). The region’s ability to sustain investment inflows amid heightened global uncertainty highlights its resilience and reinforces its role as an important destination (ECLAC, 2026[52]).
FDI in LAC remains concentrated, both in terms of source economies and destination countries. Enterprises from the European Union and the United States are the main sources of greenfield FDI in LAC. Over 2015‑2025, enterprises from the European Union (28.3%) and the United States (25.0%) accounted for more than half of total announced greenfield investment in primary and manufacturing sectors. They were followed by China (10.1%), Japan (5.0%), Canada (4.8%) and the United Kingdom (4.4%) (Figure 2.13). Intraregional investment represented only 7.3% of total greenfield FDI, underscoring the limited role of intraregional flows into the productive sector. On the destination side, concentration was even more pronounced: Mexico and Brazil alone absorbed more than half of the region’s FDI inflows (35.6% and 22.6%, respectively), followed by Argentina (11.1%), Chile (4.8%) and Peru (3.7%) (Figure 2.13).
Note: Foreign direct investment (FDI) refers to announced greenfield investment projects measured by capital expenditure. Other source economies include Algeria, Belarus, Egypt, Hong Kong (China), Iceland, India, Indonesia, Iran, Israel, Jordan, Republic of Korea, Liechtenstein, Malaysia, Monaco, Morocco, New Zealand, Norway, Pakistan, Russian Federation, Saudi Arabia, Singapore, South Africa, Sri Lanka, Switzerland, Chinese Taipei, Thailand, Tunisia, Türkiye, Ukraine, United Arab Emirates, Vanuatu and Viet Nam. Other LAC destinations comprise Antigua and Barbuda, the Bahamas, Barbados, Belize, Plurinational State of Bolivia, Cuba, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Panama, Paraguay, Suriname, Trinidad and Tobago, and Venezuela. Capital investment corresponds to ISIC Rev.4 Divisions A-C, covering the primary sector and manufacturing industries. Tech-intensity manufacturing groups are based on the OECD Technology Classification in ISIC Rev.4.
Source: Authors’ calculations based on Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
The sectoral composition of FDI varies across LAC economies. Between 2015 and 2025, some countries attracted a substantial share of announced greenfield investment in medium-high and high-technology activities. In Costa Rica, these segments represented 78.9% of inflows and Mexico accounted for more than half of its inflows (56.3%), while Brazil (38.1%) and Colombia (36.5%) also recorded sizeable shares (Figure 2.13). By contrast, investment in several South American economies remained oriented towards primary and low-technology activities, which together accounted for 46.7% of total FDI. Meanwhile, high-technology activities represented 3.6% of FDI inflows.
The role of FDI in integrating LAC into global value chains
FDI is a key driver of global value chain participation in LAC, but its effects on domestic value added vary across production stages. FDI is positively associated with both backward and forward participation in GVCs. This indicates that sectors receiving more FDI are more integrated into international production networks, both as users of foreign inputs and as suppliers of value to other countries’ exports. Empirical evidence suggests that a 10% increase in FDI is associated to a 0.045 percentage-point rise in backward participation and a 0.16 percentage-point increase in domestic value added embodied in foreign final demand (Figure 2.14). However, stronger GVC participation does not automatically translate into domestic value creation across all export activities. While FDI is linked to higher domestic value added in intermediate exports, it is not associated with a higher domestic value-added share in total exports. This suggests that FDI mainly supports upgrading in upstream segments, through stronger local sourcing and supplier linkages, but has limited effects on final production stages (Kee, Xie and Xu, 2025[54]). In these stages, exports remain more dependent on imported inputs and foreign-controlled activities. These require capabilities such as advanced manufacturing, branding and distribution that are less developed locally (Del Gatto and Delgado, 2025[55]).
Note: The figure displays the estimated percentage-point impact of a 10% increase in capital investment from announced greenfield FDI projects. For methodology, please refer to Box 2.1.
Source: Authors’ calculations based on OECD (2024[31]), Trade in Value Added (TiVA), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html; Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
FDI contributes to increasing domestic value added reaching global markets. Empirical evidence shows that a 10% increase in FDI is associated with higher domestic value added in foreign final demand across several sectors. This includes primary industries by 0.45 percentage points, medium-low technology manufacturing by 0.14, medium-high technology manufacturing by 0.29 and services by 0.14 (Figure 2.15). The particularly strong effects in medium-technology manufacturing suggest that FDI generates larger upgrading gains in more sophisticated activities. This indicates that FDI can strengthen domestic linkages by encouraging foreign firms to source more inputs locally and by supporting local firms in becoming suppliers within regional and global production networks. These stronger supplier linkages help host economies become more competitive in supplying inputs to GVCs.
Note: The figure displays the estimated percentage-point impact of a 10% increase in capital investment from announced greenfield FDI projects. For methodology, please refer to Box 2.1.
Source: Authors’ calculations based on OECD (2024[31]), Trade in Value Added (TiVA), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html; Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
The benefits of FDI for GVC integration are not automatic and depend on key enabling conditions. Countries may attract foreign investors and expand exports while capturing only a limited share of value added. They may also remain concentrated in low value assembly activities with weak linkages to the local economy (Bénétrix, Pallan and Panizza, 2026[56]). The extent to which FDI translates into upgrading is shaped by policies that create its enabling environment. A positive enabling environment is characterised by quality institutions, skilled labour, adequate infrastructure, and measures that support firm capabilities and facilitate connections with multinational enterprises (OECD, 2022[57]). A sound investment climate is also essential. Openness to FDI, investor protection and investment promotion can enhance the positive relationship between GVC participation and FDI spillovers (OECD, 2015[58]). Investment facilitation is particularly important, as it refers to the services and support provided to investors after they establish operations in the host economy. Facilitation may include assistance with regulatory procedures, supplier matchmaking, workforce development and other aftercare services that help firms expand their operations and strengthen linkages with the local economy. At the same time, the characteristics of foreign investors also matter, including type of investment, sector, motivation of the firm, and the firm’s reliance on local sourcing (IMF, 2017[50]; Crescenzi and Harman, 2022[59]). When domestic conditions and investor behaviour are aligned, the potential for productivity gains and knowledge diffusion is significantly higher. Conversely, in the absence of such an alignment, FDI may remain enclave in nature with limited integration into the local economy.
This analysis draws on sector-level fixed-effects panel regressions to evaluate the impact of capital investment from announced greenfield FDI projects on two key outcomes and countries’ integration into global value chains, as well as its implications for domestic value added across sectors. The model covers seven LAC countries over 2003-2022 and is specified as follows:
Where 𝑦𝑖s𝑡 is one of the following dependent variables for country i, sector s, in year t:
Backward participation: a measure of the share of foreign value added embodied in gross exports. It captures the extent to which domestic production relies on imported inputs.
Forward participation: a measure of the share domestic value added embodied in foreign final demand. It captures the extent to which domestic sectors contribute inputs to production processes abroad.
Domestic value added in gross exports: a measure of the share of domestic value added embodied in total gross exports. It captures the overall extent to which export activity reflects domestic production rather than foreign inputs.
Domestic value added in final products: a measure of the share of domestic value added embodied in exports of final goods. It captures domestic value in downstream stages of production, closer to final consumption.
Domestic value added in intermediate products: a measure of the share of domestic value added embodied in exports of intermediate goods and services. It captures domestic participation in upstream segments of global value chains, where countries supply inputs used in further production abroad.
All dependent variables are sourced from the OECD Trade in Value Added (TiVA) dataset.
The analysis covers all LAC economies available in the OECD Trade in Value Added (TiVA) dataset: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru.
The explanatory variable is the one-year lagged capital investment from announced greenfield FDI projects, capturing the delayed effect of project implementation. Data are sourced from fDi Markets, a Financial Times dataset.
Control variables include GDP per capita, trade openness (trade as percentage of GDP) and financial development (private sector credit as percentage of GDP). Regressions include country and year fixed-effects, and standard errors are clustered.
To assess heterogeneity across sectors, the model is extended to include interaction terms between FDI and sectoral classifications based on the OECD Technology Classification (low-tech manufacturing, medium-high technology manufacturing, services and primary sectors). Marginal effects are computed to evaluate how the relationship between FDI and domestic value added varies across sector groups.
Regressions include country and year fixed-effects. Country fixed-effects control for time-invariant structural differences across countries, while year fixed-effects capture global shocks common to all observations. Standard errors are clustered at the country level.
Countries included are Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru. The results reflect robust empirical associations but do not establish causal relationships.
Regional markets can support scale, diversification and firm internationalisation
Regional trade integration can support diversification and productive upgrading while strengthening LAC’s integration into global markets. Deeper integration expands market access, allowing firms to serve larger regional markets, exploit economies of scale and develop more sophisticated productive capabilities (DiCaprio, Santos-Paulino and Sokolova, 2017[60]; Vigninou, 2021[61]). It can also accelerate structural transformation through knowledge diffusion, technology transfer and learning, while helping firms diversify exports and move into activities with higher value added (World Bank, 2021[62]). By creating demand for a broader range of products than individual domestic markets, regional integration can support productive and export diversification and facilitate the internationalisation of small and medium-sized enterprises (SMEs) (ECLAC, 2026[19]). Stronger regional linkages can also enhance resilience to external shocks and support development of cross-border value chains, reinforcing PDPs at the regional level (Vargas, 2021[63]; ECLAC, 2024[64]; UNCTAD, 2024[65]).
Intraregional trade remains limited, although more diversified and manufacturing-intensive than extraregional trade
Intraregional trade in LAC remains limited. In 2024, intraregional exports accounted for 14% of total regional exports, down from 18% in 2000. This remains well below the levels observed in Africa (17%), Asia (59%) and Europe (67%) (Figure 2.16). LAC also records the lowest level of intraregional trade among the regions considered. This gap has persisted over the last three decades, suggesting that regional trade integration has advanced more slowly than elsewhere.
Regional integration remains hindered by persistent trade and structural barriers. Despite a dense network of regional trade agreements and declining tariff barriers, trade costs within the region remain high. Tariffs persist in some sectors, while non-tariff barriers, customs inefficiencies, regulatory frictions, and infrastructure and logistics gaps continue to raise the cost of trading across borders (see Chapter 3). Also, factors such as a fragmented regional economy and weak institutional support further constrain regional integration (Bhattacharya and Pienknagura, 2024[35]; ECLAC, 2026[24]). Limited export diversification and overlapping export structures reduce complementarities between countries, while weak regional production networks limit opportunities for cross-border specialisation and value chain development (OECD et al., 2025[4]).
Note: Regional groupings follow the United Nations Statistics Division’s M49 standard, as adopted by UNCTAD. Africa (UNCTAD code 5100) comprises all 54 African economies, including Northern, sub-Saharan, Eastern, Central, Southern and Western Africa. Asia (5300) includes Central, Eastern, Southeastern, Southern and Western Asia (the latter comprising the Middle East), as well as Japan, Israel and the Republic of Korea. Europe (5400) comprises Eastern, Northern, Southern and Western Europe (including all EU member states, the United Kingdom and non-EU European economies such as Switzerland, Norway and the Western Balkans). Latin America and the Caribbean (part of Americas, 5200) covers Central America, South America and the Caribbean. North America (part of Americas, 5200) comprises Canada, the United States, Bermuda and Greenland. Intraregional trade share is calculated as the value of merchandise exports from economies within a region to other economies within the same region, divided by that region’s total exports to the world, in current USD.
Source: Authors’ calculations based on UNCTAD (2024[66]), UNCTADstat data centre, https://unctadstat.unctad.org/datacentre/dataviewer/.
The regional market plays a critical role in the productive and export diversification of LAC. For nearly all countries in the region, except for Mexico, the basket of products exported to the regional market is significantly more diverse than the basket sent to major global partners like China, the United States or the European Union (Figure 2.17). This pattern holds true for all countries in LAC (except Mexico) regardless of a country’s size or its export specialisation (ECLAC, 2026[19]) . This underscores the region’s unique capacity to absorb a wider variety of goods, particularly those with higher value added, compared to the more commodity-heavy exports typically sent to extraregional markets. Manufacturing is particularly important in intraregional trade, accounting for an average of 47% of exports among LAC countries (excluding Mexico) (ECLAC, 2026[19]).
Source: Authors’ elaboration based on (ECLAC, 2026[19]), Managing Transformations in an Era of Ruptures.
The regional market is the most accessible destination for LAC firms, particularly smaller enterprises seeking to internationalise for the first time. In nine out of ten LAC countries analysed, the number of firms exporting within the region exceeds those exporting to the United States, China or the European Union (Figure 2.18). This pattern reflects structural advantages of regional trade, including shorter distances, shared language and cultural ties, and lower administrative and compliance costs. These factors make regional markets more accessible entry points, particularly for smaller firms. By contrast, exports to extraregional markets, especially in Asia, remain concentrated among a small number of large firms focussed primarily on natural resources. The regional market thus functions both as a destination for more diversified goods, and as a platform through which a broader universe of firms, including SMEs, can begin to internationalise and build the capabilities needed to compete in global markets (ECLAC, 2026[19]).
Source: Authors’ elaboration based on (ECLAC, 2026[19]), Managing Transformations in an Era of Ruptures.
Intraregional trade in LAC remains below its potential
LAC’s trade structure suggests potential for stronger intraregional trade integration. On average, observed intraregional trade over the past two decades has remained six percentage points of GDP below its estimated structural potential. These estimates suggest that current productive structures and regional demand could support higher levels of trade within the region. However, this potential should not be interpreted as an outcome that will materialise automatically or in the short term. Rather, it reflects the level of trade predicted by a gravity model based on countries’ economic size, income levels, geographic proximity and trade structures (Box 2.2). The gap with respect to expected levels of intraregional trade varies across countries. Economies such as Uruguay, Ecuador and Belize show the largest opportunities relative to GDP, with gaps averaging between 4% and 13% of their GDP. By contrast, Mexico’s intraregional trade is already relatively close to the level predicted by its current structural characteristics. Further gains in regional integration would therefore likely require changes in productive structures, export specialisation and diversification, and deeper regional value chain linkages (Figure 2.19).
Percentage of GDP average 2002-2024, primary and manufacturing sectors
Note: Values indicate under-trading relative to countries’ GDP. Please refer to methodology Box 2.2.
Source: Authors’ calculations based on CEPII (2022[67]), CEPII Gravity Database, http://www.cepii.fr/CEPII/en/bdd_modele/bdd_modele_item.asp?id=8; CEPII (2025[68]), BACI: International Trade Database at the Product Level, http://www.cepii.fr/CEPII.
Policy barriers help explain part of the gap between actual and expected intraregional trade. Although the institutional foundations for regional integration are largely in place, implementation remains fragmented. LAC has more than 33 trade agreements covering a large share of intraregional trade, including MERCOSUR, Pacific Alliance and the Caribbean Community (CARICOM) (World Trade Organization, 2024[69]). However, overlapping agreements and differing rules of origin increase compliance costs, limit input cumulation across markets and reduce incentives to build regional value chains. Missing trade links between key subregions, together with infrastructure, logistics and connectivity gaps, further raise trade costs and constrain the development of integrated regional production networks (Blyde, 2018[70]; Bhattacharya and Pienknagura, 2024[35]; Estevadeordal, Talvi and Werner, 2025[71]) (see Chapter 3).
This analysis uses a gravity model to identify sectors and country pairs where intraregional merchandise trade in LAC remains below its structural potential, given countries’ economic size (annual GDP), geographic proximity and bilateral characteristics. The model covers 28 sectors over 2002‑2024 and is specified as follows:
Where X̂ᵢⱼ,ₖ is the predicted bilateral trade flow for exporter i, importer j, during year t and sector k, estimated separately for each sector using Poisson Pseudo Maximum Likelihood.
Then, predicted (X̂) and observed (X) trade flows are compared to compute the gap at the country-pair and sector level. This measure expresses the gap between observed trade and its expected structural potential as a share of that potential.
Trade data: product-level bilateral trade flows are sourced from the BACI dataset (CEPII, 2025[68]) and are classified into ISIC Rev4 sectors at the 2-digit level based on the UN correspondence table. Sectors are grouped by technology intensity according to the OECD Technology Classification.
Gravity variables: structural determinants of trade are sourced from diverse databases – bilateral distance, contiguity, common language, colonial ties and regional trade agreements (CEPII, 2022[67]); GDP and GDP per capita from World Development Indicators (World Bank, 2026[1]) measured in current US dollars for each year of the panel; capital stock per worker from Penn World Tables 11.0 (University of Groningen/ University of California Davis, 2024[72]); and a resource-rich dummy (mineral rents >10% of GDP) (World Bank, 2026[1]).
Multilateral resistance: trade between two countries depends not only on their bilateral relationship but also on how easily each of them can trade with everyone else, a concept known as multilateral resistance. A country geographically remote from the rest of the world, for example, will tend to trade more with its immediate neighbours simply because alternatives are more costly. The model accounts for this by constructing a GDP-weighted remoteness index for each exporter and importer (Baier and Bergstrand, 2007[73]), capturing the distance of each country, on average, from all its potential trading partners. This approach avoids using country-year fixed-effects, which would absorb the very differences between observed and predicted trade that the model aims to identify (Fally, 2015[74]).
The analysis is based on Mulabdic and Yasar (2021[75]) and extends the standard gravity framework to bilateral trade at the sector level (Egger and Larch, 2008[76]). Other references include Estimator: PPML by Silva and Tenreyro (2006[77]) and multilateral resistance: Baier and Bergstrand (2007[73]).
The largest untapped opportunities for intraregional trade are concentrated in more technology-intensive sectors. Between 2002 and 2024, intraregional exports of high-technology manufactures were around 75% below the level predicted by the gravity model, while medium-low technology manufactures recorded a gap of about 45%. By contrast, low-technology manufactures were much closer to predicted levels, with a gap of around 15% (Figure 2.20). These results suggest that the greatest scope for expanding intraregional trade lies in activities with higher value added, where stronger regional trade linkages could support industrial upgrading and development of regional value chains.
Percentage below predicted exports, 2002-2024
Note: Sectors specified by ISIC Rev.4, 2-digit sectors and OECD’s technology classification. Please refer to methodology Box 2.2.
Source: Authors’ calculations based on CEPII (2022[67]), CEPII Gravity Database, http://www.cepii.fr/CEPII/en/bdd_modele/bdd_modele_item.asp?id=8; CEPII (2025[68]), BACI: International Trade Database at the Product Level, http://www.cepii.fr/CEPII.
Several technology-intensive sectors point to untapped regional trade potential. Over the past two decades, technology-intensive manufacturing sectors have shown significant scope to expand intraregional trade. Intraregional exports in sectors such as computers, electronics and optical equipment, medical instruments and machinery, and transport equipment were 33‑86% below expected levels. Expanding regional trade in higher-technology manufactures could generate large gains, as these sectors support learning, innovation and industrial upgrading, helping firms adopt new technologies and move into activities with higher value added (OECD et al., 2025[4]). Opportunities also extend to critical minerals, with intraregional exports of metal ores around 60% below expected levels (Figure 2.21). These inputs are increasingly central to the green and digital transitions, areas in which LAC holds some of the world’s largest reserves (see Chapter 1).
Percentage below predicted exports, 2002-2024
Note: Sectors specified by ISIC Rev.4, 2-digit sectors, sections A, B and C. Values indicate the percentage of trade gap relative to their structural potential. Please refer to methodology Box 2.2.
Source: Authors’ calculations based on CEPII (2022[67]), CEPII Gravity Database, http://www.cepii.fr/CEPII/en/bdd_modele/bdd_modele_item.asp?id=8; CEPII (2025[68]), BACI: International Trade Database at the Product Level, http://www.cepii.fr/CEPII.
Trade complementarity can support stronger intraregional trade, but it remains modest and uneven across countries
Trade complementarity is an important determinant of intraregional trade. The extent to which countries can expand trade within the region depends on whether their export structures match the import demand of regional partners. By measuring the alignment between exports and imports, trade complementarity indicates the scope for deeper trade integration. Higher complementarity can facilitate specialisation, trade in intermediate inputs and development of regional value chains. In so doing, it can strengthen productive linkages and enable countries to benefit from economies of scale, productivity gains and comparative advantage (WTO, OECD and WB, 2019[78]). As productive structures become more complementary, improvements in connectivity and infrastructure can further unlock trade potential by reducing the costs of cross-border production and exchange.
Trade complementarities across LAC remain modest. In 2024, the export basket of a typical country matched less than one-fifth of the region’s import demand (Figure 2.22). As a result, opportunities for mutually beneficial trade remain limited, as countries often compete in external markets rather than supply goods demanded by regional partners. This limited differentiation in export structures reduces the scope for expanding regional trade and for developing stronger productive linkages across the region (Bhattacharya and Pienknagura, 2024[35]; ECLAC, 2026[24]).
Note: Darker shades indicate higher values of the trade complementarity index between two countries. The trade complementarity index (Michaely, 1996[39]) measures the degree to which country j’s export structure matches country i’s import needs. Letting mᵢₖ denote sector k’s share in country i’s total imports from the world and xʲₖ its share in country j’s total exports to the world, the index is defined as cⁱʲ = 100 [1 − Σₖ |mᵢₖ − xʲₖ| / 2]. Calculated values range from 0 (no complementarity) to 100 (perfect match).
The analysis uses 3-digit SITC product levels and the Lall (2000[79]) technological intensity classification.
Source: Authors’ calculations based on UN Comtrade via World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org.
Trade complementarity varies significantly across countries. Economies with more diversified export structures, particularly those with a stronger presence in medium- and high-technology manufacturing, tend to exhibit greater complementarity with regional partners (Figure 2.23). Mexico stands out as the most complementary economy, reflecting its diversified manufacturing base in sectors such as automotive, electronics and machinery. Several Central American economies also show relatively high complementarity, supported by export baskets that combine manufacturing and agro-processing activities. By contrast, economies specialised in primary products tend to exhibit much lower complementarity, as their export baskets often overlap with those of neighbouring countries, limiting opportunities for mutually beneficial and deeper intraregional trade.
Note: Each country is averaged across all partners, yielding a summary measure of how well a country’s export structure fits the representative regional importer.
Source: Authors’ calculations based on UN Comtrade via World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org.
Trade complementarity has evolved unevenly across LAC, reflecting changes in export structures. While the regional average has remained broadly stable, individual countries and subregional blocs have followed markedly different trajectories over time (Figure 2.24). Increases in trade complementarity have generally accompanied export diversification and the expansion of manufacturing activities, particularly in several Central American economies that have broadened their export base and deepened participation in light manufacturing and assembly activities. In contrast, complementarity has declined in several South American economies as exports became increasingly concentrated in primary commodities. In the region’s larger commodity exporters, the commodity boom reinforced specialisation in raw materials, reducing alignment between their export baskets and regional demand. These divergent trajectories suggest that changes in export composition and productive diversification play an important role in shaping regional trade complementarities over time.
Note: Panel A shows the evolution of average export complementarity between each country and the other LAC countries. The LAC average represents the simple average across all countries and their regional partners. Subregional averages are calculated as the simple average of each country’s average complementarity with all other countries in the region, including countries within the same subregion. Mexico and Central America include Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua and Panama. Andean countries include Bolivia, Colombia, Ecuador and Peru. The Southern Cone includes Argentina, Brazil, Chile, Paraguay and Uruguay. The Caribbean includes Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana and Suriname. In Panel B, changes are calculated between the periods 2001-2005 and 2020-2024.
Source: Authors’ calculations based on UN Comtrade via World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org.
The sectoral composition of complementarity points to where opportunities for deeper regional trade may be strongest. Manufacturing sectors, particularly those with medium and high technological intensity, account for the greatest share of the complementarity observed across the region (Figure 2.25). This contrasts with primary products, where most countries export similar goods simultaneously, leaving limited scope for mutually beneficial trade. Medium- and high-technology manufactures tend to be more closely aligned with regional demand and are less widely supplied across countries, creating greater opportunities for complementary trade and regional production linkages. By contrast, low-technology manufacturing contributes less consistently, as production in these sectors often overlaps across economies. As a result, countries with a stronger presence in medium- and high-technology manufacturing tend to exhibit greater complementarity with regional partners. This is the case even when these sectors account for a relatively small share of total exports.
This finding suggests that what matters is not the size of the manufacturing sector per se, but rather the productive capabilities that diversify export structures and make them more responsive to regional demand. Economies with these capabilities are therefore better positioned to act as anchors for regional production networks. Broadening these capabilities across a wider set of countries and sectors would strengthen the region’s capacity to transform trade complementarities into deeper productive integration. Whether these complementarities have translated into such integration effectively, however, remains an empirical question.
Note: Stacked bars sum to the export complementarity index.
Source: Authors’ calculations based on UN Comtrade via World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org.
A more catalytic form of regional integration can build on existing capabilities to develop production networks in strategic sectors
Regional value chains can support productive upgrading and better integration into global value chains
Stronger regional production integration can help LAC move into higher-value segments of GVCs. Stronger regional value chains can keep a larger share of the supply chain, inputs and production stages within the region, while providing a stepping stone towards greater participation in global value chains (OECD et al., 2025[4]; WTO, 2025[80]). By strengthening regional production networks, firms can develop productive capabilities, benefit from larger markets and gain access to inputs, technology and supplier networks that support upgrading (Brondino, Lucero and Roitbarg, 2023[81]). Regional value chains can also generate learning spillovers and facilitate specialisation in more complex activities, increasing domestic value added and enhancing competitiveness in global markets (ECLAC, 2025[82]; Hernández-Rodríguez, 2025[83]). In addition, stronger regional linkages can improve resilience by reducing supply chain complexity (ADB, 2025[84]). The experience of the European Union, North America, and East and Southeast Asia highlights how regional integration can serve as a platform for deeper participation in GVCs (Sanguinetti et al., 2021[85]).
LAC’s integration into regional value chains remains limited compared with other regions. Regional value chain participation accounts for only 13% of the region’s total global value chain participation, well below the European Union (49%), and East and Southeast Asia (52%) (Figure 2.26, Panel A). By type of linkage, regional backward participation represents 11% of total backward participation, while regional forward participation accounts for 15% of total forward participation. These shares remain far below those observed in the European Union (40% and 65%, respectively) and East and Southeast Asia (53% and 50%) (Figure 2.26, Panel B).
LAC’s low participation in regional value chains reflects weak productive linkages and fragmented regional integration. Firms in the region source the majority of their intermediate inputs from outside the region, while intraregional trade remains concentrated in final goods. This contrasts with Europe and East and Southeast Asia, where regional value chains are more deeply integrated. LAC also lacks a strong regional production hub capable of anchoring supplier networks and scaling cross-border production linkages (Fernandes, Nievas Offidani and Winkler, 2021[47]). Despite a dense network of trade agreements, regional integration remains shallow, as overlapping rules, regulatory misalignment and complex rules of origin increase compliance costs and make multi-country supply chains difficult to organise (Blyde and Trachtenberg, 2020[46]). High transport and logistics costs further constrain regional sourcing, as infrastructure gaps, weak connectivity and border inefficiencies reduce the benefits of geographic proximity (see Chapter 3).
Several countries have begun to embed regional integration explicitly into their national productive development strategies. Colombia’s Política Nacional de Reindustrialización and Mexico’s Plan México both identify deeper regional integration as a strategic objective. This suggests that the institutional basis for co‑ordinating productive agendas at the regional level is already emerging (ECLAC, 2025[82]).
Note: LAC comprises 28 countries for which data are available: Argentina, Antigua and Barbuda, the Bahamas, Barbados, Belize, the Plurinational State of Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela. Africa comprises 48 countries for which data are available. East and Southeastern Asia comprise ASEAN-10 economies plus China, Japan, Republic of Korea, Hong Kong (China), Macau (China), Chinese Taipei and Mongolia.
Source: Authors’ calculations based on Casella et al. (2019[48]), UNCTAD insights: Improving the analysis of global value chains: The UNCTAD-Eora Database, https://doi.org/10.18356/3aad0f6a-en.
Existing intra-industry trade provides a basis for deeper regional production networks
Intra-industry trade can help identify existing capabilities on which deeper regional production networks can be built. It provides an important indication of the depth and sophistication of regional economic integration. Higher levels of two-way trade within the same industries suggest that countries are both trading on the basis of different factor endowments and sectoral specialisation, and participating in more integrated production systems and exchanging differentiated products.
Intra-industry trade remains limited across LAC. Between 2020 and 2024, around 17% of intraregional trade consisted of two-way exchanges within the same industry (Figure 2.27, Panel A). This share has remained broadly unchanged over the past two decades, suggesting limited progress in deepening productive integration across the region. Most intraregional trade continues to reflect inter-industry specialisation, whereby countries exchange goods from different sectors rather than participate in integrated production processes. Consistent with this pattern, the Grubel-Lloyd index, which measures the extent of intra-industry trade, has remained low over time (Figure 2.27, Panel B).
Note: Panel A shows intra-industry trade as a share of total bilateral trade within the region. Panel B shows the simple average of the Grubel-Lloyd index across LAC economies, with individual economies in grey. The analysis covers 17 Latin American and Caribbean economies for which bilateral product-level trade data are available throughout the period. The Grubel-Lloyd index measures the share of bilateral trade that consists of two-way exchange within the same product category. For each pair of economies, it is computed as GL = 1 − Σ|X−M| / Σ(X+M), where X and M are exports and imports of each product, and is multiplied by 100. It ranges from 0, when all trade flows in one direction, to 100, when exports and imports match exactly in every product. Products are defined at the three-digit level of the Standard International Trade Classification. Source: Authors’ calculations based on UN Comtrade via World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org.
Existing productive linkages are concentrated in a relatively small number of bilateral relationships that provide a basis for deeper regional production networks. Regional productive integration is highly concentrated rather than evenly distributed across the region. A relatively small number of bilateral corridors account for nearly 80% of regional intra-industry trade, including Argentina-Brazil, Brazil-Mexico and Guatemala-El Salvador (Figure 2.28, Panel A). This concentration suggests that regional production networks are anchored by a small number of economies with stronger manufacturing capabilities, while most bilateral relationships remain weakly integrated. Deepening and extending these networks could integrate more SMEs and local suppliers, spread technology and productivity gains, and strengthen LAC’s participation in global value chains.
The sectoral composition of intra-industry trade differs across bilateral networks. Manufactures account for close to 60% of two-way trade across the region. However, their share rises substantially in the leading corridors, where they represent more than 70% of intra-industry trade (Figure 2.28, Panel B). Medium-technology manufactures alone account for close to two-thirds of trade within the five largest corridors. Deeper productive integration is concentrated in corridors where stronger manufacturing capabilities are already in place. The leading intra-industry trade corridors are not uniform. Argentina-Brazil and Brazil-Mexico are overwhelmingly manufacturing corridors, reflecting their stronger industrial bases and deeper production linkages. By contrast, Guatemala-El Salvador exhibits a different pattern, with intra-industry trade concentrated in primary products and resource-based manufactures, consistent with the agro-processing and light manufacturing activities common to both economies.
Note: Panel A shows the 14 largest bilateral corridors; each corridor appears on both sides with half its value, so that ribbon widths are proportional to two-way trade. Panel B decomposes each corridor by technology intensity, and figures in brackets indicate the corridor’s share in the regional total. The analysis covers 17 Latin American and Caribbean economies for which bilateral product-level trade data are available throughout the period.
Source: Authors’ calculations based on UN Comtrade via World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org.
At the product level, intra-industry trade points to specific activities where deeper regional production networks could build. The three products with the largest two-way trade belong to the automotive complex, while plastics, pharmaceuticals, electricity distribution equipment and internal combustion engines also feature prominently (Figure 2.29). These products share characteristics that support regional production networks, including product differentiation, economies of scale and production processes that lend themselves to fragmentation across countries. Their prominence suggests that regional productive integration has developed primarily in activities where cross-border specialisation is technologically and economically feasible.
Note: n.e.s. = not elsewhere specified. The 15 three-digit products of the Standard International Trade Classification have the largest two-way trade across all bilateral relationships, annual average of the period; percentages correspond to shares in the regional total. The analysis covers 17 Latin American and Caribbean economies for which bilateral product-level trade data are available throughout the period.
Source: Authors’ calculations based on UN Comtrade via World Bank (2025[36]), World Integrated Trade Solution, https://wits.worldbank.org.
There is potential to deepen regional value chains and increase value added within the region
Intraregional trade in intermediate goods is more diversified and sophisticated than extraregional trade, offering opportunities for value chain upgrading in LAC. Value chains are driven by cross-border trade in intermediate inputs, which can generate both backward and forward linkages by drawing on inputs from multiple sectors and supplying goods and services used by other industries. Across seven LAC economies, intermediate trade within the region has a stronger manufacturing and medium-technology component than trade with extraregional partners. In Brazil, primary products account for 65% of extraregional intermediate exports, while medium-low and medium-high technology manufactures represent 60% of intraregional trade (Figure 2.30). A similar pattern is observed in Colombia, where primary products account for 66% of extraregional intermediate exports, compared with 68% of intraregional trade in medium-low and medium-high technology manufactures. In Peru, primary products represent 75% of extraregional intermediate exports, while medium-low technology manufacturing accounts for 51% of intraregional trade. Costa Rica has a more diversified export structure, but the regional market still has a stronger technology component. Medium-high technology manufactures account for 35% of intraregional intermediate exports compared with 30% of extraregional exports, while the corresponding shares for high-technology manufacturing are 19% and 6%.
Source: Authors’ calculations based on OECD (2024[31]), Trade in Value Added (TiVA), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html.
There is scope for expanding regional trade of intermediate inputs, although its scale and composition vary across sectors and countries. Analysis covering seven LAC economies estimates that up to USD 46.4 billion in intermediate inputs currently sourced outside the region could instead be sourced regionally (Box 2.3). This represents around 9% of LAC’s current imports of these goods from extra-regional partners. Chemicals account for the largest share of this additional regional sourcing, at 18% of the total, followed by basic iron and steel (11%), agriculture (9%) and food, beverages and tobacco (8%) (Figure 2.31, Panel A). The opportunities also extend to more technology-intensive manufacturing, including motor vehicles (7%), machinery and equipment (3%), computers and electronics (2%) and electrical equipment (2%). The scale and technological composition of this additional sourcing also vary across supplier countries. The scope for additional regional sourcing from Peru is equivalent to 1.6% of Peru’s GDP, compared with 1.5% of GDP in Argentina, 1.4% in Colombia and 1.3% in Chile (Figure 2.31, Panel B). In Peru, this sourcing is concentrated in medium-low-technology activities, while medium-high-technology manufacturing plays a larger role in Colombia, Argentina and Brazil. Costa Rica and Mexico present smaller figures relative to their economic size, at 0.65% and 0.47% of GDP respectively, but with a relatively greater contribution from medium high and high technology-intensive activities.
Note: Additional regional sourcing is estimated by scaling up existing regional sourcing relationships according to the methodology described in Box 2.3.
Source: Authors’ calculations based on OECD (2024[31]), Trade in Value Added (TiVA), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html.
Deeper regional value chains could increase the value added generated within LAC and embodied in its exports. A simulation reallocating up to 10% of extraregional intermediate sourcing towards regional suppliers increases regional value-added content across all technological groups, with the largest relative increases in medium-high-technology (1.4%) and medium-low-technology manufacturing (1.14%) (Figure 2.32, Panel A). Domestic value-added gains also vary across countries. On average in LAC, the reallocation increases domestic value added embodied in exports by 0.47 percentage points of GDP, ranging from 0.71 percentage points in Colombia, 0.62 in Peru and 0.58 in Argentina to 0.44 in Chile, 0.39 in Brazil, 0.37 in Costa Rica and 0.16 in Mexico (Figure 2.32, Panel B). Medium-high-technology manufacturing contributes more to these gains in Colombia and Argentina, while medium-low-technology manufacturing plays a larger role in Peru. Gains also extend to other sectors, including services, reflecting the production linkages that connect exporting industries with upstream activities such as transport, logistics, finance, ICT and other business services (Miroudot and Cadestin, 2017[22]).
Scenario reallocating up to 10% of extraregional intermediate sourcing towards regional suppliers
Note: For methodology, please refer to Box 2.3.
Source: Authors’ calculations based on OECD (2024[31]), Trade in Value Added (TiVA), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html.
This exercise assesses the scope for increasing intraregional sourcing of intermediate inputs and its effects on value added generated within LAC. It first identifies the sectors where regional sourcing could increase and how this additional sourcing is allocated across supplier countries and then simulates the regional and domestic value-added effects of increasing regional sourcing.
The analysis builds on the hypothetical extraction approach used by Brondino et al. (2023[81]), which reallocates intermediate inputs sourced outside the region towards regional suppliers within an input-output framework. The analysis adapts this approach to seven LAC economies and introduces additional importer and supplier-side constraints based on observed trade patterns.
1) Identifying the scope for additional regional sourcing. For each importing country-sector, the exercise compares the value of intermediate inputs sourced within LAC with those sourced outside the region and identifies the regional suppliers already serving that market. It then estimates the USD value of extraregional sourcing that could be reallocated to these existing regional suppliers, based on their observed regional and extraregional trade. This amount is subject to two constraints:
Importer-side constraint: additional regional sourcing cannot exceed either the value already sourced regionally or the value currently sourced outside the region.
Supplier-side constraint: additional sales allocated to each supplier-sector across all regional buyers cannot exceed the value that the supplier-sector currently exports outside the region.
The resulting amount of additional regional sourcing is decomposed by sector to estimate each sector’s share of the total. It is also allocated across the existing regional supplier countries, in proportion to their current shares in each importing country-sector’s regional sourcing.
2) Simulating the value-added effects. The simulation assumes that LAC countries reallocate 10% of their extraregional intermediate sourcing towards regional suppliers.
The resulting increases in value added are estimated using the input-output framework underlying the OECD TiVA methodology:
Regional value added embodied in extraregional exports measures the value added generated across the seven LAC economies and embodied in their exports outside the region.
Domestic value added embodied in exports measures the value added generated within each country each country and sector of origin, including through domestic production linkages.
The analysis uses the OECD Inter-Country Input-Output (ICIO) tables underlying the 2025 edition of the OECD Trade in Value Added (TiVA) database and covers Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru in 2022.
The OECD Trade in Value Added (TiVA) database measures the value added by each country in the production of goods and services traded internationally, providing a more accurate picture of global trade flows and countries’ participation in global value chains than conventional trade statistics.
The results represent a stylised scenario based on observed trade relationships. The exercise does not account for changes in production capacity, prices, product characteristics, trade costs or other factors that may affect sourcing decisions.
Emerging opportunities in high-technology niches and critical minerals can support diversification into higher value-added activities
High-technology exports in LAC are concentrated in a few economies. In 2024, Mexico accounted for 85% of the region’s high-technology exports and led in 18 of its 20 main high-technology export products. Light vehicles represented the largest export category, reaching USD 25 billion (Table 2.1). Brazil remained the region’s second-largest high-technology exporter. Although its share of regional high-technology exports declined from 15% in 2005 to 7% in 2024, the country continues to maintain a sophisticated industrial base, with successful examples such as Embraer, the world’s third-largest manufacturer of commercial aircraft, which showcases high-technology production chains in the global aerospace industry.
Several countries have also developed competitive niches in activities with high value added, highlighting the region’s potential for productive transformation. Costa Rica and the Dominican Republic have leveraged strategic investment attraction and free trade zones to become global leaders in medical devices. In Costa Rica, the proactive co‑ordination between the government and multinational firms has allowed for a transition from simple assembly to the production of high-precision cardiovascular and orthopaedic equipment. In terms of modern services exports, Brazil is the regional leader (33%), followed by Argentina (10%) and the rapid emergence of Costa Rica, which reached a 10% share in 2024 (Table 2.1). These pockets of excellence demonstrate that with active productive development and trade policies, regional economies can insert themselves effectively into high value-added segments.
Shifts in global demand and technology could create further opportunities to build on these capabilities (see Chapter 1). Growing demand associated with artificial intelligence (AI) and semiconductors could provide opportunities for countries such as Mexico and Costa Rica to move beyond assembly into higher-value activities, including testing, packaging and design services. At the same time, greater regional co‑operation around lithium value chains in Argentina, Bolivia and Chile, and emerging green hydrogen activities in Chile and Colombia, could support development of new high-technology activities linked to electromobility and sustainable energy. Realising these opportunities will require addressing persistent technological gaps and strengthening local suppliers, specialised human capital, and the capacity to adopt and develop advanced technologies.
Note: n.e.s. = not elsewhere specified.
Source: Authors’ elaboration based on UN Comtrade (2024[5]), UN Comtrade, https://comtradeplus.un.org/.
Opportunities for upgrading also extend to critical minerals. Intraregional exports of metal ores remain around 60% below their estimated structural potential, pointing to considerable scope for stronger regional trade and productive linkages. At the same time, 62% of LAC’s critical-mineral exports between 2019 and 2023 consisted of unprocessed or only basically refined products, highlighting the limited value currently retained in the region (ECLAC, 2025[86]). By connecting complementary capabilities in extraction, processing, manufacturing and related services across countries, regional integration could support local suppliers and strengthen LAC’s position in critical-mineral value chains (UNCTAD, 2025[87]; UNCTAD, 2025[88]). (see Chapter 1).
Intraregional investment is key to increase productive regional integration
Intraregional FDI can play an important role in strengthening the region’s productive integration and global competitiveness. Beyond providing capital, FDI between countries within the region helps build cross-border supplier networks, supports the development of regional value chains, and increases trade in intermediate goods and services (Comotti, Crescenzi and Iammarino, 2020[89]). By linking production across neighbouring economies, intraregional FDI can deepen regional economic integration while improving resilience to global disruptions through shorter and more diversified supply chains (World Bank, 2020[90]). It can also facilitate the transfer of technology, managerial know-how and skills, helping domestic firms upgrade capabilities and move into activities with higher value added (OECD, 2022[57]; OECD, 2023[91]). In this way, stronger intraregional investment can help the region both trade more within itself and also compete more effectively in global markets (ADB, 2017[92]).
LAC firms invest a substantial share of their outward FDI within the region, yet most FDI received by LAC continues to originate from extraregional sources. Over 2003‑2025, on average, 56% of greenfield FDI announcements originating from LAC was invested elsewhere within the region. By contrast, only 9% of total FDI inward greenfield announcements into LAC originated from other LAC economies (Figure 2.33). This means that, while LAC firms allocate a large share of their outward investment within the region, these flows remain small relative to the much larger volumes of extraregional capital entering LAC.
Note: FDI refers to announced greenfield investment projects measured by capital expenditure (capex). The share of LAC FDI outflows is defined as the proportion of total FDI originating from LAC economies that is invested within the region as a percentage of total investment. The share of FDI inflows to LAC is defined as the proportion of total FDI received by LAC economies that originates from within the region as a percentage of total investment.
Source: Authors’ calculations based on Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
Intraregional FDI in LAC remains concentrated in a few economies
Intraregional investment in LAC remains concentrated among a small number of economies, although the composition of leading investors and recipients has shifted over time (Figure 2.34). On the outward side, Chile has recently become the largest source of intraregional greenfield FDI announcements (47.2% of outflows in 2023‑2025), with Argentina emerging as the second largest (24.6%). Chile has long been one of the region’s main intraregional investors, directed mainly to Brazil; its outward FDI rebounded strongly in 2025 after declining the previous year (ECLAC, 2026[52]). This marks a shift from earlier periods, when Brazil and Mexico were the main regional investors (Figure 2.34, Panel A). On the receiving side, Brazil has emerged as the main recipient of intraregional inflows (44.1% in 2023‑2025), followed by Uruguay (16%), whereas in earlier periods the leading destination rotated among Argentina, Peru and Colombia (Figure 2.34, Panel B). Considering FDI inflows, Central America stands out as the subregion with the strongest investment-based integration, with approximately 35% of its FDI inflows originating from LAC (ECLAC, 2026[52]).
Note: Foreign direct investment (FDI) refers to announced greenfield investment projects measured by capital expenditure (capex). The figure shows the distribution of the main economies involved in intraregional FDI flows. In Panel A, “Others” comprises Antigua and Barbuda, the Bahamas, Barbados, the Plurinational State of Bolivia, Costa Rica, Cuba, the Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Nicaragua, Paraguay, Saint Kitts and Nevis, Saint Lucia, Trinidad and Tobago, and Uruguay. In Panel B, “Others” comprises the Bahamas, Barbados, Belize, the Plurinational State of Bolivia, Costa Rica, Cuba, Dominica, the Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Paraguay, Saint Lucia, Suriname, and Trinidad and Tobago.
Source: Authors’ calculations based on Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
The sectoral profile of intraregional FDI varies considerably across LAC economies
Intraregional FDI reflects different patterns of economic specialisation across LAC economies. Over the 2015‑2025 period, manufacturing and primary activities together accounted for 46.6% of total intraregional inward announcements, and services for a further 45.2%. The remaining 8.1% of activities were directed to the energy and construction sectors (Figure 2.35). Structural profiles nonetheless vary considerably across the region. They range from economies with diversified flows between manufacturing and services, (such as Brazil and Mexico) to others more specialised (such as Uruguay in manufacturing and the Caribbean in services).
Note: Foreign direct investment (FDI) refers to announced greenfield investment projects measured by capital expenditure. The “Others” category includes the Plurinational State of Bolivia, El Salvador, Guatemala, Honduras, Nicaragua and Venezuela. The Caribbean aggregate comprises the Bahamas, Barbados, Belize, Cuba, Dominica, the Dominican Republic, Guyana, Haiti, Jamaica, Saint Kitts and Nevis, Saint Lucia, Suriname, and Trinidad and Tobago.
Source: Authors’ calculations based on Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
Intraregional FDI remains concentrated in lower-technology and lower R&D-intensity activities
Within manufacturing and primary sectors, inflows of intraregional announced greenfield FDI is concentrated in activities with lower value added. Over 2015‑2025, low-technology manufacturing accounted for 46.5% of intraregional inflows of capital investment in manufacturing and primary activities. This was followed by medium-low technology manufacturing (21.8%) and primary products (20.6%). Together, these lower-value activities represented 89% of intraregional announced inflows in manufacturing and primary activities. In contrast, medium-high technology manufacturing represented 10.2% of investment in these sectors, while high-technology manufacturing remained marginal (0.8%) (Figure 2.36). This concentration reflects a few large corridors rather than a broad regional pattern. In low-technology manufacturing, the Chile to Brazil investment corridor accounts for 58% of all low-technology manufacturing intraregional investment. In primary activities, the concentration was even higher, with 90% of investment driven by two bilateral relationships: Mexico investing in Peru and Argentina investing in Mexico (Figure 2.36).
Note: Foreign direct investment (FDI) refers to announced greenfield investment projects measured by capital expenditure. Capital investment corresponds to ISIC Rev.4 Divisions A-C, covering the primary sector and manufacturing industries. Manufacturing sectors are classified by technology intensity and services by R&D intensity, following the OECD Technology Classification (ISIC Rev.4).
Source: Authors’ calculations based on Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
In services, intraregional announced greenfield FDI shows a similar pattern, with intraregional investment concentrated in lower R&D-intensity activities. Over 2015‑2025, low R&D-intensity services accounted for 55.8% of intraregional FDI inflows in services, followed by medium-high (21.4%) and medium-low R&D-intensity services (21.2%). High R&D-intensity services remained marginal, representing 1.6% of intraregional inflows in services (Figure 2.37). Brazil stands out as the main hub for higher-value services; it is both the largest recipient and, as a source, the most technology-oriented investor. More than 80% of its outward services investment is in medium-high and high R&D-intensity activities, directed mainly to Chile and Mexico (Figure 2.37).
Note: Foreign direct investment (FDI) refers to announced greenfield investment projects measured by capital expenditure. Capital investment corresponds to ISIC Rev.4 Divisions G-J, covering the services sectors. Services sectors are classified by R&D intensity, following the OECD Technology Classification (ISIC Rev.4). The “Others” category includes the Bahamas, Barbados, Belize, Cuba, Dominica, the Dominican Republic, Guyana, Haiti, Jamaica (destination panel), Saint Kitts and Nevis, Saint Lucia, Suriname, Trinidad and Tobago, and other LAC economies that are not shown individually for readability.
Source: Authors’ calculations based on Financial Times (2026[53]), fDi Markets, http://www.ftlocations.com/products-and-services/fdi-markets.
Productive development policies can foster regional integration and stronger global positioning
PDPs can play a central role in strengthening regional integration and enhancing the region’s position in global markets. By combining horizontal and vertical interventions that support productivity growth, structural transformation and innovation, PDPs can help firms connect more effectively to regional and GVCs, foster cross-border productive linkages, and promote more inclusive and sustainable development patterns. In this way, they provide a critical policy framework for translating emerging economic opportunities into deeper regional integration and greater international competitiveness (Llinás and Salazar-Xirinachs, 2023[93]; ECLAC, 2024[64]; ECLAC, 2026[94]; OECD et al., 2025[4]).
The PDPs and regional integration can reinforce each other. Regional markets provide the scale and complementarities needed to support the development of strategic sectors, including clean-energy technologies, semiconductors, pharmaceutical inputs, digital services and advanced manufacturing (ECLAC, 2026[94]). In turn, PDPs with a regional orientation can foster deeper productive integration by encouraging cross-border value chains through co‑ordinated cluster initiatives, common standards, regional content requirements and joint public procurement mechanisms (ECLAC, 2024[64]). Together, these policies can strengthen regional productive capacities, boost competitiveness and enhance the region’s global positioning.
Regional integration also expands the scope of internationalisation within PDPs. Beyond promoting exports or attracting foreign investment, regional integration enables countries to connect regional productive structures with external sources of technology, knowledge and innovation, while facilitating engagement with the productive development strategies of other regions (ECLAC, 2025[9]). In this context, the investments, standards, demand signals and learning spillovers generated by the PDPs of leading regional economies can accelerate the productive upgrading of smaller or less diversified economies (ECLAC, 2024[64]). Regional integration provides the institutional framework and market conditions needed to unlock these spillovers and strengthen collective productive development.
Emerging national strategies suggest that this regional approach to productive development is already taking shape. Brazil’s Nova Indústria Brasil, Colombia’s Política Nacional de Reindustrialización, Mexico’s Plan México and Peru’s Política Nacional de Desarrollo Industrial reflect a new generation of PDPs. These are characterised by sector prioritisation, high-level political leadership, territorial approaches and productive articulation initiatives, with some also incorporating regional integration as a strategic objective (ECLAC, 2025[9]). Colombia’s reindustrialisation policy explicitly identifies deeper integration with Latin America and the Caribbean as a policy goal, while Mexico’s Plan México highlights continental integration as a driver of industrial upgrading. Together, these initiatives demonstrate that the foundations for a regional productive development agenda already exist. This creates opportunities to build on national strategies through greater regional co‑ordination and co‑operation.
The main obstacle to regional integration is no longer the absence of national strategies, but rather the lack of regional co‑ordination among them. Most PDPs in LAC continue to operate in isolation, with weak articulation between national industrial strategies and regional integration mechanisms, limiting opportunities to build regional value chains and exploit economies of scale. The region’s intraregional trade share remains among the lowest globally. Regional value chains in LAC are shallow compared to those of East Asia or the European Union, where deep integration has historically amplified the productivity gains from PDPs (OECD et al., 2025[4]). Overcoming this fragmentation will require stronger regional productive agendas in areas of common interest, greater policy learning across countries, more effective use of regional platforms and stronger governance arrangements to support PDPs with a regional scope (ECLAC, 2026[94]). Developing the technical, operational, political and prospective capacities needed to sustain this agenda will be critical for translating national productive strategies into a coherent regional development project (ECLAC, 2024[64]; ECLAC, 2026[94]; OECD et al., 2025[4]).
Escaping the low-productivity, low-growth trap that constrains the region will require moving beyond this fragmentation. Key priorities include:
building regional productive agendas in sectors with convergence among the productive priorities established by countries and territories under their PDPs (e.g. sectors related to the energy transition)
exchanging good – and bad – practices in PDP design and implementation across countries
strengthening regional platforms and instruments such as REDEPRO (the Network of Subnational Governments for Productive Development), the IAP Platform (which already brings together more than 475 cluster and productive articulation initiatives from 20 countries) and the CELAC Food Security Plan
addressing the governance gap, given that the region may be lacking adequate institutional arrangements to co‑ordinate a truly regional productive development agenda (ECLAC, 2026[94]).
Building these governance foundations – alongside the technical, operational, political and prospective state capacities needed to design, implement and evaluate PDPs with a regional scope – represents one of the most significant institutional challenges and opportunities on LAC’s development horizon (ECLAC, 2024[64]; ECLAC, 2026[94]; OECD et al., 2025[4]).
Financial markets in LAC have expanded significantly over the past three decades, but further efforts are needed to deepen and integrate them
Financial sector development in LAC has been uneven, supporting large firms while leaving smaller enterprises constrained. The expansion of financial systems across the region has contributed to the growth and consolidation of large companies, which are better positioned to access formal financing. However, micro-, small- and medium-sized enterprises (MSMEs) continue to face significant barriers to accessing financial markets, and LAC exhibits one of the largest MSME financing gaps among developing regions. At the same time, while domestic capital markets remain relatively shallow and offer limited access for private firms, the region has increased its integration into international financial markets. This has occurred especially through debt issuance and the use of depositary receipts (OECD et al., 2025[4]).
Regional financial integration in LAC offers significant potential to deepen capital markets, although structural barriers remain. Greater integration can broaden investor access, increase liquidity, reduce transaction costs and attract a more diverse pool of foreign investors, while expanding the range of issuers and lowering borrowing costs. However, progress is constrained by macroeconomic asymmetries, shallow domestic markets, fragmented regulatory frameworks and incompatible infrastructures across countries.
A key initiative is the Nuam exchange, which aims to integrate the stock exchanges of Colombia, Lima, and Santiago into a single platform. As of August 2025, these markets had a combined capitalisation exceeding USD 500 billion – USD 212 billion in Chile, USD 100 billion in Colombia, and USD 204 billion in Peru – with 162, 61 and 192 companies listed in the three countries, respectively (Figure 2.38, Panel A). While still operating separately, they now share a common trading system, laying the groundwork for deeper integration. International experiences such as Euronext demonstrate the potential of this model, though further steps – such as regulatory alignment and interoperability of clearing systems – remain essential (OECD et al., 2025[4]). Sectorally, financial institutions dominate across the three markets, representing 24‑32% of capitalisation (Figure 2.38, Panel B). Other sectors, including industrials and utilities, also play important roles, while Peru remains highly concentrated in materials (69%). This composition highlights both complementarities and the need for greater diversification, suggesting that deeper regional integration could support more balanced economic transformation and enhanced investment opportunities.
Note: 2025 data refer to information available up to 31 August 2025. Panel B: “Other” includes consumer discretionary, communication services, healthcare, information technology and real estate. Sector classification follows the MSCI Global Industry Classification Standard.
Source: Authors’ elaboration based on Nuam (2025[95]), Market Capitalization, https://www.nuam.com/en/stock-market-bulletin-reports.
Digital regional integration offers significant yet underexplored opportunities for LAC
The digital dimension of regional integration represents a critical and underexplored frontier (see Chapter 1). The region’s capacity to leverage digital transformation as a driver of productive development depends both on what individual countries do domestically, and on the degree to which they can build a genuinely integrated digital space. Scale is a defining feature of the digital economy: the value of digital platforms, data ecosystems and technology investments grows with the size of the market they serve. For most LAC firms, national markets alone are too small to reach the critical mass needed to compete in the digital economy, invest in frontier technologies, or attract the talent and capital that digital transformation demands. A more digitally integrated regional market could fundamentally change this equation (ECLAC, 2025).
Realising this potential requires deliberate convergence around several key dimensions. First, frameworks for cross-border digital trade and e‑commerce need to be harmonised to reduce fragmentation and transaction costs for firms operating across borders. Second, common rules are needed for data flows and data governance, which are increasingly the lifeblood of digital business models and AI applications. Third, paperless trade and digital customs procedures should be advanced to reduce trade costs and facilitate the participation of SMEs in regional markets. Fourth, regulatory standards must be aligned for digital financial services and electronic transactions, which are essential for development of integrated digital payments ecosystems. Progress on these fronts would benefit firms and consumers within the region and also strengthen LAC’s collective capacity to shape global digital governance in ways that reflect its own development priorities (ECLAC, 2025; OECD et al., 2025).
Existing regional co‑operation frameworks are crucial to advance this agenda. The eLAC Digital Agenda, a ministerial process co‑ordinated by ECLAC, provides the primary regional platform for policy dialogue and convergence among LAC governments on digital priorities. It covers digital infrastructure, digital government, the digital economy, digital skills and emerging technologies, including AI. Strengthening eLAC with an explicit productive development dimension – connecting it more deliberately to value chain initiatives of regional productive development agendas – could serve as the regional institutional backbone for the integration of digital and productive policies (ECLAC, 2025; Calderon et al., 2021). This would require giving eLAC a more prominent and operational role in the architecture of regional integration. To that end, it would move from being a space for policy dialogue to becoming a driver of convergence in regulatory frameworks, digital public infrastructure and shared technological standards.
The eLAC Digital Agenda for Latin America and the Caribbean provides a regional platform to advance digitally enabled integration. Its work is organised around three mutually reinforcing areas that connect evidence generation, regional co‑operation and implementation.
1. Knowledge and monitoring. ECLAC supports evidence-based digital policies through tools such as the Digital Development Observatory and the Latin American Artificial Intelligence Index (ILIA), developed with the National Center for Artificial Intelligence (CENIA). Together, these initiatives monitor more than 80 indicators covering connectivity, digital government, artificial intelligence (AI) adoption, productive digitalisation and digital skills. This evidence helps countries identify gaps, prioritise investments and assess progress, including in the context of the WSIS+20 process and the Global Digital Compact.
2. Regional policy dialogue. Through the eLAC Ministerial Conferences and thematic working groups, ECLAC brings governments together around shared priorities in areas such as meaningful connectivity, digital government, AI governance and the digital economy. These mechanisms help build common regional positions and strengthen the participation of Latin America and the Caribbean in global digital governance processes.
3. Practical tools and technical assistance. ECLAC also supports implementation through the Digital Transformation Lab (dLAB), the School of Digital Transformation and direct technical assistance to member states. These initiatives translate regional agreements into practical instruments, including SimTDP, RESMA and the Guide on Data and AI for Governments, while strengthening the institutional capabilities required for productive digital transformation.
Together, these three areas allow eLAC to connect regional priorities with concrete national action, while supporting greater policy co‑ordination and capacity building across Latin America and the Caribbean.
Achieving digital regional integration also requires addressing the digital skills dimension at a regional scale. The depth of the skills gap, with more than 70% of the LAC population lacking basic digital competencies, calls for shared frameworks that allow countries to converge on common standards while adapting to their diverse institutional and socio-economic contexts. The Regional Digital Competencies Framework for Latin America and the Caribbean (DigCompALC), co-produced by ECLAC with GIZ and Cetic.br under the EU-LAC Digital Alliance (see Chapter 1 and Chapter 3), can serve as this shared reference at the regional level. It could be the common foundation for curricula design, skills policy and assessment instruments. In so doing, it would ensure that expansion of digital markets and AI adoption generates inclusive outcomes across the region rather than deepening inequalities (ECLAC, 2026).
Regional digital integration cannot be treated as a single, homogeneous process across LAC. Subregional spaces, with distinct structural conditions, institutional architectures and digital readiness levels, require tailored approaches that build upward towards a broader regional agenda rather than being driven top‑down from it. The Caribbean is an important case in point as its small island developing states (SIDS) face structural digital constraints that differ qualitatively from those of larger continental economies: extremely small domestic markets, high dependence on a narrow set of export activities, acute vulnerability to external shocks and climate disasters, and severe limitations in public institutional capacity and fiscal space. These conditions mean that regional and subregional co‑operation are not merely beneficial; they are also necessary for any meaningful digital transformation strategy (ECLAC/OECS, 2026).
One innovative response to these structural constraints is the concept of data embassies. Under this arrangement, a country stores critical public data and digital infrastructure in a trusted foreign jurisdiction under its own legal sovereignty, reducing dependence on fragile or exposed local infrastructure. Originally developed in Estonia and adapted to small-state contexts, data embassies respond directly to the Caribbean SIDS condition: limited physical infrastructure resilience; high exposure to hurricanes and natural disasters that can destroy or interrupt critical government systems; and insufficient local capacity to ensure continuity of essential digital services. For Caribbean governments, a data embassy arrangement – built on the basis of bilateral or subregional agreements and aligned with CARICOM's digital agenda – could allow the secure hosting of core government data and services in partner jurisdictions while retaining full legal sovereignty over those systems. ECLAC has supported initial policy dialogues on this approach with Caribbean member states, including a pilot discussion in Belize City in 2026, and identified data embassies as a priority area for subregional digital co‑operation in the Caribbean (ECLAC, 2026). More broadly, the Caribbean experience illustrates a key principle for LAC digital integration: the most effective regional frameworks are those that are built on, and respond to, the concrete structural heterogeneity of the countries they seek to connect.
Regional electricity integration remains an untapped opportunity for LAC
Regional electricity integration could enhance the benefits of LAC’s diverse and abundant renewable resources (see Chapter 1). By connecting national electricity systems and enabling cross-border electricity exchanges, integration allows countries to share generation resources and make more efficient use of transmission and generation infrastructure. The region’s diverse electricity mix combines large-scale hydropower with rapidly growing wind and solar capacity spread across different climatic zones and subregions. In so doing, it creates opportunities for countries to complement each other’s generation profiles and share variability. Differences in available generation capacity, renewable-resource endowments, generation technologies, and hourly and seasonal demand profiles create opportunities for greater complementarity across electricity systems (OECD, 2014[96]; Timilsina, Deluque Curiel and Chattopadhyay, 2024[97]). Connecting systems with different generation profiles can therefore lower reserve-capacity requirements, improve reliability and facilitate integration of larger shares of variable renewable energy (OECD, 2014[96]; IEA, 2023[98]).
Regional electricity integration could generate economic gains through two main mechanisms. First, cross-border trade allows countries to draw on generation available in neighbouring systems when domestic supply is constrained. This reduces the amount of reserve capacity that each country needs to maintain independently and allows generation assets to be used more efficiently. Second, pooling supply and demand across countries increases the effective size of electricity markets, enabling lower-cost or under-used generation to serve demand beyond national borders and creating economies of scale. More interconnected electricity systems could help countries respond to these emerging demands by drawing on generation beyond domestic markets, while improving conditions for electricity-intensive productive investment. Integration can also strengthen energy security by expanding access to regionally generated renewable electricity, helping economies that import fossil fuels to reduce their dependence, as well as their exposure to volatility in international energy markets (OECD, 2023[99]). Model-based estimates for 20 LAC countries suggest that unconstrained trade could raise cross-border exchanges from around 4% of regional electricity generation to 29% under a fully regional market, generating gross annual benefits of nearly USD 1.9 billion. Around 80% of these benefits could already be captured through subregional trade. The remaining gains would arise from further integration across subregional markets close to 80%, which could already be captured through subregional trade alone (Timilsina, Deluque Curiel and Chattopadhyay, 2024[97]).
The opportunities from deeper electricity integration differ across LAC economies, making regional heterogeneity a potential source of gains rather than only a constraint. Economies with abundant renewable resources but relatively small domestic markets, such as Paraguay and Uruguay, could reach larger markets and economies of scale. Importers of fossil fuels could reduce their exposure to external energy shocks. The share of fossil fuels generated in Central America, for example, fell from 37% to 23% between 2014 and 2022. This period combined regional trade under the Central American Electrical Interconnection System (SIEPAC) with substantial domestic renewable investment (Valenzuela and Tesfaye, 2024[100]). Larger economies such as Brazil, Colombia and Mexico can benefit from additional system flexibility and opportunities to trade temporary electricity surpluses (Timilsina, Deluque Curiel and Chattopadhyay, 2024[97]).
The relevance of regional electricity integration is likely to grow further as rising electricity demand, energy-security concerns and climate-related risks place increasing pressure on LAC’s power systems. Transport electrification, industrial decarbonisation and expanding digital infrastructure are increasing electricity needs, with data centres, cloud computing and AI in particular requiring large and reliable electricity supplies (IEA, 2026[101]). These benefits have become more salient amid geopolitical tensions and supply disruptions. Climate change further increases the value of more resilient and geographically diversified electricity systems. Greater geographical diversification can help manage variations in renewable generation. Meanwhile, more frequent droughts, heatwaves and extreme weather events make historical patterns of electricity supply and demand less predictable (IEA, 2023[98]). This increases the importance of resilient grids, diversified generation and co‑ordinated regional planning.
Regional electricity integration has advanced across LAC but remains fragmented. These initiatives cover electricity trade in general, not only renewable energy. However, they have become more relevant as renewable generation has expanded. The most advanced initiative is the Central American Electrical Interconnection System (SIEPAC). Launched in 1996 by Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, SIEPAC combines a physical transmission line with the Regional Electricity Market (MER), a wholesale market that functions as a seventh market superimposed on the six national systems. It is governed by its own regional regulator, operator and policy council (Echeverría et al., 2017[102]). Elsewhere, the Andean Electrical Interconnection System (SINEA) links Bolivia, Chile, Colombia, Ecuador and Peru; the Southern Cone Energy Integration System (SIESUR) involves Argentina, Brazil, Chile, Paraguay and Uruguay; and the Arco Norte initiative would connect Brazil’s northern states with Guyana, Suriname and French Guiana (OECD et al., 2025). These arrangements sit at different stages. SINEA countries adopted common operational and commercial regulations in 2024. For its part, SIESUR has an approved 2023‑2032 roadmap with continuing technical dialogue among member countries. Meanwhile, Arco Norte remains at an earlier planning stage (ECLAC, 2025[103]).
Regional electricity integration in LAC continues to face substantial infrastructure, distributional and governance barriers. Cross-border generation and transmission projects require large and long-lived investments. However, their financial, environmental and social costs and benefits may be distributed unevenly across participating countries and communities (IEA, 2019[104]). This raises difficult questions over who finances the infrastructure, who carries construction and operating risk, and how the resulting revenues and benefits are shared. Electricity compounds the difficulty because cross-border trade depends on dedicated assets that cannot easily be redeployed. This makes stable institutional relationships among the parties more important than for most other traded goods.
In addressing the challenge of regional electricity integration, LAC could potentially learn from the experience of South America. Concerns over security of supply and limited mutual trust have favoured national self-supply strategies and predominantly bilateral forms of exchange in the continent (Flôres Junior, 2016[105]). Paraguay illustrates how bilateral contractual arrangements can shape the distribution of gains from electricity integration. Under the Itaipú Treaty, electricity from Paraguay’s share that is not used domestically has historically been contracted by Brazil at near-cost prices. Meanwhile, the agreement has restricted the sale of this surplus to alternative markets (Che, 2021[106]). Technical differences between national systems can create additional infrastructure requirements. Differences in operating frequency, for example, require frequency-conversion facilities at interconnections between Brazil and Argentina, Uruguay and Paraguay (OECD, 2014[96]). The long-planned Colombia‑Panama interconnection, which would join the Andean and Central American systems, has been deferred repeatedly despite decades of study (Interconexión Eléctrica Colombia-Panamá, 2026[107]). Differences in pricing, subsidies, market structures and regulatory frameworks compound these constraints. Regulation can discourage cross-border trade even where transmission capacity already exists (Timilsina, Deluque Curiel and Chattopadhyay, 2024[97]).
Effective regional electricity integration requires institutional arrangements as much as physical interconnection. SIEPAC shows how cross-border transmission can be underpinned by a regional market, regulator and system operator, an institutional depth that other arrangements in LAC have not yet reached (OECD, 2014[96]). Greater compatibility in technical standards, market rules and cross-border capacity allocation would allow existing infrastructure to be used more fully. Co‑ordinated regional planning would help identify investments whose benefits extend across national borders and address the uneven distribution of their costs and benefits (IEA, 2019[104]). Financing remains an important constraint, particularly where large upfront requirements and regulatory uncertainty limit private participation (Global Solutions Initiative, 2023[108]). Deeper integration therefore need not begin with a single regional market. Strengthening existing subregional arrangements and progressively improving interoperability between them offers a more feasible path. Such a path would be better suited to the differences in market structure, resource endowment and institutional capacity that the region contains. African countries have faced similar challenges in their efforts to advance regional electricity markets. For example, the Southern African Power Pool, the most successful of the five existent power pools in the region, which links more than a dozen countries, operates a competitive regional electricity trading platform and facilitates cross-border electricity trade among member utilities. However, cross-border electricity exchanges still account for a relatively small share of total electricity demand, underscoring the importance of complementing physical interconnection with strong governance arrangements, effective market frameworks and adequate transmission infrastructure (Energy Transition Africa, 2026[109]).
In a changing global context, deeper and more diversified integration can help LAC strengthen its position in the global economy and support long-term development. While the region has become increasingly open, low diversification, limited domestic value creation and weak productive linkages continue to constrain the benefits of integration. Increasing participation and moving into higher-value segments of global value chains can help address these challenges by supporting productive upgrading, strengthening domestic capabilities and creating more productive and higher-quality employment. FDI can reinforce these processes by connecting firms to capital, technology, knowledge and international production networks.
Regional integration can provide a platform for this upgrading and stronger global positioning. Regional markets can help firms achieve scale, internationalise and develop productive capabilities, while existing patterns of intra-industry trade show that the region already has productive linkages on which deeper production networks can be built. Yet regional productive integration remains shallow. Deepening and extending existing networks, strengthening regional value chains and increasing regional sourcing can generate more value within LAC and support stronger participation in global value chains. Greater intraregional investment and stronger co-ordination of productive development policies can reinforce these linkages by directing investment towards strategic sectors and connecting productive capabilities across countries.
Realising this potential requires going beyond trade and investment to strengthen the conditions that enable deeper productive integration. Greater financial, digital and electricity integration can improve connectivity, expand markets and facilitate cross-border production, while closing gaps in infrastructure, skills, financing and regulatory co-ordination can strengthen firms’ capacity to participate and upgrade in regional and global markets. Ultimately, integration is not an objective in itself, but a means to foster productive transformation, strengthen resilience and support more sustainable and inclusive long-term growth. The following key policy messages highlight priority areas for translating deeper integration into stronger development outcomes.
Towards stronger integration into the global economy
LAC has become an increasingly open region, but opportunities remain to deepen regional and global integration and derive greater benefits from it.
Export baskets remain concentrated in primary commodities and low-technology goods and services, limiting productivity growth, diversification and resilience.
Services exports are growing but remain concentrated in lower-skill activities and traditional destination markets, pointing to greater scope for further diversification and upgrading.
Participation in GVCs remains below that of other regions and concentrated in commodities and upstream activities, with limited domestic linkages and value addition.
Increasing participation and moving into higher-value segments of GVCs can support export diversification, domestic value creation and more productive and higher-quality employment.
FDI is an important driver of participation in GVCs and can support technology transfer, productive upgrading and domestic value creation.
The benefits of FDI are not automatic and depend on productive capabilities, local supplier linkages and the capacity to absorb knowledge and technology.
Regional integration as a platform for stronger global positioning
Regional integration can strengthen LAC’s participation in global markets by helping firms build capabilities, achieve scale and participate in more sophisticated value chains.
Although intraregional trade remains limited, regional markets are more diversified and manufacturing-intensive than extraregional markets, making them an important platform for productive upgrading, SME internationalisation and export diversification.
Potential remains to expand integration, particularly in technology-intensive sectors. To realise it, strengthening productive capabilities and trade complementarity across the region is key.
Deepening regional productive integration
Existing intra-industry trade reveals sectors and corridors where LAC can build on existing capabilities to develop regional production networks, integrate more SMEs and local suppliers.
Regional value chains can serve as a platform for upgrading, helping firms strengthen productive capabilities, increase domestic value added and integrate into more sophisticated segments of global production networks.
Greater regional sourcing of intermediate inputs can increase the value generated within LAC and embodied in its exports, particularly in medium-technology manufacturing.
The digital and green transitions create opportunities to develop new regional and global value chain linkages in areas such as critical minerals, renewable energy, modern services and selected high-technology industries.
Intraregional investment remains limited despite its potential to strengthen regional production networks, productive integration and regional competitiveness.
Stronger regional co‑ordination of productive development policies can help translate integration into greater productive capabilities, innovation and value creation.
Broader dimensions of regional integration
Financial, digital and electricity integration can complement trade and investment integration by expanding market opportunities, improving connectivity and strengthening resilience.
References
[37] Acosta, C. et al. (2026), Conexión Sur-Sur, camino a la integración Celac - África, CAF, Development Bank of Latin America and the Caribbean, https://scioteca.caf.com/handle/123456789/2608.
[84] ADB (2025), Asian Economic Integration Report 2025: Harnessing the Benefits of Regional Cooperation and Integration, Asian Development Bank, Manila, https://www.adb.org/sites/default/files/publication/1042516/asian-economic-integration-report-2025.pdf.
[92] ADB (2017), Asian Economic Integration Report 2017, Asian Development Bank, Manila, https://www.adb.org/publications/asian-economic-integration-report-2017.
[73] Baier, S. and J. Bergstrand (2007), “Do free trade agreements actually increase members’ international trade?”, Journal of International Economics, Vol. 71/1, pp. 72-95, https://doi.org/10.1016/j.jinteco.2006.02.005.
[16] Banco de España (2026), Informe de economía Latinoamericana: America Latina: riesgos y factores de soporte frente a la crisis de Oriente Medio, [Latin American Economic Report: Latin America: Risks and Supporting Factors in the Face of the Middle East Crisis], Banco de España, Madrid, https://doi.org/10.53479/42988.
[56] Bénétrix, A., H. Pallan and H. Panizza (2026), “The elusive link between FDI and economic growth: Sectoral heterogeneity and global value chains”, CEPR Discussion Papers, No. 21021, CEPR Press, Paris and London, https://cepr.org/publications/dp21021.
[35] Bhattacharya, R. and S. Pienknagura (2024), “Constraints on trade in the LAC region”, IMF Working Papers, No. 032, International Monetary Fund, Washington, DC, https://doi.org/10.5089/9798400269455.001.
[30] Blyde, J. (2026), “Addressing regulatory barriers to trade in services in Latin America and the Caribbean”, Economía LACEA Journal, Vol. 25/1, pp. 104-120, https://doi.org/10.31389/eco.509.
[70] Blyde, J. (2018), “The spaghetti bowl and international supply chains”, IDB Blog, https://blogs.iadb.org/integration-trade/en/spaghetti-bowl-international-supply-chains/ (accessed on 10 July 2026).
[46] Blyde, J. and D. Trachtenberg (2020), Global Value Chains and Latin America: A Technical Note, Inter-American Development Bank, Washington, DC, https://doi.org/10.18235/0002155.
[81] Brondino, G., J. Lucero and H. Roitbarg (2023), “Productive specialization and integration in South America: A global input-output analysis”, Structural Change and Economic Dynamics, Vol. 67, pp. 89-97, https://doi.org/10.1016/j.strueco.2023.07.005.
[48] Casella, B. et al. (2019), “UNCTAD insights: Improving the analysis of global value chains: The UNCTAD-Eora Database”, Transnational Corporations, Vol. 26/3, pp. 115-142, https://doi.org/10.18356/3aad0f6a-en.
[68] CEPII (2025), BACI: International Trade Database at the Product Level, (dataset), http://www.cepii.fr/CEPII (accessed on 12 March 2026).
[67] CEPII (2022), The CEPII Gravity Database, (dataset), http://www.cepii.fr/CEPII/en/bdd_modele/bdd_modele_item.asp?id=8 (accessed on 19 March 2026).
[106] Che, N. (2021), Macroeconomic Impact of the Itaipú Treaty Review for Paraguay, International Monetary Fund, Washington, DC, https://doi.org/10.5089/9781513573755.001.
[89] Comotti, S., R. Crescenzi and S. Iammarino (2020), Foreign Direct Investment, Global Value Chains and Regional Economic Development in Europe, European Commission, Directorate-General for Regional and Urban Policy, https://data.europa.eu/doi/10.2776/086010.
[59] Crescenzi, R. and O. Harman (2022), Climbing Up Global Value Chains: Leveraging FDI for Economic Development, Hinrich Foundation, Singapore, https://www.lse.ac.uk/business/consulting/assets/documents/Climbing-up-global-value-chains.pdf.
[55] Del Gatto, M. and H. Delgado (2025), “FDI, imports and foreign value added: A sectoral perspective”, SSRN, https://doi.org/10.2139/ssrn.5116830.
[60] DiCaprio, A., A. Santos-Paulino and M. Sokolova (2017), Regional trade agreements, integration and development, UN Trade and Development, Geneva, https://unctad.org/system/files/official-document/ser_rp2017d1_en.pdf.
[102] Echeverría, C. et al. (2017), Central American Electricity Integration: Central American Electrical Interconnection System, Inter-American Development Bank, Washington, DC, https://doi.org/10.18235/0012708.
[24] ECLAC (2026), International Trade Outlook for Latin America and the Caribbean 2025, United Nations Commission for Latin America and the Caribbean, Santiago, https://www.cepal.org/en/publications/90126-international-trade-outlook-latin-america-and-caribbean-2025-international-trade.
[52] ECLAC (2026), La Inversión Extranjera Directa en América Latina y el Caribe, 2026: navegando el nuevo contexto global, [Foreign Direct Investment in Latin America and the Caribbean, 2026: Navigating the New Global Context], United Nations Commission for Latin America and the Caribbean, Santiago, https://hdl.handle.net/11362/90154.
[19] ECLAC (2026), Managing Transformations in an Era of Ruptures, Economic Commission for Latin America and the Caribbean, Santiago, https://www.cepal.org/en/publications/90369-managing-transformations-era-ruptures.
[94] ECLAC (2026), Panorama of Productive Development Policies in Latin America and the Caribbean, 2025: How to escape the trap of low capacity for growth, Economic Commission for Latin America and the Caribbean (ECLAC), Santiago, https://hdl.handle.net/11362/82534.
[86] ECLAC (2025), Foreign Direct Investment in Latin America and the Caribbean, 2025, United Nations Commission for Latin America and the Caribbean, Santiago, https://www.cepal.org/en/publications/83116-foreign-direct-investment-latin-america-and-caribbean-2025.
[103] ECLAC (2025), Integración energética y transición justa en América Latina y el Caribe: oportunidades y desafíos hacia 2050, [Energy Integration and a Just Transition in Latin America and the Caribbean: Opportunities and Challenges towards 2050], United Nations Economic Commission for Latin America and the Caribbean, Santiago, https://www.cepal.org/es/enfoques/integracion-energetica-transicion-justa-america-latina-caribe-oportunidades-desafios-2050 (accessed on 23 August 2026).
[25] ECLAC (2025), Overcoming Development Traps in Latin America and the Caribbean in the Digital Age: The Transformative Potential of Digital Technologies and Artificial Intelligence, UN Economic Commission for Latin America and the Caribbean, Santiago, https://www.cepal.org/en/publications/81383-overcoming-development-traps-latin-america-and-caribbean-digital-age.
[82] ECLAC (2025), Productive Development Policies for a New Era, United Nations Commission for Latin America and the Caribbean, Santiago, https://www.cepal.org/en/publications/productive-development-policies-new-era.
[9] ECLAC (2025), Relations between Latin America and the Caribbean and China: Areas of Opportunity for more Productive, Inclusive and Sustainable Development, United Nations Commission for Latin America and the Caribbean, Santiago, https://www.observatorioasiapacifico.org/wp-content/uploads/2025/06/CEPAL-Document-in-English.pdf.
[64] ECLAC (2024), Panorama of Productive Development Policies in Latin America and the Caribbean, 2024: How can the region advance the great productive transformation it needs?, United Nations Economic Commission for Latin America and the Caribbean, Santiago, https://www.cepal.org/en/publications/80643-panorama-productive-development-policies-latin-america-and-caribbean-2024-how-can.
[18] EEAS (2024), “Factsheet: Central America Association Agreement”, European Union, Brussels, https://www.eeas.europa.eu/sites/default/files/documents/2024/Factsheet-Central%20America-Association%20Agreement-2024-06.pdf.
[76] Egger, P. and M. Larch (2008), “Interdependent preferential trade agreement memberships: An empirical analysis”, Journal of International Economics, Vol. 76/2, pp. 384-399, https://doi.org/10.1016/j.jinteco.2008.08.003.
[109] Energy Transition Africa (2026), Are Africa’s Regional Power Pools Delivering Or Stalling the Continent’s Energy Transition?, https://www.energytransitionafrica.com/insights/article/africa-regional-power-pools-analysis.
[71] Estevadeordal, A., E. Talvi and A. Werner (2025), “Towards an integrated EU-Latin America economic area”, https://www.realinstitutoelcano.org/en/analyses/towards-an-integrated-eu-latin-america-economic-area/ (accessed on 23 August 2026).
[17] European Commission (2026), “EU-Mexico agreement”, https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/mexico/eu-mexico-agreement_en (accessed on 12 June 2026).
[8] European Commission (2026), European Union, Trade in Goods with Latin American Countries, European Commission, Brussels, https://webgate.ec.europa.eu/isdb_results/factsheets/region/details_latin-american-countries_en.pdf.
[74] Fally, T. (2015), “Structural gravity and fixed effects”, Journal of International Economics, Vol. 97/1, pp. 76-85, https://doi.org/10.1016/j.jinteco.2015.05.005.
[43] Fernandes, A., H. Kee and D. Winkler (2020), Determinants of Global Value Chain Participation: Cross-Country Evidence, World Bank, Washington, DC, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/930751585234915451.
[47] Fernandes, A., G. Nievas Offidani and D. Winkler (2021), Trade and Global Value Chain Integration in Latin America: Stylized Facts, World Bank Group, Washington, DC, https://documents1.worldbank.org/curated/en/852831620894644965/pdf/Trade-and-Global-Value-Chain-Integration-in-Latin-America-Stylized-Facts.pdf.
[53] Financial Times (2026), fDi Markets, (dataset), http://www.ftlocations.com/products-and-services/fdi-markets (accessed on 1 June 2026).
[105] Flôres Junior, R. (2016), Global Value Chains as a Regional Integration Tool: The case of the Renewables Industry in South America, FGV NPII, Rio de Janeiro, https://iiu.fgv.br/en/projects/global-value-chains-regional-integration-tool-case-renewables-industry-south-america.
[29] Galindo-Rueda, F. and F. Verger (2016), “OECD Taxonomy of Economic Activities Based on R&D Intensity”, OECD Science, Technology and Industry Working Papers, No. 2016/4, OECD Publishing, Paris, https://doi.org/10.1787/5jlv73sqqp8r-en.
[26] Giordano, P. et al. (2024), Bucking the Trend: The Potential of Knowledge-Based Services, Inter-American Development Bank, Washington, DC, https://doi.org/10.18235/0013235.
[23] Giordano, P. and C. Ortiz de Mendívil (2021), Trade in Services in Latin America and the Caribbean: An Overview of Trends, Costs, and Policies, Inter-American Development Bank, Washington, DC, https://doi.org/10.18235/0003801.
[38] Giordano, P. and C. Ortiz de Mendívil (2019), Making the Most of Connectivity: Unlocking the Trade Potential of Latin America and the Caribbean in Asia, Inter-American Development Bank, Washington, D.C, https://publications.iadb.org/en/making-most-connectivity-unlocking-trade-potential-latin-america-and-caribbean-asia.
[108] Global Solutions Initiative (2023), Bridging the gaps and mitigating the risks: Tackling the challenges of sustainable cross-border energy infrastructure finance, Global Solutions Initiative, CITY, https://www.global-solutions-initiative.org/wp-content/uploads/2025/03/T20_TF3_PB15.pdf.
[6] Hausmann, R., J. Hwang and D. Rodrik (2007), “What you export matters”, NBER Working Paper Series, No. 11905, National Bureau of Economic Research, Cambridge, MA, https://www.nber.org/system/files/working_papers/w11905/w11905.pdf.
[83] Hernández-Rodríguez, E. (2025), “Technological diversification through global value chains in European regions”, European Planning Studies, Vol. 32, pp. 1-22, https://doi.org/10.1080/09654313.2026.2684528.
[21] Heuser, C. and A. Mattoo (2017), “Services trade and global value chains”, Policy Research Working Paper, World Bank, Washington, DC, https://documents1.worldbank.org/curated/en/627361498584454928/pdf/WPS8126.pdf.
[101] IEA (2026), Electricity 2026, International Energy Agency, Paris, https://www.iea.org/reports/electricity-2026.
[98] IEA (2023), Latin America Energy Outlook 2023, International Energy Agency, Paris, https://www.iea.org/reports/latin-america-energy-outlook-2023.
[104] IEA (2019), Integrating Power Systems across Borders, International Energy Agency, Paris, https://www.iea.org/reports/integrating-power-systems-across-borders.
[50] IMF (2017), FDI, Global Value Chains, and Local Sourcing in Developing Countries, International Monetary Fund, Washington, DC, https://doi.org/10.5089/9781484335109.001.
[2] IMF (2017), Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment, International Monetary Fund, Washington, DC, https://www.imf.org/-/media/Files/Publications/PP/041017joint-wto-wb-imf-trade-paper.ashx.
[107] Interconexión Eléctrica Colombia-Panamá (2026), “Interconexión Eléctrica Colombia-Panamá”, https://www.interconexioncp.com/ (accessed on 18 August 2026).
[14] Japan Customs (2012), “Outline of the agreement between Japan and the Republic of Peru for an economic partnership”, https://www.customs.go.jp/english/c-answer_e/keizairenkei/4061_e.htm (accessed on 29 June 2026).
[54] Kee, H., E. Xie and M. Xu (2025), Firm Linkages and Domestic Value Added in Exports: Moving up the Global Value Chains with High-Speed Railways, World Bank Group, Washington, DC, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099627111252435618.
[33] Kozul-Wright, R. and P. Fortunato (2020), Managing Trade through Productive Integration: Industrial Policy in an Interdepent World, Oxford University Press, https://doi.org/10.1093/oxfordhb/9780198862420.001.0001.
[45] Lalanne, Á. (2025), Value chains and inclusive employment in Latin America, CEPAL, https://repositorio.cepal.org/server/api/core/bitstreams/653912bf-e965-4f95-b1f8-7a5086855201/content.
[79] Lall, S. (2000), “The technological structure and performance of developing country manufactured exports, 1985-98”, Oxford Development Studies, Vol. 28/3, pp. 337–369, https://doi.org/10.1080/713688318.
[93] Llinás, M. and J. Salazar-Xirinachs (2023), “Towards transformation of the growth and development strategy for Latin America and the Caribbean: the role of productive development policies”, CEPAL Review 141, pp. 53-83, https://hdl.handle.net/11362/69196.
[39] Michaely, M. (1996), “Trade preferential agreements in Latin America: An ex-ante assessment”, Policy Research Working Papers, No. 1583, World Bank, Washington, DC, https://documents.worldbank.org/curated/en/934301468773398976.
[13] Ministry of Foreign Affairs of Japan (2005), “Japan-Mexico economic partnership agreement”, https://www.mofa.go.jp/policy/economy/fta/mexico.html (accessed on 29 June 2026).
[22] Miroudot, S. and C. Cadestin (2017), “Services In Global Value Chains: From Inputs to Value-Creating Activities”, OECD Trade Policy Papers, No. 197, OECD Publishing, Paris, https://doi.org/10.1787/465f0d8b-en.
[41] Montalbano, P., S. Nenci and C. Pietrobelli (2018), “Opening and linking up: Firms, GVCs, and productivity in Latin America”, Small Business Economics, Vol. 50, pp. 917-935.
[75] Mulabdic, A. and P. Yasar (2021), Gravity Model-Based Export Potential: An Application to Turkey, World Bank Group, Washington, DC, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/716811614628943473.
[15] Murakami, Y. (2025), “Do deep regional trade agreements facilitate regional production networks in Latin American and Caribbean countries?”, Review of World Economics, Vol. 161/3, pp. 1139-1180, https://doi.org/10.1007/s10290-024-00579-9.
[20] Nordås, H. and Y. Kim (2013), “The Role of Services for Competitiveness in Manufacturing CAPS?”, OECD Trade Policy Papers, OECD Publishing, Paris, https://doi.org/10.1787/5k484xb7cx6b-en.
[95] Nuam (2025), Market Capitalization, (dataset), https://www.nuam.com/en/stock-market-bulletin-reports (accessed on 13 March 2026).
[7] OECD (2025), Assessing the Socio-economic Impact of Foreign Direct Investment in Latin America and the Caribbean: A Focus on EU Investments, OECD Publishing, Paris, https://doi.org/10.1787/fd8fb41c-en.
[32] OECD (2025), Trade in Value Added (TiVA): Services Value Added Embodied in Manufacturing Exports (MFG_EXGR_SVC_VA), https://www.oecd.org/content/dam/oecd/en/data/datasets/trade-in-value-added-indicators-for-services-by-mode-of-supply/MFG_EXGR_SVC_VA.csv (accessed on 8 June 2026).
[31] OECD (2024), Trade in Value Added (TiVA), (dataset), https://www.oecd.org/en/topics/sub-issues/trade-in-value-added.html (accessed on 24 August 2026).
[91] OECD (2023), Policy Toolkit for Strengthening FDI and SME Linkages, OECD Publishing, Paris, https://doi.org/10.1787/688bde9a-en.
[99] OECD (2023), Towards Climate Resilience and Neutrality in Latin America and the Caribbean: Key Policy Priorities, OECD Publishing, Paris, https://doi.org/10.1787/278e52e8-en.
[57] OECD (2022), FDI Qualities Policy Toolkit, OECD Publishing, Paris, https://doi.org/10.1787/7ba74100-en.
[58] OECD (2015), Policy Framework for Investment, OECD Publishing, Paris, https://www.oecd.org/content/dam/oecd/en/publications/reports/2015/09/policy-framework-for-investment-2015-edition_g1g3e67f/9789264208667-en.pdf.
[96] OECD (2014), Electricity Markets in Latin America: Regional Integration and Competition Issues, OECD Publishing, Paris, https://doi.org/10.1787/9a4b5538-en.
[28] OECD and WTO (2025), The OECD-WTO Balanced Trade in Services Database (BaTIS), (dataset) LINK, https://www.oecd.org/en/data/datasets/oecd-balanced-trade-statistics.html (accessed on 21 August 2026).
[4] OECD et al. (2025), Latin American Economic Outlook 2025: Promoting and Financing Production Transformation, OECD Publishing, Paris, https://doi.org/10.1787/80e48de5-en.
[49] OECD et al. (2022), Latin American Economic Outlook 2022: Towards a Green and Just Transition, OECD Publishing, Paris, https://doi.org/10.1787/3d5554fc-en.
[3] Onafowora, O. and O. Owoye (2024), “Trade openness, governance quality, and economic growth in Latin America and the Caribbean”, International Economics, Vol. 179, https://doi.org/10.1016/j.inteco.2024.100527.
[11] Orbach, J. (2024), “Explainer: China’s free-trade agreements in Latin America”, AS/COA Online, https://www.as-coa.org/articles/explainer-chinas-free-trade-agreements-latin-america (accessed on 8 July 2026).
[12] Prazeres, T., D. Bohl and P. Zhang (2021), China-LAC Trade: Four Scenarios in 2035, Atlantic Council, Washington, DC, https://www.atlanticcouncil.org/in-depth-research-reports/china-lac-trade-four-scenarios-in-2035/.
[42] Raei, F. and A. Ignatenko (2019), “Global value chains: What are the benefits and why do countries participate?”, IMF Working Paper, No. 18, International Monetary Fund, Washington, DC, https://doi.org/10.5089/9781484392928.001.
[51] Sanfilippo, M. et al. (2018), “Foreign direct investment, integration in global value chains, and local development”, https://cepr.org/voxeu/columns/foreign-direct-investment-integration-global-value-chains-and-local-development (accessed on 2 June 2026).
[85] Sanguinetti, P. et al. (2021), RED 2021: Pathways to Integration: Trade Facilitation, Infrastructure and Global Value Chains, Development Bank of Latin America and the Caribbean, Caracas, https://scioteca.caf.com/handle/123456789/1823.
[77] Silva, J. and S. Tenreyro (2006), “The log of gravity”, The Review of Economics and Statistics, Vol. 88/4, pp. 641-658, http://doi.org/10.1162/rest.88.4.641.
[97] Timilsina, G., I. Deluque Curiel and D. Chattopadhyay (2024), “Regional electricity trade in Latin America”, Economics of Energy & Environmental Policy, Vol. 13/2, https://doi.org/10.5547/2160-5890.13.1.gtim.
[40] Turan, T., H. Yanıkkaya and H. Özer (2026), “Does global value chain participation lead to economic upgrading?”, The European Journal of Development Research, Vol. 38, pp. 570-593, https://doi.org/10.1057/s41287-026-00745-9.
[5] UN Comtrade (2024), UN Comtrade, (dataset), https://comtradeplus.un.org/ (accessed on 26 August 2026).
[27] UNCTAD (2026), UNCTADstat data centre, (dataset), https://unctadstat.unctad.org/datacentre/ (accessed on 23 April 2025).
[87] UNCTAD (2025), Critical Minerals, Critical Decisions: Industrial Policy for the Energy Transition, UN Trade and Development, Geneva, https://unctad.org/publication/critical-minerals-critical-decisions-industrial-policy-energy-transition.
[88] UNCTAD (2025), “Harnessing regional integration and green industrial policy for enhancing sustainable development in Latin America”, Policy Brief, No. 118, UN Trade and Development, Geneva, https://unctad.org/publication/harnessing-regional-integration-and-green-industrial-policy-enhancing-sustainable.
[65] UNCTAD (2024), Trade and Development Report 2024: Rethinking Development in the Age of Discontent, UN Trade and Development, Geneva, https://unctad.org/system/files/official-document/tdr2024_en.pdf.
[66] UNCTAD (2024), UNCTADstat data centre, (dataset), https://unctadstat.unctad.org/datacentre/dataviewer/ (accessed on 22 April 2025).
[34] UNCTAD (2023), “Realizing product diversification for structural change in Africa”, Working Paper, No. 5, UN Trade and Development, Geneva, https://unctad.org/system/files/official-document/wp-2023d4-no5_en.pdf.
[72] University of Groningen/ University of California Davis (2024), Penn World Tables Version 11.0, (dataset), https://www.rug.nl/ggdc/productivity/pwt/ (accessed on 20 August 2026).
[100] Valenzuela, J. and M. Tesfaye (2024), “Central America as a blueprint for regional power integration”, https://energyforgrowth.org/article/central-america-as-a-blueprint-for-regional-power-integration/ (accessed on 1 June 2026).
[63] Vargas, M. (2021), Iniciativas clusters: Una forma concreta y efectiva de “mover la aguja” de la productividad, [Cluster initiatives: A concrete and effective way to ‘make a difference’ to productivity], Puntoaparte Editores, https://confecamaras.org.co/wp-content/uploads/2024/03/iniciativas-cluster-marco-llinas.pdf.
[61] Vigninou, G. (2021), Is Regional Trade Integration a Growth and Convergence Engine in Africa?, International Monetary Fund, Washington, DC, https://doi.org/10.5089/9781513567716.001.
[1] World Bank (2026), World Development Indicators, (dataset), https://databank.worldbank.org/source/world-development-indicators (accessed on 20 August 2026).
[36] World Bank (2025), World Integrated Trade Solution (WITS), (dataset), https://wits.worldbank.org (accessed on 24 August 2026).
[62] World Bank (2021), World Development Report 2021: Data for Better Lives, World Bank, Washington, DC, https://www.worldbank.org/en/publication/wdr2021.
[90] World Bank (2020), “Promoting innovation in China: Lessons from international good practice”, FCI Insight, World Bank Group, World Bank, Washington, DC, https://documents1.worldbank.org/curated/en/571611587708038991/pdf/Promoting-Innovation-in-China-Lessons-from-International-Good-Practice.pdf.
[44] World Bank (2020), World Development Report 2020: Trading for Development in the Age of Global Value Chains, World Bank, Washington, DC, https://www.worldbank.org/en/publication/wdr2020.
[69] World Trade Organization (2024), World Trade Report 2023, World Trade Organization, Geneva, https://doi.org/10.30875/9789287074102.
[80] WTO (2025), Global Value Chain Development Report 2025, World Trade Organization, https://www.wto.org/english/res_e/publications_e/gvcreport2025_e.htm.
[78] WTO, OECD and WB (2019), Global Value Chain Development Report 2019: Technological Innovation, Supply Chain Trade, and Workers in a Globalized World, World Trade Organization, https://www.wto.org/english/res_e/publications_e/gvcd_report_19_e.htm.
[10] Zhang, P. (2024), Testimony before the US-China Economic and Security Review Commission: Key Economic Strategies for Leveling the US-China Playing Field in Trade, Investment, and Technology, Atlantic Council, Washington, DC, https://www.uscc.gov/sites/default/files/2024-05/Pepe_Zhang_Testimony.pdf.