| PHYSICAL, PRODUCTIVE AND CULTURAL CONNECTIVITY:
Conditions for a sustainable insertion in global economic competition.
by Félix Peña
English translation: Isabel Romero Carranza
At the recent Conference on Infrastructure for the
Development of Latin America, organized by the CAF in Buenos Aires, on
April 25 and 26 of this year, one of its panels analyzed the topic "Infrastructure
One of the comments referred to the context of profound changes that
are taking place in global economic competition and which any ideas on
the future of regional integration should take into account. Looking forward,
operating on the national, regional and interregional realities will require
a great effort of innovation and creativity from all the protagonists
involved, in order to understand the dynamics and complexity of global
economic competition and to succeed in the respective markets.
In these comments, the following points were highlighted:
- The need to reinforce the value of the region in global economic
competition. Its endowment of natural resources and creativity, product
of the miscegenation that characterizes it, are -among others- factors
that enhance what its countries can contribute to a more populated and
connected world with patterns of consumption typical of the urban middle
- The incidence of greater connectivity between the countries of
the region and of these with the world on the relative competitiveness
of their goods and services. There are three closely linked aspects
in which there is a need to accentuate the connectivity between Latin
American countries and, especially, with those of other emerging regions.
We are referring to the physical, the productive and the cultural connectivity.
- To capitalize on the accumulated experiences in the shared development
between Latin American companies and countries. An assessment of the
integration attempts developed in Latin America, and in its different
sub-regions, would help project more effectively the future actions
for the joint work with other nations of the same region and of other
regions. In addition, it would help identify existing institutional
ambits in the region and that have not always been fully exploited.
An institutional ambit that could be better used to advance in the
three points mentioned above is the LAIA. It presents all the qualities
that help reconcile flexibility and predictability as necessary conditions
to encourage productive investments in spaces sometimes characterized
by marked diversity.
With a provocative phrase in the introductory chapter of his recent
book, Kishore Mahbubani reminds us "in the early twenty-first
century, history has turned a corner, perhaps the most significant corner
the humanity has ever turned
" He adds, "A brief
comparison of the past 200 years with the previous 1.800 years will provide
the answer. From Ad 1 to 1820, the two largest economies were always those
of China and India. Only after that period did Europe take off, followed
by America. Viewed against the backdrop of the past 1.800 years, the recent
period of Western relative over performance against other civilizations
is a major historical aberration. All such aberrations come to an end,
and that is happening now" ("Has the West Lost It. A provocation?"
Penguin Random House UK 2018).
The above quote illustrates the depth of the changes that Argentina and
its Latin American partners will have to face for their insertion in the
world. These changes will require examining the displacement of the axes
of global economic competition. Countries in Asia, Africa and Latin America
itself will gain increasing relative importance, among other factors due
to the growth of their population and their gross product and, in particular,
the purchasing power of their urban middle class consumers. To imagine
the possible impact of such growth on the eventual future demand for goods
and services, which Argentina and its regional partners might be in a
position to offer, is then a highly recommended exercise.
The recent meeting of the CAF-Latin American Development Bank in Buenos
Aires allowed, among other contributions, to explore some ideas about
the impact that the changes in global economic competition will have on
the development strategies of the region and, in particular, on that of
its physical infrastructure (see Infrastructure Conference for the Development
of Latin America, April 25 and 26, 2018 on https://www.caf.com/).
These ideas were addressed especially in Panel 4, which dealt with "Infrastructure
for Integration". The discussions focused on issues such as how to
accelerate the infrastructure agenda for regional integration and how
to go from the traditional agenda to a productive agenda, among others.
The panel was moderated by Victor Rico, Secretary General of the CAF.
The participants referred to three specific questions: Which are the
most relevant challenges to speed up the process of integration in Latin
America? What complementary actions are advisable in order to accelerate
the implementation of the infrastructure agenda for regional integration?
What are the recommendations to improve the quantity and quality of investments
in infrastructure for physical and functional integration in the Regional
In a document designed to guide the presentations, Rafael Farromeque,
senior specialist of the Infrastructure vice Presidency, pointed out that
the integration process in Latin America faces multiple challenges. One
of the most relevant of these challenges is to develop suitable mechanisms
to speed up the implementation of infrastructure projects with high potential
i) boost productive complementarity between countries,
ii) favor the reduction of logistics costs in trade,
iii) promote convergence of public and private actors around the challenge
of increasing productivity and
iv) improve the competitiveness of the value chains associated with
trade within the region and with the rest of the world.
He added that, in this context, it is inevitable to improve the quantity
and quality of investments in infrastructure for physical integration
and, at the same time, strengthen the governance of the process; to improve
the management of the cycle of projects and to facilitate the financing
and execution of investments, promoting the convergence of public and
private actors around the challenge of increasing productivity and strengthening
The document adds that this will require an evolutionary leap in the
understanding of the infrastructure agenda of regional integration, moving
from a "one-dimensional paradigm", focused on physical integration,
to a "multidimensional paradigm" of physical and functional
integration. He concludes by pointing out that this functional approach
should encompass systemic interventions -infrastructure, services, governance-on
the Logistics Integration Corridors, which articulate different development
areas (productive clusters, interconnection points, border crossings,
metropolitan areas, ports, etc.) through the establishment of stable and
reliable relationships. This would imply as an objective the implementation
of joint projects and simultaneous actions on very specific development
We had to contribute one of the comments in the abovementioned panel.
The central point of these comments referred to the context of profound
changes that are taking place in global economic competition, which must
include the reflection on the future of regional integration. Changes
such as those mentioned at the beginning of this newsletter, imply acknowledging
that many approaches, paradigms and concepts applied in past decades to
the process of economic integration between sovereign, developing and
contiguous nations are becoming obsolete. In the future, operating on
the national, regional and interregional realities will require a great
effort of innovation and creativity from all the protagonists, in order
to understand the dynamics and complexity of the global economic competition
and to succeed in the respective markets.
We framed the comments around the following three points:
- The need to reinforce the value of the region in global economic competition.
Notwithstanding their well-known social, political and economic problems,
the fact that Latin American countries are relatively far from the main
lines of tension in the international system-in the sense proposed at
the time by Raymond Aron-gives them a clear competitive advantage with
respect to other regions, where the word "war" does not necessarily
evoke something obsolete. Additionally, their endowment of natural resources
and their creativity, product of the miscegenation that characterizes
the region, are-among others-factors that add value to what these countries
can offer to a more populated and connected world with patterns of consumption
typical of the urban middle class.
- The impact of the greater connectivity between the countries of the
region and with the rest of the world on the relative competitiveness
of their goods and services. In three closely linked aspects, there
is a need to promote the connectivity between Latin American countries
and, especially, with those of other emerging regions. We are referring
to the physical, the productive and the cultural connectivity. A good
example is the insertion of companies providing goods and services from
one Latin American country in productive linkages that involve companies
from other countries of the region, and that aspire to insert themselves
into broader productive networks that reach consumers from other regions
with their products and services. The physical connection and that of
the respective productive systems would be, in such a case, a determining
factor. So would be the cultural, in the sense of having the ability
to understand and appreciate the values and preferences-often very diverse-of
the partners and, above all, of the consumers from other countries and
- To capitalize on the accumulated experiences -not always successful-in
the shared development between Latin American companies and countries.
A thorough evaluation of the integration attempts developed in Latin
America and in its different sub-regions, would help project more efficiently
the future actions for joint work with other nations of the same region
and of other regions. It would also help identify existing institutional
ambits in the Latin American region that have not been fully exploited.
An institutional ambit that could be better used to advance in the three
points just mentioned is that of the Latin American Integration Association
(LAIA/ALADI). A simple reading of the Treaty of Montevideo of 1980, in
particular of its provisions referring to the different types of "agreements
of partial scope", helps to appreciate all the untapped potential
of this institutional framework. It has all the qualities that allow reconciling
flexibility and predictability as necessary conditions to encourage productive
investments in spaces sometimes characterized by marked diversities.
The LAIA is an appropriate institutional framework to carry forward the
strategic idea of "convergence in diversity", as promoted at
the time by the countries of the Pacific Alliance and Mercosur, among
others. Moreover, in the last paragraph of the preamble to the Montevideo
Treaty of 1980, and not coincidentally, explicit reference is made to
the "Enabling Clause", which was approved by a Latin American
initiative in the Tokyo Round just one year before its signature. This
clause is still valid among developing countries and allows to design,
with flexibility, multinational productive agreements compatible with
the "principle of non-discrimination", which continues to be
to this day a central rule of the multilateral trading system.
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More