Foreign Trade, FDI, and Capital Flows Study
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Publication
Post Covid-19 - Building a Resilient and More Sustainable Recovery in El Salvador, Guatemala, and Honduras: Central America Competitiveness Report
(Washington, DC : World Bank, 2022)The Coronavirus (Covid-19) pandemic has had widespread negative effects in developing countries around the world, generating an unprecedented shock. Latin America and the Caribbean (LAC) was a particularly affected region, recording a significant contraction in regional GDP and international trade in 2020. This report focuses on the impact of Covid-19 and recovery in El Salvador, Guatemala and Honduras. These three Central American countries (CA3), albeit unique in their history and characteristics, share many similarities in their economic context and challenges for achieving sustained growth. The region includes one of the poorest countries in the Western Hemisphere, with low economic growth rates relative to other Latin American countries. -
Publication
Ecuador Trade and Investment Competitiveness Report
(World Bank, Washington, DC, 2019-06)The internationalization of the Ecuadorian economy is necessary if the country is to successfully adopt a development model led by the private-sector. The Ecuadorian government is seeking to accelerate growth and sustain social progress by giving greater prominence to the private sector; it does at a time when external conditions are less favorable than at any time in the last decade. This report has three main objectives; to provide a systematic benchmark of Ecuador’s connection to the global economy, to identify key bottlenecks, and to make recommendations for enhancing the competitiveness of the private sector. The assessment is broken down into two sections. First, there is a section about international competitiveness outcomes, which assess Ecuador’s performance and identifies the challenges associated with connecting to international markets. The analysis looks at outcomes throughout the four competitiveness channels; that is, exports, imports, foreign direct investment (FDI), and global value chains (GVCs). The report’s second main section contains a competitiveness diagnostic about the key drivers behind the previously identified challenges and provides actionable policy recommendations to overcome them. The determinants are grouped in four mutually exclusive groups: (i) the macro and fiscal framework; (ii) the institutional and regulatory framework governing trade and investment; (iii) supply-side factors; and (iv) demand-side factors. -
Publication
Special Economic Zones in the Dominican Republic: Policy Considerations for a More Competitive and Inclusive Sector
(World Bank, Washington, DC, 2016-11)The Dominican Republic is often considered an example of the successful implementation of Special Economic Zones (henceforth SEZs) in the Western hemisphere. The zones fueled economic growth during the 1980s and 1990s and, while they experienced a sharp decline in employment due in part to the expiry of the end of the Multi-Fiber Agreement and stronger international competition in the textile and apparel industry in 2005, signs of recovery have been observed since 2009. Surgical equipment, chemicals and plastics, and footwear have recently emerged as the new drivers of export dynamism in the zones (World Bank, 2015). The objective of this report is to inform the policy discussion around the developmental impact of SEZs in the Dominican Republic by empirically assessing i) the implications of regulatory reforms aimed at complying with WTO disciplines regarding the elimination of incentives conditioned on export performance for SEZs firms, ii) the extent to which SEZs participate in Global Value Chains, and iii) their linkages with domestic suppliers. The report is organized as follows: The second section presents the historical importance of SEZ as an engine of economic growth in the country. The third section depicts the structural shift in terms of production in SEZs and evaluates the degree of value addition taking place in the Dominican Republic. The fourth section evaluates the degree and evolution of linkages between SEZs and local firms. The fifth section shows the impact of the regulatory changes in the SEZ regimen undertaken to comply with WTO disciplines. Finally, some conclusions and policy recommendations are presented in section six. -
Publication
Jamaica Customs Act: WTO Trade Facilitation Agreement Gap Analysis
(World Bank, Washington, DC, 2016-07-15)This paper reviews the alignment of the customs act of Jamaica to the World Trade Organization (WTO) Trade Facilitation Agreement (TFA) and recommends changes where gaps are identified. In part II of this paper, the customs act is reviewed against each of the TFA technical measures, in order given in the agreement. Part III of the paper is a conclusion and summarizes the gaps and proposals of part II. -
Publication
How to Sustain Export Dynamism by Reducing Duality in the Dominican Republic
(Washington, DC, 2015-03-02)This report analyzes export competitiveness in the Dominican Republic drawing from the Trade Competitiveness Diagnostic methodology (Farole and Reis, 2012). Dominican exports fare well in terms of performance, sophistication, and survival in Special Economic Zones. Three main challenges are identified: 1) quality issues and rejection of agro exports in the US border; 2) the role of Special Economic Zones in the new decade and the lack of backward linkages; and 3) excessive concentration in terms of markets that is not addressed by a fragmented institutional setup. -
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Trade Matters: New Opportunities for the Caribbean
(Washington, DC, 2015-01)Trade is essential for Caribbean countries development and poverty reduction. Given their small market size, they are dependent on exports to produce manufactured products at efficient scale. And given their natural amenities, they rely on tourism as a major spur to economic activity. Trade in the Caribbean thus makes an essential contribution to increasing employment and reducing poverty by supporting growth. At the same time, the high dependence on trade also makes Caribbean economies vulnerable to external shocks. For example, the global financial crisis imposed substantial job losses in sectors such as tourism that the poor rely on for employment. This report employs several different, but complementary, empirical approaches to analyzing the impact of this emerging new trade environment on shared prosperity in the Caribbean. These include the following six topics, with each corresponding to an individual chapter: (i) assessment of the Caribbean s performance in reaping the opportunities offered by the new trade environment; (ii) identification of the main determinants of Caribbean countries trade performance; (iii) discussion of the role of innovation and access to keys services in improving the productivity of exporting firms; (iv) exploration of how regional integration and other trade agreements could boost Caribbean trade performance; (v) firm-level examination of the implications of trade for employment; and (vi) identification of which households are involved in international trade and the implications of trade for their socio-economic status. -
Publication
Costa Rica : Five Years after CAFTA-DR, Assessing Early Results for the Costa Rican Economy
(Washington, DC, 2014-06-13)The Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR) has been fundamental in creating a stable framework for Costa Rica's trade with the United States. For Costa Rica, CAFTA-DR is more than a trade agreement. Besides eliminating tariffs and reducing non-tariff barriers between member countries, CAFTA-DR also introduced major changes to the legal framework of member countries, reducing barriers to services, promoting transparency, and ensuring a secure and predictable environment for investors. This report analyses how CAFTA-DR has impacted the Costa Rican economy in the five years after ratification, both on a macro level and in key specific sectors. The report shows that CAFTA-DR is yielding benefits to the Costa Rican economy, but it is too early to provide a complete account just after five years. The agreement has succeeded to further trade integration between Costa Rica, the US, and other CAFTA-DR countries. Exports to the US began increasing several years before the agreement, but CAFTA-DR accelerated the trend. Costa Rica continues attracting FDI above levels observed in other CAFTA-DR countries, with an increasing share from US investors and a focus on medical devices and business services. Online survey and interviews of high-tech firms in free trade zones found that CAFTA-DR was an important factor in the investment decisions. CAFTA-DR ignited an explosion of changes in the telecom and insurance sectors, bringing new regulatory frameworks, competition, product innovations, and price reductions. Consumers are reaping the benefits of improved telecom and insurance services. But some issues remain for those markets to mature. Finally, the concern regarding the potential negative impact on the Costa Rican Social Security Administration's finances due to the intellectual property rights measures have not been observed. -
Publication
Oriental Republic of Uruguay: Integration into Global Value Chains the Dairy Industry and the ICT Industry
(World Bank, Buenos Aires, 2014)Uruguay has much to gain from further integration with the global marketplace. Increased trade allows economies of scale and increases exposure to technological and knowledge spillovers, resulting in greater productivity. Participating in global and regional value chains is an important launch-pad for international integration. Uruguay requires a multipronged strategy that targets increased sophistication of Uruguay’s productive structure and diversification into specialized, high-value, modern services exports unconstrained by lack of economies of scale or distance. This report analyzes the dairy and Information & Communications Technology (ICT) and ICT Enabled Services (ICTES) value chains in Uruguay to identify opportunities for industry-specificupgrading and integration with global value chains (GVCs). By taking the dairy and ICT/ICTES value chains as concrete cases, the analysis piloted here illustrates how a traditional industry, locked in low value added exports, such as dairy, and a new export service industry, such as ICT/ICTES, can tackle the remoteness and ‘smallness’ challenges of Uruguay, and pursue economic upgrading andbetter international integration. The analytical approach targets opportunities to both enter new international production networks and participate in higher-value-added business segments. These objectives align with the Government of Uruguay’s priority to determine how the country can integrate better with global markets through GVCs. GVCs have four key features that set them apart from traditional production and trade: (1) customization of production—with intensive contracting between parties, often subject to distinct legal systems, (2) sequential production decisions going from the buyer to the suppliers, (3) high contracting costs, and (4) global matching not onlyof goods and services, but also of production teams. These distinct features of GVCs have implications for the overall business environment conducive to fertile grounds for GVCs to prosper, as well as for the types of trade facilitation efforts, infrastructure, skills, and trade and investment policies that are best suited for this reality. -
Publication
Exports, Export Destinations, and Skills
( 2010-05)This paper explores the links between exports, export destinations and skill utilization by firms. The authors identify two mechanisms behind these links, which we integrate into a unified theory of export destinations and skills. First, exporting to high-income countries requires quality upgrades that are skill-intensive (Verhoogen, 2008). Second, exporting in general, and exporting to high-income destinations in particular, requires services like distribution, transportation, and advertising, activities that are also intensive in skilled labor (Matsuyama, 2007). Both theories suggest a skill-bias in export destinations: firms that export to high-income destinations hire more skills and pay higher wages than firms that export to middle-income countries or that sells domestically. The authors test the theory using a panel of manufacturing Argentine firms. The data cover the period 1998-2000 and thus span the Brazilian currency devaluation of 1999. The authors use the exogenous changes in exports and export destinations brought about by this devaluation in a major export partner to identify the causal effect of exporting and of exporting to high-income countries on skill utilization. The authors fine that Argentine firms exporting to high-income countries hired a higher proportion of skilled workers and paid higher average wages than other exporters (to non high-income countries) and domestic firms. Instead, the authors cannot identify any causal effect of exporting per se on either skill utilization or average wages. -
Publication
Uruguay - Trade and Logistics : An Opportunity - Main Report
(World Bank, 2010-04-15)Globalization has brought about a rapid expansion of international trade and a dramatic change in trade structure. The liberalization of trade in goods and services, containerization, new integrated transport networks, advances in information communication technology and modern business logistics have created unprecedented business opportunities for the trade and transport industries, as firms increasingly rely on global supply chains for production and distribution. In response to the government's request, this study assesses Uruguay's potential as a logistics hub and as a regional distribution center. The competitiveness of Uruguay's logistics system is assessed from an international perspective and policy recommendations towards further efficiency gains are provided. The study focuses on policies related to enhancing domestic and regional trade facilitation and assesses the wider economic impact of such reforms on logistics costs and trade.