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Only Mexico stands out in value chains in LAC

Mexico is the only country in Latin America and the Caribbean (LAC) that is highly integrated into global value chains, according to an analysis released by the European Central Bank (ECB).

At the global level, the type and extent of participation in GVCs vary from country to country.

On the one hand, small open economies or countries that are heavily involved in the assembly and processing of goods, such as Mexico or the countries of emerging Europe, tend to be located in the downstream value chain and have large linkages downstream, originating from the fact that a large proportion of its exports consists of foreign value added.

On the other hand, commodity exporters, such as Russia and countries in the Middle East and Africa, are located in the upstream value chain and instead exhibit high direct linkages.

The latter reflects the fact that the commodity exports of these countries travel along the value chain and serve as inputs in the production of other countries.

However, countries with high forward linkages are not limited to commodity exporters.

In particular, according to the analysis, the United States United States and several large euro area economies also exhibit high shares due to large exports of high value added services (including marketing activities and R&D) that are used as intermediate inputs in other countries

Value chains

For many advanced economies, the backward and forward linkages have been increasing over time.

This is an indication of the fact that they participate in global value chains in a multifaceted way, through both vertical and horizontal linkages.

Also movements along the value chain may be the result of deliberate government policies.

In countries such as China, Indonesia, Thailand and Malaysia, for example, the share of advanced has increased considerably in the last 30 years as a result of policies aimed at reinforcing the local content of their production and exports.

By contrast, emerging European economies have continued to integrate downwards into the supply chains of Western European companies, so that the foreign content of their exports has increased more visibly.

Latin American countries have also seen the foreign content of their exports increase over time.

Overall (with the exception of Mexico, which is highly integrated into US value chains), participation in global value chains remains low among Latin American countries compared to their peers. analysis.

 

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