The Head of ECLAC's International Trade Unit, Nanno Mulder, invited Latin American countries to implement policies to promote exports of knowledge-based services, especially with regard to their institutionality and governance. This suggestion was made in the framework of a virtual conference of the Institute for the Integration of Latin America and the Caribbean (INTAL), a member of the Inter-American Development Bank (IDB).
“Knowledge-based services (KBS) are the fastest growing sector in trade. The region requires a change in public policies to face the challenges we are facing and take advantage of these new spaces for growth,” said the expert.
The virtual conference took place on Thursday, November 19, 2020, as part of the series “Dialogues on Integration and Trade in Times of Pandemic”, coordinated by Pablo García, Director of INTAL, with the aim of detecting opportunities that offer concrete commercial results in the region.
"THEServices provided by information and communications technologies (ICT) are the most dynamic components of international trade in the last decade. 51% of the world's exports correspond to the services sector, while its performance is more resilient to international crises. The pandemic confirmed this behavior," emphasized Pablo García.
According to IDB data, during the first half of 2020, travel fell by 55%, transportation by 22%, and services by 3%. However, Latin American countries are lagging behind in exporting knowledge-based services. “How can we boost the sector?” asked the IDB’s leading economist.
Services during the pandemic
“As ECLAC points out, the region accounted for 2017% of global exports of knowledge-based services in 2,” said Nanno Mulder. He explained the situation of the sector during the pandemic: “According to official data, the area of knowledge-based services has two aspects of analysis. On the one hand, a negative aspect caused by the sharp decline in the economy that led to the cancellation of investments that could improve competitiveness. On the other hand, the positive aspect is linked to factors that gave a boost to knowledge services that begin with the teleworking and the e-commerce".
For the CEPAL analyst, the trend will be strengthened and Latin America requires a change in public policies, as well as a public-private alliance to face current and future challenges.
Exporting e-commerce
“During the pandemic, the Local e-commerce has taken a major turn in Latin American countries. Mercado Libre statistics show that local sales have skyrocketed in the period from February to August 2020. However, cross-border sales fell by a third in Brazil and Uruguay, according to data from the VUCE customs offices of those countries. The explanation is that the drop in flights caused the purchases that consumers made on e-commerce platforms to arrive on commercial flights whose waiting times have been lengthened. This has discouraged people. Logistics had a major impact on the decline in cross-border e-commerce,” said Mulder.
The expert added that Cross-border e-commerce has not actually grown in the last ten years either. “This has to do with a few services that have been transformed to satisfy consumers and businesses., the difficulty in making payments, the poor development of customer service; that is, the lack of policies in favor of an ecosystem that allows the export of e-commerce," he said.
Good governance
According to Mulder, The topic mentioned was analyzed in a recent study by ECLAC, entitled “Governance and export performance of modern services in Latin America and India”".
El report points the performance of countries exporting modern services Latin America and the Caribbean: Brazil, Argentina, Costa Rica, Mexico, Chile, Panama, Uruguay, Colombia, Peru and Guatemala. However, the development of the sector in each of them has been very different.
“This led the authors to look at governance – that is, coordination mechanisms in the public sector, as well as in the public-private sphere – to foster knowledge-based services,” Mulder said.
“There was evidence of a significant delay in the majority of countries in the region, both in the design and implementation of their policies to promote exports of services; therefore, the export success of countries is related to good governance,” he said.
Countries such as Costa Rica, Chile and Uruguay demonstrated medium- and long-term governance, while Brazil, Mexico and Argentina were dependent on political cycles and focused on the domestic market. If a country wants to grow, it has to invest in the knowledge-based services sector, which adds value to mining and agriculture, to boost exports., must have a long-term view and support the private sector. This will allow it to promote a new phase of industrial policy and increase the likelihood that these initiatives will transcend governments," concluded the Head of the International Trade Unit of ECLAC.
Aduana News is the first Argentine customs newspaper to launch its digital version. With 20 years of experience, its publications and initiatives aim to provide the most relevant knowledge on customs issues in order to contribute to safe trade in the region.
