Competitive Regional and Global International Integration

After the collapse of world trade in 2009 and a brief period of recovery in 2010 and 2011, countries in Latin America and the Caribbean, have faced a severe negative shock in their terms of trade, especially the commodity exporting countries. Meanwhile, sluggish growth is also slowing in the Region’s trade partners: a modest 2.1 percent GDP growth in 2015 for the OECD countries, which has been low since 2011, has been joined by a sharp slowdown in developing countries, particularly China. These factors are behind the deterioration in trade openness ratios (see Indicator 2.4.1 in Figure A.4). In order to counter the economic headwinds coming from the global economy, the Region needs to keep advancing a modern trade and integration agenda to lower trade and transportation costs. Against this adverse external scenario, trade within the Region has remained relatively stable (see Indicator 2.4.2 in Figure A.4). Latin American and Caribbean exports to partners within the Region have been more diverse, more stable in their composition, and more concentrated in manufactures than the Latin America and the Caribbean’s exports to other regions. While the decline in the prices of minerals has affected the foreign direct investment (FDI) inflows in this sector recently, in general, FDI inflows remain very important for the Region, and their pace has remained relatively stable (see Indicator 2.4.3 in Figure A.4).

Targets were met for four of the five CRF output indicators for this sector priority (Figure B.4), with contributions from more than 200 projects in all 26 borrowing member countries. Only Indicator 3.4.5 (“mobilization volume by NSG financed projects and companies”) did not meet its target in 2015. During the last four years, this indicator was tracked in terms of “total project cost minus IDB financing” at financial closing (totaling US$17.9 billion in 2015) to better reflect the amount of funds eventually committed to the Region. However, because this indicator target was originally defined in terms of approval this year the DEO reports the “total project cost minus IDB financing” at approval (totaling US$26.9 billion) to more accurately measure progress towards the original final target of US$31.2 billion. The observed gap between approvals and commitments (i.e closings) is mostly attributable to various transactions not expected to close until after December 31, 2015.

Stories 2.9 and 2.10 illustrate the reach of the projects that contributed to this sector priority. Story 2.9 features a private sector operation that mobilized resources through an innovative financing structure (Indicator 3.4.5), which in turn, made possible the development of the largest hydropower plant in Costa Rica. Story 2.10 illustrates one way in which a Mesoamerican initiative contributed to meeting the target for Indicator 3.4.3 (“number of cross border and transnational projects supported”). The initiative simplified the procedures to transport goods across the border from El Salvador by systematizing many processes that allow transporters to complete border check procedures in just a matter of minutes.

Figure A.4
Regional Development Goals:
Competitive Regional and Global International Integration
Figure B.4
2012–2015 Output Contribution Indicators:
Competitive Regional and Global International Integration

Development Stories

Story 2.9
One Step Forward Towards Carbon-neutral

Story 2.10
Trade without Borders