LAC area textile industry responds to Asian growth
According to a report entitled ‘Latin America and the Caribbean’s Response to the Growth of China and India: Overview of Research Findings and Policy Implications’, concerns that the two Asian countries are displacing Latin America in world markets for goods, services, foreign direct investment, and innovation are misleading.
World Bank chief economist for the Latin America and the Caribbean (LAC), and one the authors of the report, Guillermo Perry, stated, “The overall regional effects of the larger presence of the two Asian economies have been positive, but our countries have not taken full advantage of the rapidly growing markets in China and India, nor of the global opportunities generated by cheap intermediate inputs and new production networks.”
China and India’s share of world exports is 50% larger than that of LAC, while in 1990 the opposite was true. However, contrary to what many believe, LAC’s exports of services to the United States—its main market—are seven times larger than China’s and India’s combined.
The report also acknowledged that some industries, firms and sub-regions are being negatively affected by the rapid growth of China and India, particularly in Mexico and Central America. These industries include textiles, industrial and electrical machinery and transport equipment.
Some countries are responding by changing their specialisation pattern in favour of natural resource and scientific-knowledge-intensive industries. In the case of the apparel industry, Costa Rica and the Dominican Republic are shifting to higher quality, higher price textiles and clothing, while others such as Haiti and Nicaragua are moving towards lower-wage, unskilled-labour intensive products.
The report states that governments in LAC need to support policies that facilitate rural development and natural resource-based industries to help the economies respond well to higher demand and prices for commodities. The study also recommends the strengthening of export and investment promotion, in coordination with the business sector, in the two Asian markets, and helping LAC companies to better integrate into global production chains.
