Constraints on Trade in the LAC Region

By Rina Bhattacharya, Samuel Pienknagura

February 16, 2024

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Rina Bhattacharya, and Samuel Pienknagura. Constraints on Trade in the LAC Region, (USA: International Monetary Fund, 2024) accessed December 3, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper studies Latin America and the Caribbean’s (LAC) trade performance in recent years and estimates the salience of key country-specific factors in explaining underperformance in some sub-regions within LAC. First, the paper documents that, while the average country in the region displays aggregate trade values that are consistent with a standard gravity model, there is substantial heterogeneity across sub-regions and product-types. The paper then estimates an augmented gravity specification that includes proxies for the quality of infrastructure, the availability and quality of factors of production, and governance. Results point to infrastructure and customs regulation as key factors explaining undertrading in manufacturing in most sub-regions. Factors of production partly explain South America’s underpeformance in manufacturing while governance explains undertrading across most product groups, but neither set of factors play a significant role in other sub-regions.

Subject: Exports, International trade, Trade balance, Trade in goods, Trade policy

Keywords: Asia and Pacific, Caribbean, Central America, Constraints, Exports, Gravity specification, Latin America and the Caribbean, Merchandise goods, Paper document, South America, Sub-Saharan Africa, Trade, Trade balance, Trade in goods, Trade performance, Trade policy, Trade policy variable

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/032
Stock No:

WPIEA2024032
ISBN:

9798400269455
ISSN:

1018-5941

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