Constraints on Trade in the LAC Region

Rina Bhattacharya and Samuel Pienknagura

No 2024/032, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Trade; Constraints; Latin America and the Caribbean; trade performance; paper document; gravity specification; trade policy variable; merchandise goods; Trade balance; Trade policy; Exports; Trade in goods; Caribbean; South America; Central America; Asia and Pacific; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 43
Date: 2024-02-16
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