Global value chains and world trade

282 Pages·2014·3.63 MB·English

Global value
t
chains and n
e
m
p
world trade o
l
e
v
e
D
Prospects and challenges
c
i
m
for Latin America
o
n
o
c
RENÉ A. HERNÁNDEZ E
JORGE MARIO MARTÍNEZ-PIVA
NANNO MULDER
Editors
Global value chains
and world trade
Prospects and challenges
for Latin America
René A. Hernández
Jorge Mario Martínez-Piva
Nanno Mulder
Editors
Economic Commission for Latin America and the Caribbean (ECLAC)
Santiago, Chile, August 2014
ECLAC Books
127
Alicia Bárcena
Executive Secretary
Antonio Prado
Deputy Executive Secretary
Osvaldo Rosales
Chief, International Trade and Integration Division
Ricardo Pérez
Chief, Publications and Web Services Division
This book was edited by René A. Hernández, Jorge Mario Martínez-Piva and Nanno
Mulder of the Economic Commission for Latin America and the Caribbean (ECLAC). It
contains a selection of original papers presented at the international conference “Latin
America’s Prospects for Upgrading in Global Value Chains”, held on 14-15 March 2012 at
Colegio de Mexico, Mexico City. The conference was jointly organized by four international
organizations —ECLAC, the Inter-American Development Bank (IDB), the Organization for
Economic Cooperation and Development (OECD) and the World Bank) in partnership with
Colegio de México.
This book was made possible thanks to financial assistance kindly provided by the Federal
Ministry for Economic Cooperation and Development (BMZ) of Germany. The views
expressed in this book are those of the authors and do not necessarily coincide with those of
the United Nations, its Member States or the sponsoring institutions.
The boundaries and names shown on the maps included in this publication do not imply
official endorsement or acceptance by the United Nations.
Cover design: Ximena Ulibarri
United Nations publication
ISBN 978-92-1-221124-4
eISBN 978-92-1-056932-3
LC/G.2617-P
Sales No. E.14.II.G.17
Copyright © United Nations, 2014
All rights reserved
Printed at United Nations, Santiago, Chile
This publication should be cited as: René A. Hernández, Jorge Mario Martínez and Nanno
Mulder, “Global value chains and world trade: Prospects and challenges for Latin America”,
ECLAC Books, No. 127 (LC/G.2617-P), Santiago, Chile, Economic Commission for Latin
America and the Caribbean (ECLAC), 2014.
Applications for the right to reproduce this work are welcomed and should be sent to the Secretary of the
Publications Board, United Nations Headquarters, New York, N.Y. 10017, United States. Member States
and the governmental institutions may reproduce this work without prior authorization, but are requested
to mention the source and inform the United Nations of such reproduction.
Contents
Foreword ................................................................................................................11
About the editors ..................................................................................................15
Introduction ...........................................................................................................21
Chapter I
Mapping global value chains ..............................................................................43
Introduction ...............................................................................................43
A. The rise of global value chains .......................................................45
1. A brief history of global value chains ......................................45
2. The main drivers of the phenomenon ......................................46
3. How far will the fragmentation of production go? ................47
4. Industries, business functions or tasks?...................................48
B. Data and methodology ....................................................................48
1. New data available to study GVCs: the OECD
ICIO model ...................................................................................49
2. Measuring the importance of GVCs: country and
industry indicators ......................................................................50
3. The distance to final demand: what is the position
of a country in the value chain? ................................................54
C. Analysis of specific GVCs ................................................................56
1. Case study 1: agriculture and food products ..........................56
2. Case study 2: motor vehicles .....................................................61
3. Case study 3: electronics (office, accounting and
computing machinery) ...............................................................64
4. Case study 4: business services .................................................67
4 ECLAC
D. Concluding remarks: closing the gap between policies
and the reality of business ...............................................................72
Bibliography ...............................................................................................73
Annex ..........................................................................................................75
Chapter II
Global value chains in Latin America: A development perspective
for upgrading .........................................................................................................79
Introduction ................................................................................................79
A. The global value chains framework: a tool
for driving economic development
in the new global economy ..............................................................81
1. What is value chain analysis? ....................................................81
2. What is the role of value chain analysis
in economic development? ........................................................83
B. Latin America’s participation and opportunities
in global value chains .......................................................................84
1. How Latin American countries participate in GVCs .............85
2. How Latin American countries can leverage local
endowments to upgrade in global value chains .....................92
C. Skills for upgrading in global value chains: workforce
development and national innovation systems ...........................95
1. Finishing schools in India and Latin America ........................96
2. The Chilean Public-Private Strategic Council
for the Offshore Services Sector ................................................98
3. The aerospace industry in Querétaro, Mexico ........................98
4. Costa Rica’s offshore services talent-development
pipeline .........................................................................................99
D. Conclusions......................................................................................100
Bibliography .............................................................................................101
Chapter III
Access to finance in value chains: New evidence from
Latin America ......................................................................................................107
Introduction ..............................................................................................107
A. How can inter-firm linkages in value chains facilitate
access to financing? .........................................................................109
B. Case Studies .....................................................................................111
1. The agrifood industry in Argentina .......................................111
2. The furniture value chains in the Serra Gaucha
cluster, Brazil ..............................................................................116
3. The information and communication technology (ICT)
sector in Costa Rica ...................................................................123
C. Summary of empirical findings ....................................................128
D. Policy Implications .........................................................................131
Bibliography .............................................................................................133
Global value chains and world trade... 5
Chapter IV
Inclusive value chain interventions in the high-value agrifood
sector in Latin America ......................................................................................137
Introduction ..............................................................................................138
A. Inclusion of small and medium-sized producers
in high-value agriculture chains ...................................................139
1. Changing governance patterns in high-value agrifood
industries: challenges and opportunities for
small producers. .....................................................................140
B. Model for sustainable inclusion of small and medium-
sized producers in the value chain: a holistic approach ..............143
1. Competitiveness ........................................................................144
2. The four pillars model ..............................................................145
3. Sustainability of small producer inclusion
in the value chain ......................................................................150
C. Selected IDB Multilateral Investment Fund projects: best
practices and lessons learned ........................................................151
1. Case 1. Supporting the competitiveness of Central
American coffee producers (Costa Rica, El Salvador,
Guatemala, Honduras and Nicaragua) ..................................152
2. Case 2. Strengthening the competitiveness of the
stevia value chain (Paraguay) .................................................153
3. Case 3. Conversion to organic cacao cultivation (Peru) ..........154
4. Case 4. Strengthening the competitiveness of
organic fruit and vegetable producers in the
Peruvian Andes .........................................................................154
5. Case 5. Improving the competitiveness of micro and
small rural apiculturists (Nicaragua and Honduras) ............155
D. Conclusions......................................................................................156
Bibliography .............................................................................................160
Chapter V
Economic integration and value chains case study: Dairy products
in Central America ..............................................................................................163
Introduction ..............................................................................................163
A. Problem ............................................................................................164
B. Objectives .........................................................................................165
C. Conceptual framework ..................................................................165
1. Economic integration and international trade ......................165
2. Foreign direct investment and economic integration ............166
3. Value chain analysis and governance ....................................168
D. Methodology ...................................................................................169
E. The dairy sector in Central America: an overview ....................170
1. Nicaragua’s dairy value chain ...............................................173
2. El Salvador’s dairy value chain .............................................174
3. Costa Rica’s dairy value chain ................................................175
4. Panama’s dairy value chain ....................................................176
6 ECLAC
F. Economic integration through regional value chains ................178
1. Vertical Integration and Economic Integration .....................178
2. FDI and integration of the Central American
dairy industry ............................................................................179
G. Final Remarks ..................................................................................180
Bibliography .............................................................................................182
Chapter VI
Value chain development for cocoa smallholders in Ecuador .....................185
A. The value chain approach to smallholder development
in Ecuador adopted by the German Agency for
International Cooperation (GIZ)...................................................185
B. The selection of value chains for promotion ...............................188
C. Value chain analysis of a speciality product —the case
of “fine aromatic cocoa” .................................................................190
1. Product and market characteristics ........................................190
2. Value chain characteristics .......................................................193
3. Primary cocoa producers: characteristics and
social aspects .............................................................................195
D. Strategic analysis .............................................................................196
1. Development objective and strategy for fine
aromatic cocoa ...........................................................................196
2. Value chain problems, needs and opportunities ..................197
E. Value chain development activities ..............................................198
F. Impact and lessons learned ...........................................................201
1. Impacts of value chain promotion ..........................................201
2. Lessons learned .........................................................................203
Bibliography .............................................................................................205
Chapter VII
Brazilian production sharing and implications for production
integration in South America ............................................................................207
Introduction ..............................................................................................207
A. The state of theories and findings ................................................209
B. Measuring production sharing .....................................................213
C. Trade and production sharing ......................................................216
1. The context .................................................................................217
2. Trade in parts and components ...............................................218
3. Trade in final manufacturing products ..................................221
D. Magnitude of production sharing in Brazil ................................227
1. Imported input share ................................................................228
2. Degree of vertical specialization .............................................231
3. Advantages in assembly operations.......................................235
4. Results and policy implications ..............................................238
Bibliography .............................................................................................240
Annex ........................................................................................................244
Global value chains and world trade... 7
Chapter VIII
Value chains in Colombian exports to the European Union:
How inclusive are they? .....................................................................................245
Introduction ..............................................................................................245
A. Exports and value chains ...............................................................246
1. Backward linkages of the export sector to the
domestic economy ....................................................................246
2. Domestic value chains related to exports to the
European Union ........................................................................249
3. Direct and indirect employment in sectors exporting
to the European Union .............................................................252
B. Background to the Association Agreement between
Colombia and the European Union .............................................259
1. Bilateral trade.............................................................................259
2. Outcomes of the Association Agreement ..............................262
3. Survey of previous studies ......................................................264
C. Modelling the effects of the Association Agreement
on Colombia.....................................................................................265
1. Computable general equilibrium model ...............................265
2. Micro simulation methodology ..............................................267
3. Two scenarios .............................................................................268
D. Macroeconomic and social outcomes of the Association
Agreement with the European Union ..........................................269
1. Macroeconomic outcomes .......................................................269
2. Effects on international trade ..................................................270
3. Social impacts ............................................................................272
E. Conclusions......................................................................................274
Bibliography .............................................................................................276
Tables
II.1 Latin America (selected countries): economic and industry
indicators for the offshore services industry, 2008 ..............................92
III.1 Chain governance indicators ...............................................................110
III.2 Summary of financial instruments and guarantees observed
in Argentine agrifood value chains .....................................................115
III.3 Main sources of finance for sampled furniture firms in
Serra Gaucha ..........................................................................................118
III.4 Summary of financial instruments and guarantees observed
in furniture value chains (Serra Gaucha, Brazil) ...............................122
III.5 Inter-firm linkages and financing in the ICT sector
in Costa Rica ...........................................................................................127
III.6 Relationships between chain governance and inter-firm
linkages in accessing finance for three case studies .........................130
IV.1 Selected competitiveness bottlenecks and measures for
overcoming them ...................................................................................144
8 ECLAC
IV.2 Overview of the Multilateral Investment Fund projects
under consideration ..............................................................................151
V.1 Yearly average exports and imports of dairy products
in Central America, 1994-2011 .............................................................171
V.2 Main characteristics of the dairy industry in Central America ...........172
V.3 Countries’ position in terms of world dairy production .................173
VI.1 GIZ product and market evaluation matrix for promoting
value chains, November 2002 ..............................................................189
VI.2 Ecuador: basic data on export cocoa, May 2004 ................................191
VI.3 Ecuador: sources of income of the members of the KALLARI
Association, located in the Sumaco Biosphere Reserve ...................195
VI.4 Ecuador: strengths, weaknesses, opportunities and threats
of the aromatic cocoa chain ..................................................................198
VI.5 Ecuador: farmer-buyer contracts in the fine aromatic
cocoa value chain ...................................................................................199
VI.6 Summary of the strategy for improving the fine aromatic
cocoa value chain ...................................................................................200
VI.7 Results (impact) model designed by GIZ to promote value
chains, including monitoring indicators, 2003 ..................................201
VI.8 Impacts on the competitiveness of the KALLARI value
chain, 2006-2011 .....................................................................................202
VI.9 Impacts of the promotion of the special cacao value chain,
at the level of small cacao farmers, in selected cases ........................203
VII.1 Brazil: top import and export countries in 2008 ................................218
VII.2 Brazil: imports of parts and components, 2008 .................................219
VII.3 Brazil: exports of parts and components, 2008 ..................................220
VII.4 Finished products and parts and components in the
electronics industry ...............................................................................223
VII.5 Finished products and parts and components in the
automotive and aircraft industries ......................................................224
VII.6 Brazil: exports of electronics, 2008 ......................................................225
VII.7 Brazil: automotive/aircraft exports, 2008 ..........................................225
VII.8 Average imported input share in finished products, 1975-1995 ..........229
VII.9 Coefficient of imported inputs in industrial sectors, 2005 ...............229
VII.10 Vertical specialization in the manufacturing sector in Brazil ..........232
VII.11 Revealed comparative advantage .......................................................236
VII.12 Revealed comparative advantages in Brazil: parts and
components, electronics, automobiles and aircraft ..........................236
VII.A.1 Vertical specialization in Brazil ............................................................244
VIII.1 Sectors with stronger and weaker backward linkages, 2005 .............247
VIII.2 Ranking of products with significant backward linkages, 2005 ..........248
VIII.3 Colombia: export sectors to the European Union with
strongest backward linkages, 2005 ......................................................249
VIII.4 Employment requirements per US$ 1 million of production
in sectors which export predominantly to the
European Union, 2005 ...........................................................................253
Global value chains and world trade... 9
VIII.5 Output, exports and total and export-related production
and employment, 2005 ..........................................................................255
VIII.6 Total employment in sectors linked to exports to the
European Union, 2005 ...........................................................................256
VIII.7 Direct and indirect exports employment by destination
market, 2005............................................................................................258
VIII.8 European Union: tariffs applied to imports from Colombia,
February 2012 .........................................................................................261
VIII.9 Tariff protection structure at the product group level,
baseline of the Global Trade Analysis Project (GTAP) .....................263
VIII.10 Estimation results on the probability of employment ......................268
VIII.11 Colombia: outcomes of simulations of an association
agreement with the European Union .................................................270
VIII.12 Colombia: impact of scenarios 1 and 2 on international
trade by broad sector .............................................................................271
VIII.13 Employment by industry in Colombia: persons employed,
level of qualification and employment content of
production, 2010 ....................................................................................272
VIII.14 Colombia: microsimulation results .....................................................273
Figures
I.1 GVC participation index in OECD countries, 2009 ............................51
I.2 GVC participation index for selected non-OECD
economies, 2009 .......................................................................................52
I.3 Average length of GVCs across all industries .....................................53
I.4 Length of GVCs by industry, 2009 ........................................................54
I.5 Distance to final demand, selected economies, 1995 and 2009 ..............55
I.6 Length index for the agriculture value chain, by country, 2009 ............58
I.7 Length index for the food product value chain,
by country, 2009 .......................................................................................59
I.8 Participation and distance to final demand in the
agriculture value chain, by country, 2009 ............................................60
I.9 Participation and distance to final demand in the food
products chain, by country, 2009 ...........................................................60
I.10 Import content of exports by country of origin in the motor
vehicle industry, 2009 ..............................................................................62
I.11 Length index of value chains in the motor vehicle industry,
by country, 2009 .......................................................................................63
I.12 Participation and distance to final demand in the motor
vehicle industry, by country, 2009 .........................................................64
I.13 Length index in the electronics value chain,
by country, 2009 .......................................................................................65
I.14 Participation and distance to final demand in the electronics
value chain, by country, 2009 .................................................................67
I.15 Trade in business services, as a share of total trade in
services, 2000-2008 ...................................................................................68