| TRANSNATIONAL PRODUCTIVE NETWORKS:
Some conditions that can contribute to their development and sustainability
by Félix Peña
English translation: Isabel Romero Carranza
For any given country opportunities involve challenges
of all kinds. On the one hand, is knowing how to detect these opportunities
early on, which implies fine-tuning diagnostic capabilities. On the other
hand, is harnessing them to benefit the national interests and the interests
of the society as a whole. This requires an effort of organization and
coordination of all the sectors involved.
One of the palpable effects of the changes that are taking place in the
global economic scenario is that countries are expanding the geographic
horizon of their international integration strategies. This is generating
a picture of global economic competition and redistribution of power among
nations that will require multi-regional strategies aimed at strengthening
the relations with all the countries of the world.
Some of the main unresolved issues in terms of cooperation for regional
economic governance in Latin America will require attention in light of
recent developments, such as the growing economic role of China, the redefinition
of the relations between the US and Cuba, and the acknowledgement by Mercosur
and the Pacific Alliance of the convenience of a strategy for convergence
We can mention at least three unresolved matters in terms of regional
economic governance. The first is the adaptation of institutions and joint
work methods to the new global and regional realities. The second is to
define strategies for preferential negotiations with other regions. The
third, and perhaps the most important, is to create conditions that render
viable multiple forms of transnational networks that link the development
of competitive goods and services at global scale.
The experience gained in the region provides some conclusions about the
conditions that, if developed in the coming years, could facilitate the
expansion of the system of productive networks at Latin American scale.
The main ones are: the quality and density of the connectivity between
national economic spaces, especially in South America; the quality of
the ground rules to ensure access to the corresponding markets and the
stability of the conditions for productive investment, and the quality
of national strategies aimed at promoting greater connection, compatibility
and convergence between the productive systems of the countries in the
region, as well as encouraging the transnational association between companies.
A timely detection of the windows of opportunity that are opening up
is relevant for the integration of a country into world trade. This has
always been the case, but it is much more so now in an international context
with a strong dynamic of change. (For related developments refer to, among
others, the March
2015 issue of this Newsletter, on http://www.felixpena.com.ar, and
2014 issue on http://www.felixpena.com.ar/).
The weight of the immediate problems that Latin American countries often
have to confront (among others, weakening economic growth, social inequality
and poverty; organized crime, violence and corruption; citizen dissatisfaction
and problems of social legitimacy; stagnation of social mobility and loss
of future horizons), often make it difficult to detect any opportunities
that arise. As a result, the short term usually prevails.
This is even more true in a society that, for many different reasons,
is dominated by a culture of attachment to the past. In all spheres of
life the past is often recognized and valued. But to be stuck in the past
may make it difficult to detect, in a timely manner, any opportunities
that may arise for the future. Nostalgia weakens the ability to visualize
new horizons. It is, for example, a current challenge for countries that
have played a leading role in the international system for the last six
decades and today perceive deterioration in their relative power and their
ability to generate sustainable conditions for the welfare of their populations.
In this regard, and as pointed out a few years ago by the Venezuelan
economist Carlota Perez, at a conference in Buenos Aires, perceiving in
time the factors that affect the shifts of competitive advantages between
nations requires mastering the skills of "hunters of moving targets".
These are shifts that arise, for example, from geopolitical, technological
and cultural changes, or from the distribution of relative power between
competitors or even between nations. Eventually, they may render obsolete
strategies and policies aimed at sustainable economic growth and development.
This was experienced at one time by Latin American countries that attempted
to preserve some of their industrial strategies, particularly those based
on import substitution, which did not involve a simultaneous effort for
innovation and for the development of technical progress. Something along
the lines of what Fernando Fanjnzylber called "showcase modernization".
For a country -as for individuals, institutions, companies, athletes,
artists-opportunities involve challenges of all kinds. One of them is
knowing how to detect these opportunities early on. The other is knowing
how to take full advantage of them to benefit national interests and,
in particular, the interests of society as a whole. The first challenge
involves refining diagnostic capabilities. The second entails a strong
effort for the organization and coordination of all the sectors involved
at the public, business, social and academic level. (In this regard see
2015 issue of this Newsletter on http://www.felixpena.com.ar/).
The above considerations become relevant when considering the scenario
of global economic competition that Latin American countries are likely
to confront in the coming years. The combination of opportunities and
challenges will be present in at least three aspects. The first of these
aspects is the increase in world population, especially in Asia, Africa
and Latin America itself and, in particular, the growth of urban middle
class sectors. The second is the constant technological change, with its
impact on the production of goods, provision of services and, in particular,
the global connectivity of countries, markets, competitors, consumers,
workers and citizens. And the third is the impact of the two abovementioned
changes in political and economic governance, both globally and in the
different regions. All this will have a strong impact on values, beliefs,
identities, cultural preferences and even in the relative power of nations
One of the practical effects of the changes that are taking place and
that will continue to occur in the three aspects mentioned above, is the
expansion of the geographic horizon of the international trade integration
strategies of each of the countries of the region and, therefore, of the
region as a whole. In this sense, the scenario of global economic competition
and redistribution of power among nations which is emerging will require
the development of multi-regional strategies aimed at intensifying economic
relations with all countries and regions worldwide. (In this regard see
2013 issue of this Newsletter on http://www.felixpena.com.ar/).
Obviously, the multiplicity of options that this will entail will depend
on the products and services that a country is sable to offer to the rest
of the world. An example of the tous azimuts scope of an international
trade integration strategy aimed, simultaneously, at multiple targets
is food production -especially for the supermarket aisles- and the provision
of services related to its production, including innovation and distribution.
It is one of the assets that generate opportunities in South American
countries, as is reflected, among others, by the activities of the GPS
Group -group of producing countries of the South, also known as ABPU (see
In the case of Latin American countries, examples of this may be found
at multiple levels linked with energy, industrial production and construction,
creativity, natural resources and transportation, among others.
The recent visit of the Prime Minister of the People's Republic of China,
Li Keqiang, illustrates the opportunities and challenges that have opened
up in recent years for Latin American countries. They can be considered
opportunities due to the size of the Chinese economy and the willingness
expressed by the Chinese government to stimulate a quantitative, as well
as qualitative, leap in the future development of trade and bi-regional
investments. Concepts such as that of diversification of the economic
structure and of cooperation in production capacity have marked the contents
of the agenda that Latin American countries will have to fulfill in the
coming years in their joint work with China, including the projection
to Asia-Pacific and Eurasia. It is an agenda that is not opposed and even
complements that which should be developed with other regions in which
China also has a growing presence, such as North America, Europe, the
Arab countries and Africa.
Among the major announcements that have been made by the authorities
of the Chinese government on its relations with Latin America we should
mention, due to its scale, the creation of a Special Fund for Cooperation
in Matters of Productive Capacity between China and Latin America and
the Caribbean. The Fund will provide thirty billion dollars in funding
to support cooperation projects in the fields of production capacity and
the manufacture of equipment. (In reference to this, see the presentation
by Li Keqiang at the China-Brazil
Business Summit, on May 20, 2015, on http://www.fmprec.gov.cn/.
See also the speeches by the Executive Secretary of ECLAC, Alicia Bárcena
and Prime Minister Li Keqiang during his visit to ECLAC, in Santiago de
Chile, on May 25, 2015, on http://www.cepal.org/es/print/31563
and on http://www.fmprc.gov.cn/esp/zxxx/t1267618.shtml).
Some of the main outstanding matters in relation with cooperation for
regional economic governance among Latin American nations require strong
attention if we consider recent events, such as those that point to the
growing economic role of China, the redefinition of the relations between
the US and Cuba, and the recognition by the Mercosur and Pacific Alliance
countries of the convenience of developing a strategy for convergence
in diversity. (On this last point, see the December
2014 issue of this Newsletter on http://www.felixpena.com.ar).
There seem to be three unresolved matters that can be mentioned in relation
with regional economic governance. The first of them is the adaptation
of institutions and methods of joint work to the new economic and political
realities that have been evinced in the region and at the global level.
This is something that has gained strong relevance in recent times in
relation to what can be called the "aggiornamiento of Mercosur"
-i.e.: its updating in terms of its objectives and methodologies. The
same would apply to other institutions of regional cooperation that reflect
outdated realities, meaning that they were conceived and designed in a
world that, in fact, no longer exists.
The second is to define the strategies for preferential trade negotiations
with other regions in light of what finally results from the evolution
of the negotiations of the interregional mega-agreements, such as the
Transpacific Partnership (TPP) and the Trade and Investment Partnership
The third, and perhaps the most important, is to create conditions that
would make possible the development of multiple forms of transnational
networks that help link, at regional level and with projection to the
world, the capacity that the countries may develop to produce goods and
provide services that are competitive on a global scale.
What does the experience gained in the region regarding the development
of transnational productive linkages teach? As we know, this is a relatively
poor experience given that transnational production chains, in their various
forms, have not developed in Latin America in a way that is comparable
to that of other regions, such as Southeast Asia, North America and Europe
The experience gained in the region, however, would help draw some preliminary
conclusions on what conditions would need to be developed in the coming
years in order to encourage the widening of the network of transnational
productive chains in Latin America.
The three main conditions to be developed would be the following:
- Quality and density of the connectivity between the different national
economic regions, especially in South America, in terms of physical
infrastructure and transport and in the facilitation of trade. Much
would need to be done in the region in order to make it really attractive
for productive linkages aimed at producing goods and providing services
for the region and the world. This is one of the areas in which joint
action with China and other emerging countries has the best prospects
for the future. A strategy of preferential trade agreements in their
various forms and not necessarily in accordance with pre-established
models, making use of the flexibility allowed by WTO rules -if well
interpreted-, with large countries and regions such as the USA and Canada,
the EU, China and India, could also be more attractive.
- Quality of the ground rules to ensure access to the respective markets
and conditions in which to develop productive investments. The precariousness
of the ground rules, especially those relating to the conditions of
access to markets, as has been the case in LAFTA first and the ALADI
and Mercosur later, has been one of the major factors affecting the
development of sustainable production chains in the region. The expression
"I was not given the market I was promised", common among
SME entrepreneurs in less developed countries, illustrates the scope
of the effect of the precariousness of rules. Given the importance of
certainty and ease of access and exit of the markets and even the possibility
of accumulating rules of origin, this a central factor when promoting
the development of regional production networks.
- Quality of national and business strategies aimed at promoting greater
connection, compatibility and convergence between the productive systems
of the countries in the region as well as transnational business partnerships.
This is a key factor in a world with multiple options that requires
the insertion of companies in transnational production, distribution
and service provision networks. It is difficult to imagine successful
companies that do not have a strategy based on knowing with certainty
what they want and what can be obtained by partnering with companies
in other countries, making use of the multiple forms of joint production
and value chains.
A discussion of the conditions mentioned above and others that may be
required seems fundamental in articulating national and regional strategies
to seize the opportunities that are opening up in the world for the countries
of the region. This debate should be focused on how to create conditions
to encourage and provide stability for the multiple forms of productive
linkages that may develop in the region.
Without prejudice to other instruments that can be employed, the institutional
framework of the LAIA provides some that may be functional to create conditions
to encourage different forms of transnational production linkages. One
of them is stated in Resolution ALALC/CMC No. 2 of 1980, which establishes
the system of partial scope agreements, especially through Articles 7
and 10. Their provisions would even allow to imagine creative mechanisms
to provide greater certainty for those who invest in the development of
such production chains, as well as for those involved in their financing.
The LAIA becomes thus one of the appropriate ambits to encourage the
establishment of conditions that help develop production linkages between
companies of the region. (In this regard, see the different resolutions
adopted since its creation in 1980, such as, for example, resolutions
50 (X) from 1998; 55 (XII) from 2002; 59 (XIII) from 2004, 62 (XIV) from
2008, 73 (XV) from 2009, and 79 (XVII) from 2014, on http://www.aladi.org/).
It should be noted that preferential tariff commitments within the scope
of the LAIA can be compatible with WTO rules thanks to its Enabling Clause.
It is, moreover, an ambit through which to move forward in other aspects
that are important for a regional strategy aimed at developing transnational
productive linkages, such as those related with the accumulation of rules
of origin and trade facilitation.
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More