Latin America can be the solution to the world supply crisis, says IDB

RIO DE JANEIRO, BRAZIL – Latin America can be the “sea of peace” that investments need amid global turbulence to solve supply problems and relocate businesses from other latitudes, said the president of the Inter-American Development Bank (IDB), Mauricio Claver-Carone, on Tuesday, June 7.

Because of the resources and opportunities it offers, “Latin America and the Caribbean can be a solution to these supply problems, whether it’s manufacturing in Asia or food and energy in Europe,” a product of the war conflict in this region, which provides grain and fuel for the world, the executive, who is attending the Summit of the Americas in Los Angeles, told AFP.

“The issue is to improve infrastructure,” said Claver-Carone, stressing that Latin American central banks “have been exemplary in anticipating the U.S. Federal Reserve” and taking measures so that “inflation doesn’t catch them by surprise.

The executive explained that “since the Russian war in Ukraine, for all the countries in the region, except for Argentina, El Salvador, and Bolivia, the country risk has decreased,” while China’s has increased, meaning that they have decoupled. “This had never occurred in history,” he pointed out.

All of this motivates investors to see in this region an attraction for “nearshoring,” or moving their business from one country to another that is closer or more convenient.

According to Claver-Carone, “every day we see examples of companies that want to move from Asia to Latin America and the Caribbean,” projects that the IDB also finances. “Yes, there is political discord, populism from left and right, but there is a consensus of the business community to transfer their operations,” he expressed.

Claver-Carone clarified that his position “is not anti-China, but pro-Latin America and the Caribbean. According to IDB calculations, the potential gain for Latin America and the Caribbean from nearshoring opportunities could increase up to US$78 billion in new exports of goods and services.

A bipartisan group of senators introduced a resolution yesterday calling for more support for reshoring and nearshoring initiatives “to relocate global supply chains in the United States and with our regional allies in the Western Hemisphere.”

The resolution highlights “the risks to America’s national security and economic prosperity” if it continues to depend “disproportionately on supply networks based exclusively or primarily in China.”

Claver-Carone recalled that in 2021, the IDB broke financing records in the region, with US$23.5 billion delivered, doubling the entity’s usual average. The IDB and its private sector arm, IDB Invest, are participating in these operations.

Joe Biden’s administration announced that it would propose an “ambitious reform” at the IDB “to address the region’s development challenge better as the private sector plays a central role.”

“An increase in U.S. equity participation in IDB Invest would send an important message of support to the region and increase impact investments in areas including nearshoring, digitalization, climate, and renewable energy,” Claver-Carone said.

With information from AFP