Latin American integration is one of the most present desires in the region's imagination. Throughout history, it has been a romantic idea on the verge of becoming a reality, but it has been a difficult road with countless obstacles in the way, with unbuilt bridges and borders to unify.
There are major deficits in infrastructure financing: While investments in transport infrastructure in the OECD (Organization for Economic Cooperation and Development) reach $505 per capita per year, the average investment in Latin American and Caribbean countries is $87. These figures show the development opportunities we are missing and reflect the historical debt we owe to the region's aspirations.
But new winds have emerged in the region that can reverse this inertia and ensure that Latin American and Caribbean integration becomes an engine for economic growth, social well-being, greater competitiveness and more transcendent leadership in global trends such as digital transformation. Climate change, food security or migration flows.
These statements emerged in May of this year, when the Brasilia Consensus was announced and we at CAF – Development Bank for Latin America and the Caribbean – began working with the Brazilian government and BNDES (National Bank for Economic and Social Development). The IDB (Inter-American Development Bank) and Fonplata, regional financial institutions, joined this initiative, demonstrating that joint work is necessary to achieve sustainable development in Latin America and the Caribbean.
The result is the mobilization of up to $10 billion for strategic integration projects, of which $3 billion will be contributed by CAF. This is a joint effort by countries and international organizations to revitalize integration initiatives and promote infrastructure projects that facilitate trade and services between countries in South America. These funds are part of the “Integration Routes” initiative signed in Rio de Janeiro in the presence of Lula da Silva.
Only under this common lens will we be able to overcome the major differences we have compared to other regions. For example, since the mid-1990s, only 15% of Latin American and Caribbean exports come from intraregional trade, while in Europe they account for 60%, in North America 45% and in East and Southeast Asia 35%.
One of the main obstacles has to do with geography: we are mountains, desert, paramo, Andes, glacial, Caribbean and Pacific. The leap in integration is only possible with more and better physical, energy and digital infrastructure. In the energy sector, for example, despite significant energy production capacity, we have not managed to connect South America with Mesoamerica or the Caribbean.
Another challenge is to reduce logistics costs. Trucks, for example, do not drive at the global average speed: in Europe it is 80 km/h, in Latin America and the Caribbean it is 18 km/h. We are also influenced by the current processes and dynamics of intra-regional trade, such as a Mexico that is strongly connected to the United States in the north, a Brazil that can open up more to the region, and countries large and small that are more open to each other need to network and better.
The situation at the borders (tariff and non-tariff barriers to trade) is another bottleneck to integration. In Argentina, Brazil, Chile and Colombia, the costs for technical measures, such as sanitary and phytosanitary measures or labeling requirements, correspond to tariffs of between 4% and 6%. In addition, at most border crossings in South America there is a double document and control check, which increases the time and cost of crossing the border.
We cannot approach the integration of Latin America and the Caribbean in isolation or wage war alone. We need multidimensional visions and voices to help us better understand and appreciate the benefits of a cohesive, coordinated and united region for the economic and social well-being of Latin American and Caribbean peoples.
Sergio Diaz Granados He is Executive President of CAF – Development Bank for Latin America and the Caribbean.