PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

3.0 The Burdens of LAC’s Logistics Costs
Studies show that the logistics “burdens” of individual LAC countries’ average 18 to 40
per cent of GDP, as compared to 9 to 10 per cent for OECD countries (Gausch, 2009). In
addition, traditional indicators such as the percentage and density of paved roads, port
capacities, and vessel turnaround times, or qualitative indicators based on perceptions, all
suggest that LAC’s transport infrastructure, with a few exceptions, lags behind other
regions of the world, both developing and developed.
Figure 9.2. Logistics Infrastructure Contribute to Uncompetitive Industries
Source: Gonzalez & Guasch (2007)
The above provides a comparison of average inventory levels in Latin America and the OECD. If we
consider inventories have an associated financial cost, the fact that inventory levels in LAC are three times
higher than in the OECD translate into a significant competitive disadvantage. The need to have better
logistics is in part explained in the first column. While the effect of higher inventories and transit losses are
compounded as a higher proportion of logistics costs to product value.
In LAC, logistics costs range from 18 to 34 per cent of product value – and even higher
for small and medium-sized enterprises. Therefore effective logistics management and
adequate infrastructure are required to prevent logistics costs from becoming an obstacle
to productivity and competitiveness (see Figure 9.2).
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