International Trade Outlook for Latin America and the Caribbean: Recovery in an uncertain context

20 Summary Economic Commission for Latin America and the Caribbean (ECLAC)
The foregoing analysis concerned direct exports of services. However, many services
traded indirectly through their incorporation as intermediate inputs in exports of goods.
Many manufacturing firms incorporate certain types of “cost” services to improve efficiency
and increase productivity. Examples are transport and logistics services, finances, ICT
services, insurance, management, renting and leasing of machinery, equipment and
buildings, and insurance. Other manufacturers add “value” services to differentiate their
products and make them more attractive to clients in a highly competitive environment.
Manufacturers use wireless networks and digital technologies to build sensors and
microchips into their goods to allow communication between them (Internet of things),
to provide additional services and to collect information on consumer behaviour. These
activities are concentrated in the category of business services.
Using new statistics from the World Trade Organization (WTO) and the Organization
for Economic Cooperation and Development (OECD) on international value added exports,
it was shown that the indirectly exported services are similar in value to directly exported
services. For the region’s larger economies, indirect exports represented between
65% (in the case of Chile) and 160% (in the case of Mexico) of direct services exports
in 2011. Chile’s low percentage has to do in part with its specialization in processed
commodities such as refined copper, which require relatively few services to compete
internationally. Conversely, the high percentage in Mexico reflects its exports of
medium- and high-tech industrial products such as automobiles and electronics, which
incorporate many services for competitiveness.
Brazil and Costa Rica were the countries with the largest shares of domestic
intermediate services in the value of manufacturing exports in 2011 (see figure 7).
The high domestic services content in Brazil contributes little to the international
competitiveness of its manufacturing sector, as it mostly reflects the high prices of key
services such as finance, logistics and telecoms. In turn, these high prices result from
relatively low productivity, limited competition and low levels of investment. Meanwhile,
Mexico and Costa Rica incorporated the largest percentages of imported intermediate
services in their manufacturing exports in 2011 (see figure 7). This may be because the
manufacturing sectors of these two economies are the most integrated in global and
regional production networks that have a high concentration of technology-intensive
products, which are in turn intensive in imported services.
Figure 7
Latin America
(selected countries):
share of domestic and
imported intermediate
services in the gross
value of manufacturing
exports, 2011
(Percentages)
35
30
25
20
15
10
5
0
Latin America
(7 countries)
Argentina
Brazil
Chile
Colombia
Costa Rica
Mexico
Peru
Latin America
(7 countries)
Argentina
Brazil
Chile
Colombia
Costa Rica
Mexico
Peru
Value added of domestic intermediate services
Value added of imported intermediate services
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Organization for Economic Cooperation
and Development (OECD)/World Trade Organization (WTO), Trade in Value Added (TiVA) database, 2016 [online] http://
www.oecd.org/sti/ind/measuringtradeinvalue-addedanoecd-wtojointinitiative.htm.