By: Staff Writer
July 30, 2021
Getting more US companies to invest in the Caribbean and Central America is one of the issues of focus for the Inter-American Development Bank (IDB) as a way of getting the region out of the doldrums of the COVID-19 pandemic and simultaneously building a sustainable future next to the world’s only superpower.
Mauricio Claver-Carone, president of the IDB, speaking at a webinar, said that it is “important” that the Caribbean and Latin America take advantage of nearshoring opportunities that would present themselves out of the US but do so in a way that ensures “sustainable growth” for the future.
Mr Claver-Carone also said: “I can really say and I say with pride, and I say it with the scars to show that the IDB is truly leading the way on nearshoring in this regard.
“We are the only entity, probably next to the government of Japan, that literally has a toolkit that is incentivizing and financing nearshoring activities in that regard.
“We are working with all of our member countries and what we’ve really seen is a rapid growing, which I was extraordinarily pleased of six months ago, we launched a coalition of private sector partners to really seize on this once in a multi generation opportunity, which ironically, was created by the pandemic, but the goal here is to bolster supply chains and boost nearshoring.”
Nearshoring is the the practice of transferring a business operation to a nearby country, especially in preference to a more distant one. So the idea is to now use the COVID-19 pandemic for US firms to source labour and materials from the Caribbean and Central American market the way it used to and in the Caribbean’s sense, bring it back to the Caribbean Basin initiative’s initial tenets.
The CBI is intended to facilitate the development of stable Caribbean Basin economies by providing beneficiary countries with duty-free access to the U.S. market for most goods. While the CBI was primarily a one way trade agreement that was supposed to benefit smaller Caribbean countries, nearshoring is offering a bit more by way of foreign investment opportunities for American companies to use Caribbean and Central American resources as opposed to goods heading to China, only to end back up in America as a finished product.
Mr Claver-Carone, pointing to Colombia, Guatemala and Costa Rica as examples of countries that have lost American investment to the Asian market, said that some multinationals have been investing in China for decades and they account for 35 percent of global manufacturing, “but what we saw with the pandemic there was an over-reliance and what we are seeing with the Chinese exports they are falling and has lost some $50bn as in regards to the pandemic.”
Noting further that he has seen the disruption in trade taking place that is affecting China and companies that have been “over-reliant” on China are not thinking of looking elsewhere and that over-reliance is “unwise.”
He also said: “I saw that now even the price of exports in Shenzhen and others are increasing. So that’s a reality and the reality of the result of putting too many eggs in one basket.
“So our goal now is for Latin-America, how it can and should be part of the solution. By the way, this isn’t a political issue or logistical issue. It’s really economic, it’s a national security issue.”
The People’s Republic of China formally joined the IDB in 2009 as a donor member, something Mr Claver-Carone is very careful about because he understands the political complexities of having China involved with the bank but having to speak out in some ways against them.
He added, however, “This is a health and safety issue and in many cases, a matter of life, or death, in that regard. So it’s an environmental issue, producing so many things far away raises the carbon footprint on all those goods, because we’ve got to ship them thousands of miles to consumers and that also makes nearshoring supply chain an ESG (environmental, social and corporate governance) issue for investors who really want to invest and have environmentally stable companies.”