Page 19 - Caribbean-Central America Profile 2018

REGIONAL

CARIBBEAN-CENTRAL AMERICA PROFILE 2018

MANUFACTURING

The manufacturing industry remains at the United States, the world’s second largest motor of domestic production and export patterns that
centre of technological innovation, international vehicle market. Today, 80% of Mexico’s motor would allow investment to become an engine of
trade growth and economic expansion. The vehicle production is exported and 86% of these growth. In order to harness trade as a driving
countries of Latin America and the Caribbean exports go to Canada and the United States. force of growth not only for the manufacturing
face significant challenges to further industrial Mexico has thus, become the world’s seventh sector but also natural resource-based ones
development, particularly because of the weak largest supplier and the fourth largest exporter. and services, Latin America and the Caribbean
implementation of structural change policies should adopt more proactive, forward-looking
that could boost modern and high productivity The outlooks for Mexico’s motor vehicle industry national policies, concurrent with the rapidly
sectors. Political events, such as the referendum will depend on at least two independent sets of changing world marketplace, under a strong
in the United Kingdom which resulted in the factors. On the one hand is the transformation alliance between the public and private sectors.
driven by the technology revolution under way
vote to leave the European Union (Brexit) and in the global automotive industry, changes in the In terms of exports, the economies of Central
the presidential election in the United States,
reflected trends that had developed over time concept of mobility and consumptions patterns, American and Caribbean countries are mostly
in global production and trade. Developed and regulatory pressure in the fields of safety, geared toward raw material, particularly
economies have been more interested in the environment and energy efficiency. On the agricultural goods such as fruit, coffee and
other hand, is the uncertainty triggered by the
sugar. However, there are also some low-end
repatriating production, which together with announcements of the new Administration in manufacturing exporters of products such as
the rapid technological transition and greater
competitive pressure, has redirected businesses the United States. textiles, processed foods and electronics. Many
towards more technology-intensive markets. Both Mexico and Canada have given their Caribbean and Central America governments
support for updating NAFTA, which was have made strides towards developing outward-
Over previous decades, manufacturing became oriented, niche market, and export-based
markedly global, with many operations moved adopted 23 years ago, and have indicated a desire strategies to increase competitiveness and to
from advanced economies to developing to preserve the regional automotive production achieve internationally accepted best practices.
economies to cut costs. This paradigm has been chains. Although the United States has afforded Many of the Caribbean’s production and exports
called into question recently, however, by both emphasis thus far to regulatory issues, the are still based on preferential access to markets.
negotiations on tariffs and rules of origin will
firms and governments, and manufacturing has
gained increasing importance as a source of be crucial in reaching a new agreement. In This is so whether it is sugar, bananas and rum
productive linkages, scientific and technological this framework, any major changes to the to the European Union (EU) market under the
capabilities and innovation in domestic economies. existing trade preferences could significantly Lomé Convention; beef, rum and tobacco to
upset production and supplier chains in North the United States under the Caribbean Basin
This is seen more so in the automotive America. Initiative (CBI); or a range of commodities to
industry as it is in the throes of far-reaching In the Caribbean, the deceleration in 2016 Canada under CARIBCAN. The market is now
transformation and is becoming a catalyst and reflected a modest slowdown in the Dominican the major shaper of the prospects and fortunes
driver of major technological and productive Republic, the largest economy in the region, of countries.
changes. Although vehicle manufacturers have on the completion of construction projects and Despite regional efforts to deepen integration
been leading this process for many decades, weakening manufacturing growth. Contraction
suppliers of parts, components and accessories in several commodity-exporting countries through the CARICOM Single Market and
have recently become increasingly important in namely Belize, Suriname and Trinidad and Economy and strengthen trade relations with
the production chain, powering technological Tobago also contributed to the deceleration. existing and non-traditional partners, the
Region’s competitiveness remains constrained
development. However. Momentum picked up in the second
half of 2016, and the outlook for advanced by poor infrastructure and connectivity, weak
Although North America remains one of the economies has improved for 2017–18. institutions, undiversified export markets,
three main hubs of the global automotive Better growth prospects in the United States, and low levels of private sector innovation.
industry, it has lost ground over the past few Europe, and Japan reflect some rebound in According to IDB estimates, CARICOM is
decades. Among the member countries of manufacturing and trade, as well as prospects of operating on average 46 percent below its trade
the North American Free Trade Agreement likely U.S. fiscal stimulus. potential. In addition, intra-regional trade in the
(NAFTA), however, Mexico has gained in Irrespective of growing manufactured exports, Caribbean stands at a relatively low 13 percent
stature: by virtue of intensive investment, it the Latin American economies have not of total trade; this increases to just over 20
has become one of the leading suppliers to the percent if exports to Latin America are included.
experienced the kind of dynamic restructuring

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