How Latin America's Services Stole the Spotlight from Goods

Latin America and the Caribbean witness a trade revolution: goods dip 2%, but services surge 12% in 2023. The REDLAS conference explores the transformative power of modern services, driving economic growth, job creation, and sustainable development in the region.

How Latin America's Services Stole the Spotlight from Goods
Modern services, from finance to technology, emerge as economic engines in Latin America and the Caribbean.

In a dynamic shift between 2022 and 2023, the global trade landscape witnessed a fascinating transformation. While the volume of world trade in goods experienced a modest decline of 1.6 percent, the trade in services soared, marking a significant 5 percent growth.

These trends are particularly pronounced in Latin America and the Caribbean, where the value of goods exports is anticipated to decrease by 2 percent. Services are poised for a remarkable 12 percent upswing, according to estimates by the Economic Commission for Latin America and the Caribbean (ECLAC)).

Hugo Eduardo Beteta, Director of ECLAC's Subregional Headquarters in Mexico, highlighted this transformative trend, emphasizing the burgeoning role of services in the region's economic landscape. The traditional balance, with goods representing 87 percent of total exports and services lagging at 13 percent, is gradually shifting. The latter, as Armando Sánchez Vargas of the Instituto de Investigaciones Económicas (IIEc) notes, has been expanding “slowly but surely” lately.

At the XII REDLAS Conference, a key forum for research in services, Sánchez Vargas shed light on the modern services sector as the powerhouse of global trade over the past two decades. Encompassing finance, technology, healthcare, and education, these services have not only substantially contributed to the GDP but have become crucial drivers of job creation and technological innovation, particularly in Latin America and the Caribbean.

In Mexico, services have taken center stage, employing 43 percent of the total workforce. Tertiary activities, constituting 58 percent of the GDP in the second quarter of 2023, underscore the sector's growing significance.

Beyond economic contributions, modern services hold the key to sustainable development in the region. With the potential to address environmental concerns, foster digital financial inclusion, and adapt to climate change, services can become catalysts for positive change, as emphasized by ECLAC.

However, embracing this transformation comes with its challenges. Traditional instruments regulating goods, such as tariffs and customs regimes, are losing efficacy in the face of the evolving nature of trade. The dematerialization of trade poses a unique challenge, requiring a rethink of how these instruments can be adapted to promote and boost trade in services effectively.

The REDLAS conference aims to address these complexities and promote dialogue among researchers, policymakers, and academia. The theme of resilience in modern services, productive integration, and the modernization of traditional sectors takes center stage in discussions. The Latin American and Caribbean Network of Researchers and Policymakers in Services (REDLAS) acts as a catalyst for these crucial conversations.

Sánchez Vargas emphasizes the vital role academia plays in shaping public and economic policies. When academia and the productive sector synergize, effective public policies emerge, impacting the welfare of the population positively. This collaboration, as discussed in the conference, will equip policymakers with the knowledge needed to design effective and sustainable strategies for progress.

Winfried Weck, director of the Regional Program “Partnerships for Democracy and Development with Latin America,” highlighted the significance of the conference in providing inputs for policymakers. Supported by the Konrad Adenauer Foundation (KAS), the conference incorporates theoretical and applied presentations with a focus on digital transformation – a key driver expected to shape the future of services in the region.

In conclusion, as Latin America and the Caribbean navigate this transformative shift in global trade dynamics, the REDLAS conference stands as a beacon of knowledge and collaboration. By unlocking the potential of services, the region is embracing economic growth and paving the way for sustainable development in the years to come.