The Covid-19 pandemic has taken a huge toll across the world in terms of lives lost, economic contraction and disruptions to global supply and value chains. Global GDP fell by 3.3 percent in 2020, as a result of the economic shutdowns. The economic consequences of the pandemic have been particularly devastating for Latin America and the Caribbean. In 2020 Latin American and the Caribbean economies contracted by 7 percent, the worst GDP drop of any region and its recovery in 2021 is only estimated at 4.6 percent, lagging the global average of 6.0 percent.
From the U.S. perspective, the Covid-19 pandemic led to many disruptions in manufacturing and distribution of goods and services and exposed many vulnerabilities of global value chains: early on in the crisis, the United States and other counties had a rude awakening that they were heavily dependent on China for the supply of crucial medical and protection equipment. These disruptions inspired policy experts in Washington, D.C. to examine and evaluate the benefits of nearshoring, which could potentially lead to more diversified, flexible and resilient supply chains. Nearshoring, or bringing manufacturing closer to the United States, can offer corporations greater control and oversight over production facilities, protect supply and distribution flows from disruptions, and enable quick reactions to changes in demand or resources. At the same time, nearshoring to Latin America and the Caribbean can assist Covid-19 economic recovery efforts and attract investment in these countries. However, obstacles to nearshoring include inadequate transportation and infrastructure capacity, trade and investment regulations, a saturation of small and large enterprises, crowding out medium-sized enterprises, and insufficient saving and investment rates.
Addressing these obstacles will be critical to taking advantage of post-pandemic economic opportunities. The United States can assist in building the capacity to shift part of the production process closer to home by working with multinational companies and using foreign aid, technical assistance and other development finance tools. For example, in 2019 alone, Central America and the Caribbean received $8.9 billion USD in official developmental aid (ODA) from the United States and the OECD, mainly intended for economic development. During the past 18 months, much of the media attention and policy debate around the world has centered on the health aspects of the Covid-19 crisis, including governments’ response to the pandemic and tracking data such as the number of Covid cases, deaths, and vaccinations. Yet, global supply chains are also part of the health equation and looking ahead, the United States should be focus attention on nearshoring, from a geopolitical and economic perspective. Nearshoring could create greater stability, resilience, and oversight for U.S. firms operating large supply chains. This panel will discuss how the United States can use its ODA and development finance toolbox to effectively accelerate nearshoring in the Americas.
Panelists:
Fabrizio Opertti
Manager, Integration and Trade Sector, Inter-American Development Bank
Tatiana Prazeres
Senior Fellow, University of International Business and Economics Beijing, and former Secretary of Foreign Trade, Brazil
Nazak Nikakhtar
Partner and National Security Co-Chair, Wiley Rein LLP
Omar Jimenez
Manufacturing Director, Edwards Lifesciences
Moderator:
Meredith Broadbent
Senior Adviser, CSIS