## The Dynamics of Trade Integration and Fragmentation in LAC

_IMF Working Papers, December 13, 2024_

## Source details

**Canonical URL:** [The Dynamics of Trade Integration and Fragmentation in LAC](https://www.imf.org/en/publications/wp/issues/2024/12/14/the-dynamics-of-trade-integration-and-fragmentation-in-lac-559484)

## Other formats

- [Markdown version](/en/publications/wp/issues/2024/12/14/the-dynamics-of-trade-integration-and-fragmentation-in-lac-559484/index.md)
- [Structured JSON version](/en/publications/wp/issues/2024/12/14/the-dynamics-of-trade-integration-and-fragmentation-in-lac-559484/index.json)
- [Bundle manifest](/en/publications/wp/issues/2024/12/14/the-dynamics-of-trade-integration-and-fragmentation-in-lac-559484/bundle-manifest.json)

## Bibliographic details
- Authors: Rafael Machado Parente, Flavien Moreau
- Published: December 13, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400296093.001

---

### Key findings on trade integration and infrastructure
- Trade barriers and poor infrastructure play an important role in limiting trade integration in Latin America and the Caribbean (LAC).
- Closing half of the infrastructure gap between LAC and advanced economies could lift exports by 30 percent.
- LAC’s trade responsiveness to import tariff reductions is lower than in other EMDEs, particularly in the long run.

### Sectoral and supply-side constraints
- The region’s specialization in agricultural exports contributes to lower responsiveness because of inelastic demand.
- Supply constraints cited include growing cycles and weather conditions, which limit the long-run adjustment of exports.

### Trade fragmentation scenarios and impacts
- Under a mild trade fragmentation scenario—where trade barriers are erected only among large economies—LAC is well placed to withstand impacts.
- In more extreme scenarios where the global economy splinters into competing economic blocs and LAC loses access to important markets, the region’s output losses could be sizable.
- Boosting trade, including regional trade, is identified as a strategy to mitigate risks from global fragmentation while lifting growth.

### Policy implications and recommendations
- Reduce import tariffs to boost trade, recognizing that the responsiveness in LAC is lower than in other EMDEs.
- Invest in infrastructure to close gaps with advanced economies; a partial closure (half the gap) is associated with a 30 percent lift in exports.
- Promote regional trade as a means to both increase growth and reduce vulnerability to global geoeconomic fragmentation.

---

## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2024/english/wpiea2024253-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2024/english/wpiea2024253-print-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2024/12/14/the-dynamics-of-trade-integration-and-fragmentation-in-lac-559484_