Synchronized Factories

Drivers of Global Value Chains

Transportation/logistics

Global value chains raise the stakes of addressing long-standing policy challenges, such as those related to transportation and logistics. If a country in LAC improves the quality of its ports, airports and telecommunication infrastructures to the average level in Europe, it will increase its FDI-related linkages in about 20%.

Economic integration

Maintaining low levels of protection and furthering integration in the region has become even more important, with the international fragmentation of production. Deep integration agreements provide more incentives for the formation of global supply chains than shallow agreements, because they tend to incorporate measures beyond the simple reduction of tariff rates, like investment rules or the harmonization of customs procedures.

Information failures

Access to global supply chains can also be seriously hampered by information deficiencies. Governments should promote environments that facilitate exchanges of information between players. Some information gaps can also be addressed by improving visibility through certifications. Governments could also promote collaboration or consolidation among firms to raise capabilities, address common barriers, or pay for the fixed costs of certain activities.

Local linkages

Some local firms, particularly many SMEs, will not be able to join GVCs by exporting directly. But they can still access GVCs by serving global firms located in their own countries. Successful programs aimed at fostering local linkages typically go beyond simply matchmaking services and provide complementary support to the suppliers, such as training.

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