Synchronized Factories

What is the participation of LAC in Global Value Chains?

We employ a combination of innovative datasets to develop various measures of value-chain participation.

Evidence from trade in value added, for example, shows that the typical LAC country has less backward and forward production linkages than the typical country in Asia or Europe. For example, the share of exports that is part of a multi-country production process is 13 percentage points lower in LAC than in Europe.

Many global value chains are created when a multinational company delegates part of the production process to an affiliate in another country, the so-called vertically linked affiliates. The figure shows the network of parents and their vertically linked affiliates around the world. The size of the circles indicates the total number of parent companies with vertically linked affiliates in other countries, and the thickness of the lines represents the number of bilateral vertical affiliates between each parent country and a corresponding host country.

Clearly, LAC remains pretty much on the sidelines when it comes to participating in production networks led by multinationals.

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