Jamaica stands to increase its earnings from exports to the region by US$138 million should companies consider exploring nearshoring opportunities, a study from the Inter-American Development Bank (IDB) estimates.
The bank shared data from the study at a meeting of regional trade ministers and private sector leaders in Los Angeles, California, USA, ahead of the ninth Summit of the Americas.
Discussions during the meeting included issues such as value chains, digital commerce, and climate change. The IDB also used the meeting as an opportunity to promote economic recovery through the collaborative and collective action of countries with the involvement of private sector.
According to the IDB, “Nearshoring could add an annual $78 billion in additional exports of goods and services in Latin America and the Caribbean in the near and medium term, with opportunities for quick wins in the auto industry, textiles, pharmaceuticals, and renewable energy, among others.”
It pointed out, in addition, that the reconfiguration of global supply chains, trends in trade sustainability and climate change, and the increasing digitalisation of economies were some of the factors creating opportunities in nearshoring.
“Increased environmental concerns, along with the health crisis and the recent invasion of Ukraine by Russia, has presented an opportunity in which the region can contribute to the global economy and the fight against inflation by taking a more active role in global supply chains in a way that is sustainable and equitable,” IDB President Mauricio Claver-Carone said during the meeting.
“This meeting is a demonstration that leaders from the public and private sectors can put aside their differences to find ways to create jobs and improve the well-being of our citizens — and trade is one of the main avenues to accelerate our prosperity,” he added.
The study, which is yet to be released, estimates that the market for exported goods in the region amounts to approximately US$64 million while exported services are valued around US$14 million. Mexico and Brazil would realise the largest gains from nearshoring in both goods and services.
With regard to Jamaica, the IDB estimates that the country could increase its export earnings from “quick-win” industries to the United States by US$84.9, while in Latin America potential earnings could amount to US$25.8 million.
In the medium term, Jamaican stands to earn US$27.8 million from exporting to the region.
Like Claver-Carone, executive director of the Jamaica Manufacturers and Exporters Association Kamesha Turner Blake believes that supply chain bottlenecks and increased freights costs, which have been exacerbated by the Russia-Ukraine war, have created opportunities to maximise export to Latin America and the Caribbean.
“Global supply chains continue to have challenges with little goods coming from the Far East. With markets not getting cheap goods from China, Jamaican goods are more competitive. The JMEA continues to encourage local manufacturers to capitalise on this opportunity,” she told Jamaica Observer.
Moreover, Turner Blake said manufacturers should look beyond the small population size of Jamaica and instead take into account the large tourism markets that are serviced by the country.
The IDB indicates that companies which participate in global value chains not only benefit from increasing their revenues and investment, but also improve productivity through transfers of technology while creating jobs. For countries that increase their participation in global value chains by 10 per cent, they can expect growth in per capita gross domestic product between 11 and 14 per cent.
“For the region to take advantage of opportunities that come with increased participation in GVC, the IDB recommends countries focus on a ‘3i’ strategy: investment, infrastructure and integration,” the bank stated.
“In addition, the region must increase the availability of financing for companies, particularly to enable small and medium-sized firms to connect with international markets.”