Latin America’s low level of economic integration is a global outlier. Globalization happened without regional interconnection.
Latin American countries are even worse at trading with each other. The region is far richer than sub-Saharan Africa, but intraregional trade accounts for a mere 7% of gdp in both places. Measured differently, only 14% of Latin America’s total goods trade occurs within the region, the lowest figure anywhere in the world (see chart 1).
Some reasons are structural. “We don’t trade with each other because we want to consume things that we do not produce,” says Ricardo Hausmann of Harvard University. Low intraregional trade is, in part, due to a failure to make sophisticated products. Worse, Latin American countries often produce the same things: commodities (see chart 2). Chile’s biggest export is copper. So is Peru’s. Neither is ever going to sell much of it to the other. Geography matters too. South America covers almost 18m square kilometres, four times the size of the European Union. The world’s longest mountain range and its largest tropical forest make much of the continent impassable for all but condors and jaguars.
Source: Economist