Mauricio Claver-Carone was elected President of the Inter-American Development Bank (IDB) in September 2020, during a tumultuous moment both for the IDB and the nations the organization serves. Claver-Carone has, in his short tenure, already demonstrated a strident interest in economic transformation and has been particularly vocal when it comes to the core benefits of Nearshore investment – namely cultivation of knowledge workers, greater participation in the global digital economy and inducing new investment into regions that are deserving of greater participation.
Claver-Carone is a former United States Executive Director to the IMF, Deputy Assistant to the US President and Senior Director for Western Hemisphere Affairs at the National Security Council.
He is now focused on creating new employment opportunities in a moment where millions have been pushed into poverty and many more are precariously balanced on the precipice.
He sees the power of Nearshore in promoting the need for incentivization and increased integration and cooperation between the region’s private and public spheres. As he says, with many of the world’s largest companies planning to move part of their value chain out of China in the next two years, the opportunities for Latin America and the Nearshore are huge.
Here, Claver-Carone took some time out recently to share his vision exclusively with Nearshore Americas. We present to you part one of our two-part inteview:
NSAM: You have personally expressed an interest in the value of Nearshore. How did this come to you? Why do you personally believe it is important?
MCC: Almost nothing can have a greater social and economic impact on a person’s life than a good job—and nearshoring is a great way to create good jobs.
But nearshoring doesn’t happen in a vacuum. Companies need incentives to redirect investment. The private and public sectors must work together to create conditions that favor nearshoring. Because of that, I’m a strong proponent of public and private-sector partnerships.
When I was in the U.S. government, I worked on efforts to boost infrastructure investment, create jobs, and promote best practices to help the region with nearshoring.
A 2020 Gartner survey found that a third of 260 leading global companies plan to move part of their chains out of China by 2023. That increases nearshoring opportunities in the Americas.
To seize those opportunities, we need to improve the business climate and promote free trade. By liberalizing trade policies, we added almost 40% of the region’s per capita GDP growth between 1990 and 2010. If the region is growing, we will see more nearshoring.
Today, Latin America and the Caribbean is one of the least integrated regions in the world. Just 14% of our trade takes place internally, compared with 65% in Europe and 47% in East Asia. One reason is that our trade costs are nearly 60% higher than those of Asia. We estimate that harmonizing 33 bilateral or subregional trade agreements could increase intraregional trade by 12%, or $20 billion.
Creating good jobs is critical to social and economic development because it helps raise tax revenue, reduce poverty and, if done inclusively, bring more women into the labor market.
NSAM: In this context, overall, how important do you think Nearshore operations are for economic development in Latin America and the Caribbean?
MCC: Nearshoring can be a powerful driver of development. For that to happen, we need to boost foreign direct investment and export promotion, better integrate regional trade for goods and services, and improve our trade infrastructure.
Companies want their value chains to be more resilient to natural disasters and other shocks. We estimate that if Latin America captured just 15% of U.S. imports from its top-10 source destinations outside the Western Hemisphere, the region could increase its exports of goods by $72 billion per year.
Of course, nearshoring is about more than manufacturing. It involves everything from the creative economy to services, digitalization, and integration. We must work in each of these areas, simultaneously, to create the kind of jobs that will thrive in the modern economy.
By helping companies to invest in these areas, we can help create the type of formal, taxpaying jobs that offer benefits including health and unemployment insurance, and pensions. Creating good jobs is critical to social and economic development because it helps raise tax revenue, reduce poverty and, if done inclusively, bring more women into the labor market. These are all priorities for us as a development institution.
I recently met with executives from 40 of the world’s leading companies to create a coalition to help Latin America and the Caribbean recover from the pandemic. These and other companies all want to create jobs that offer good benefits. We must make it easier for them more to do so. That includes doing things like improving ports, border crossings, intellectual property rights, and internet connections, including 5G networks.
Check back next week for Part Two of our interview with IDB President Mauricio Claver-Carone.