Opportunities for Latin America in the new geopolitical landscape

Ramón Casilda Béjar analyses the evolution of globalization, fundamentally since Covid-19 and after Russia's invasion of Ukraine, and how in the new geopolitical context the principle of economic security, supported by the flexibility and resilience of supply chains, has been gaining prominence, through concepts such as friendshoring and nearshoring, encouraging strategic investments in Latin America that could lead to innovation, technology and greater added value with higher quality jobs.

Main findings of the report:

• Fragility of globalization: The offshoring of production fostered by globalisation of the economy became evident in the form of extreme dependence on third countries, which was exacerbated by episodes such as Covid-19 and the invasion of Ukraine. Globally, China accounts for 21% of final manufactures and 30% of intermediate products) and maintains its preponderance in key sectors such as green energy (90% of solar panels). Geopolitics is taking over the economy and now the United States, Europe and China are talking to each other about threats, trade wars, tariffs, technology and arms races, economic security, etc., overlapping economic and foreign policy objectives and interests.  In line with this new re-globalisation, which implies a slower growth of global trade by 2025 and 2026, companies are redesigning supply chains to make them more resilient, sustainable and flexible, using the new strategic trend of friendshoring and nearshoring that diversifies production among several countries and thus reducing strategic dependence.
• Opportunity for Latin America: In this context, Latin America may take advantage of productive investments from Europe as well as from China and the United States, accelerating its industrialization and productive modernization through innovation, technology and greater added value, with higher quality jobs. This would be a good step towards overcoming the attractiveness that will undoubtedly continue to offer due to its abundance of natural resources. Currently, China is the most important country for exports from Brazil, Chile, Cuba, Peru and Uruguay. In the author's opinion, the EU should invest in gaining weight in the region, taking advantage of Spain's significant presence as the leading European investor in the region and the second largest in the world, only behind the United States. If it fails to do so, others will take its place.
• Mexico and Costa Rica are already benefiting from nearshoring and friendshoring strategies, but both trends represent an opportunity for the entire region. In the case of Mexico, it has already become the leading supplier to the United States, surpassing Canada and China. In 2023, Mexican exports to the US reached 475,607 million dollars (+16.4% year-on-year vs. Chinese exports, which fell by 21% year-on-year).