High Freight Costs Blame For Weak Caribbean Growth

A new report that explores the reasons for weak growth in Latin American and the Caribbean have blamed high transportation costs for undermining trade and having harmful impacts on the productivity of the entire economy. It says the region’s ports aren’t efficient enough either.

The Inter-American Development Bank (IDB) study found that the region as a whole spends nearly twice as much as the United States in freight expenses to import its goods. Most countries, it said, have higher freight rates when exporting to the United States than countries in the Far East and in Europe.

It said while Paraguay and Argentina are among the countries with the highest freight costs as a share of exports to the United States, in part explained by the long distances, even more distant regions in the world, like China, have lower freight rates than countries like Guyana.

It added that ports in Latin America and the Caribbean are among the world’s least efficient.

“The region’s ports have the lowest productivity levels when compared with ports in North America, Western Europe, the Middle East and Asia. Port efficiency is related not only to the quality of their physical facilities, but also to the various other support activities, such as pilotage, towing and tug assistance, or cargo handling,” the report said.

“In addition, both port and airport efficiency also depends on aspects such as the clarity of port procedures, the accuracy of their information systems or the existence of legal restrictions, such as requiring special licenses to perform loading and unloading operations.”

The findings are part of the upcoming IDB book entitled, “The Age of Productivity: Transforming Economies from the Bottom Up” which will be unveiled during the Bank’s annual meeting next March in Mexico.

An IDB release said the book offers a comprehensive analysis of productivity levels in the region, its impact on economic growth and recommendations for policymakers on how to address the causes of low productivity.

“High transportation costs distort allocation of resources, preventing the region from reaping the full productivity benefits from greater trade liberalization,” it says.

“Traditionally, tariffs have been one of the biggest impediments for higher productivity but its relative share of total trade costs has decreased over the past decade after the region began opening up their economies to more trade. Currently, transport costs are more than four times larger than tariff costs in Latin America and the Caribbean, representing a bigger trade barrier than tariffs.”

www.caribbean360.com

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