Latin America could be the next hot spot for trade and economic growth if the region can address its customs and border issues, according to UPS Chairman and CEO Mike Eskew. The United States, Canada and Latin America have the ability to become the world's next great trading bloc, but only if nations improve their transportation infrastructures and simplify customs requirements, Eskew said.
"I believe that Latin America, home to half-a-billion people south of the U.S.-Mexico border, has the potential to be the next hotbed of trade and economic growth," he said. "But it is clear the Americas are at a crossroads. Although we're neighbors, our border and customs policies make it sometimes seem like we're enemies. We have so many complicated customs and security requirements in place that it's often easier to import goods from Europe or Asia... The choices are to adapt, or become irrelevant."
"The first (advantage) is geographical proximity," Eskew said. "In an era of just-in-time supply chains, proximity is everything. Latin American markets can be accessed by land and sea. Another key advantage is the ability to take advantage of several free-trade agreements. While we still face the challenge of how best to knit them together, these agreements really matter."
Eskew lauded the North American Free Trade Agreement (NAFTA) between the U.S., Canada and Mexico, which already has created the second-biggest trading bloc in the world behind the European Union "and accounts for far more trade than the U.S. conducts with China."
Between 1997 and 2020, Latin America's real Gross Domestic Product is expected to grow 4.4 percent annually, which is faster economic growth than Asia at 3.6 percent and much faster than the 2.8 percent global average. But the nations of Latin America must begin to fix their problems now if they want to continue GDP growth. Eskew suggested several steps that Latin governments could take, such as developing a single, streamlined customs clearance system; identifying "trusted shippers" and allowing them a "fast lane" for customs processing; raising the minimum dollar value at which imported goods must receive customs clearance and separating the release of shipments from the collection of duties and fees; increasing spending on transportation infrastructure; and upgrading wired and wireless communications infrastructure.
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