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Logistics is a major underpinning of global competitiveness, Latin America's infrastructure is the framework for the continent's transportation networks. How does it compare in today's global economy?
The 2005 World Bank study of Latin American infrastructure revealed some of the region's onerous shortcomings in road, rail, and port assets and the negative impact this has on the region's ability to trade and generate wealth. A common political rallying cry across the region during the election season of 2006 was a promise to increase infrastructure investment.
But creating an efficient transportation system requires more than new roads and ports; it also calls for the active participation of modern logistics companies. If infrastructure is the hardware of a productive nation, then logistics services is the software that drives it.
Over the last quarter century, Latin America's investment in transportation infrastructure has failed to even keep up with population growth, while greater investment levels in Asia have been paramount to that region's wealth creation. Latin America has also been unable to create its own large scale competitive transportation service firms and has had mixed success at attracting the investment and technology transfer of international logistics service companies.
Why Logistics Matters to Latin America
Logistics is a powerful economic enabler, one of the fundamental building blocks of external and internal trade. Countries like the US and Germany, which ranked 1st and 2nd in terms of supply chain efficiency according to a recent study by SRI, derive major economic benefits from their logistical strengths.
Enjoying lower logistics costs per widget output enables factories to competitively deliver products and procure inputs over a larger geography than equivalent factories in less efficient countries. This allows industry to consolidate into larger players, achieving economies of scale and efficiencies that lower costs to consumers and raise profits and wages.
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