1. 1 Trade and Competitiveness in Argentina, Brazil and Chile Not as easy as A-B-C

2. 2 Joint work of the OECD Economics Department Directorate for Food, Agriculture and Fisheries Directorate for Financial, Fiscal and Enterprise Affairs Development Centre Ch 1: Anne-Laure Baldi and Nanno Mulder Ch 2: Joaquim Oliveira Martins and Tristan Price Ch 3: Andrea Goldstein Ch 4: Jonathan Brooks and Sabrina Lucatelli Ch 5: Carlos Winograd, Marcelo Celani and Jae-Woo Kim

3. 3 GDP Tradables Non-Tradables ManufacturingAgro-Food Real Exchange Rate (I) Which barriers? (II) Upgrading potential (IV) Need for competition policy (V) FDI may help (III) Roadmap…

4. 4 Key insights Ch. 1: Fixed exchange rate regimes distorted relative prices of tradables vs. non-tradables Ch. 2: Development of tradable sector is hindered by endogenous market barriers and trade policy Ch. 3: FDI could help overcome market barriers, though most FDI occurred in primary and service sectors Ch. 4: Agro-food sector still has large potential, but stronger framework conditions are needed Ch. 5: Competition policy in non-tradables has positive spillovers for international competitiveness

5. 5 Ch. I: Fixed exchange rate regimes distorted relative prices of tradables vs. non-tradables…

6. 6 … accelerating the declining share of tradables in employment (and GDP)

7. 7 Our model explaining relative prices shows: Fixed regimes distorted relative prices in A-B-M Portfolio inflows exacerbated the price distortion in A-B (other determinants: Balassa-Samuelson, government expenditure, terms of trade) In Chile, the frequently adapted crawling peg and smaller short-term capital inflows helped to avoid relative price distortions Todays flexible regimes in A-B-C-M support the development of the tradable sector

8. 8 Ch II: A-B-Cs primary specialisation is less dynamic in world trade… 1970 2000 1970 2000 1970

9. 9 … compared with that of Ireland, Korea and Mexico 1970 2000 1970 2000 1970

10. 10 Why did I-K-M better succeed than A-B-C in changing their trade specialisation? I-K-M benefited from regional integration, while A-B-C face tariff peaks and high non-tariff barriers in OECD; I-K-M benefited from more FDI in manufacturing, overcoming market barriers (prohibitive costs of R&D and advertising) for differentiated products.

11. 11 Ch. III: Most FDI in primary and service sectors

12. 12 A-B-C are relatively friendly to FDI: Surge mid-1990s, mostly linked to privatisation MNCs increased more their share in M than in X Some supply linkages (car manufacturing, mining, retail trade) But: Framework conditions can be further improved Better target MNC location decisions, without resorting to preferential treatment

13. 13 Ch. IV: Upgrading agro-food potential Share of Agro-food is large in output and employment 40-50% of Exports, 15-30% of Employment, 10-15% of GDP Primary products continue to account for lion share But international competition is evolving Not only depends on prices and quantities, but also on logistics In food industry: product differentiation, key role of FDI Competitiveness depends on entire food chain Shift to higher value-added products: –Reduce tariffs and NTBs in EU and United States, see graph (note FTAs of Chile) –Domestic policies: framework conditions for FDI, coordination within the food chain, investment in branding

14. 14 High producer support in the OECD… ( as percentage of the value of production, 2000-02)

15. 15 Ch. V: Need for competition policy => Competition in non-tradables makes tradable sector more competitive Argentinas experience: Infrastructure sectors were privatised in early 1990s, but regulatory frameworks remained deficient Currency board distorted relative prices, which called for larger role of competition policy the late 1990s Competition institutions were reinforced and policy moved from anti-trust to competition advocacy in regulatory reforms Several case studies illustrate that competition policy helped to reduce entry barriers, increase transparency, and foster best-practices