Home' Trinidad and Tobago Guardian : July 6th 2017 Contents JULY 6 • 2017 guardian.co.tt BUSINESS GUARDIAN
REGIONAL | BG21
Search for 'new drivers'
of economic growth
Anew International Mone-
tary Fund (IMF) Working
Paper finds that faltering
growth after the global fi-
nancial crisis has left many
countries in Latin America
and the Caribbean (LAC) still searching for
"new drivers" of economic growth.
Written by Kimberly Beaton, Aliona Ce-
botari, Xiaodan Ding and Andras Komaromi,
the paper says that weaknesses in both do-
mestic demand and trade have been exac-
erbated by limited space for countercyclical
policies in some countries, a waning pace
of trade liberalisation and a decline in the
growth of global value chains.
"Like other regions, LAC has struggled
to overcome the economic fallout from the
crisis, especially as it was followed by the end
of the commodity super-cycle that fueled
growth across most of the region before the
crisis," the paper stated.
As higher trade could still help increase
economic efficiency, productivity and over-
all activity, the authors consider the extent
to which LAC is integrated into global mar-
kets to determine the potential for further
integration as a pillar of the region's growth
The paper says traditional measures of
economic integration, such as trade open-
ness, do not capture the complexity of in-
teractions between trade partners and make
it more difficult to parse various dimensions
The authors, therefore, turn to the rap-
idly developing literature on networks "to
disentangle the sources of integration, ex-
plore their network and growth effects, and
understand how central the region is in the
growing world trade networks (WTN).
The paper states that network theory has
been extensively employed in physics, biol-
ogy, computer science and social networks,
with researchers in some of these fields un-
dertaking initial studies of the topological
features and evolution of the WTN.
The application of network analysis in-
dicators to the study the extent of global
economic integration is now increasingly
being applied to economics, including for
understanding trade integration at both
regional and global levels, the paper says.
But it adds that these alternative measures
of trade integration have yet to be considered
in-depth for LAC.
The Working Paper assesses LAC's inte-
gration into the WTN, first assessing the ex-
tent of LAC's integration based on traditional
measures of trade integration.
It then considers alternative measures of
LAC's trade integration, based on network
integration measures, including how this in-
tegration evolved over time, whether LAC's
under-trading is primarily a result of the
paucity of trade links or weak trade flows,
and how central or important LAC countries
are to the WTN.
The authors also compare LAC's inte-
gration in the WTN against fundamen-
tals-based benchmark networks, estimat-
ing two models of trade network formation
(binary and weighted), in both cases drawing
on the gravity model, and compare the actual
degree of integration to the predictions of
The paper finds that, while LAC appears
weakly connected into the WTN by tradi-
tional measures, like trade openness, "it is
relatively well connected in terms of the
number of trading partners, with the trad-
ing links of most countries in line or above
what can be predicted based on country size
or gravity models.
"Nevertheless, a number of countries re-
main under-connected due to the concen-
tration of their exports to a few destinations,
preventing the region from reaching a critical
threshold of connectivity that would allow
it to play a more central role in the WTN,"
the paper says. "LAC's integration in terms
of the intensity of the trade flows is some-
While the average size of the nominal trade
flows is boosted by the strength of Mexico's
integration in the US supply chains, the pa-
per says many countries in the region have
weaker nominal flows than could be pre-
dicted based on fundamentals.
In relative terms, however, the paper says
such under-trading is more pronounced
in smaller countries in the region; while,
in larger countries, especially Brazil, "un-
der-trading appears relatively small when
the deviation of actual trade from the predic-
tions of the gravity models is measured rel-
ative to the overall size of their trade flows."
The authors say the strength of LAC's
trade links is particularly weak within the
region, reflecting the extra-regional con-
centration of its trade due in part to the large
share of commodities in the exports of many
The authors note that the largest countries
in the region (Mexico, Brazil) are not central
to the LAC network, and play the role of only
local hubs to their immediate neighbours or
trade agreement partners.
"This leaves significant scope for larger
countries to position themselves for a more
central role in the regional subnetwork and
boost regional integration," the authors say.
On average, the paper says LAC is rela-
tively well-connected in terms of market
diversification, "although there is room
for further integration.
"The connectivity of most countries in the
region is in line or above what can be pro-
jected based on the size of their economies
or gravity-based models, but many countries
are still under-connected either due to the
concentration of their exports geographi-
cally (Mexico) or in terms of composition
(Venezuela)," the papers say.
IMF Working Paper on Caribbean countries advises:
Suriname gets IDB
funds to improve
The Inter-American Development Bank
(IDB) says it is providing a US$40
million investment loan to Suriname
to increase tax revenue and improve
public spending and investment in
order to reduce its budget deficit and
improve its fiscal sustainability in the medium-term.
The Washington-based financial institution said
that the loan aims to support the Caribbean Com-
munity (Caricom) member-state's effort to balance
The IDB said this is due to growing spending and
decreased tax revenue stemming from a drop in com-
modity prices and a halt in alumina production.
Suriname is currently implementing a fiscal adjust-
ment programme, which seeks to reduce the country's
budget deficit to 2.5 per cent of the gross domestic
product in 2018 from 5.7 per cent in 2016, the IDB said.
"Since 2011, the IDB said it has been working very
closely with Suriname to implement reforms to de-
velop the tools and framework critical to updating
the public expenditure and revenue systems, which
provide the basis for this new investment operation,"
said Gerardo Reyes-Tagle, the IDB project team leader.
The IDB representative in Suriname, Cesar Falconi,
said the investment loan will provide "a critical insti-
tutional capacity platform to improve the effective-
ness of the Ministry of Finance on its main activities
and contribute the economic growth of Suriname."
The IDB said the new operation will strengthen
the institutional capacity of the Ministry of Finance
to collect tax revenue in an "efficient manner and
strengthen the planning, prioritisation, preparation,
execution and monitoring of the annual budget, in-
cluding the implementation of public investment
The IDB also said the loan will finance activities to
revamp the Department of Taxes and Customs or-
ganisational structure in order to implement the val-
ue-added tax; improve the budget decision-making
process regarding planning, execution and monitor-
ing; and strengthen the public investment strategy in
order to prioritise and rationalise investment projects
based on the "value for money" methodology.
The project is expected to benefit the country by
allowing the government to have resources to carry
out priority public investments to improve the eco-
nomic and social situation of the population, as well
as general taxpayers, which will receive better support
to fulfill their tax obligations, the IDB said.
Since 2011, the IDB said it has been supporting
Suriname in implementing important reforms to
strengthen its fiscal position.
It said IDB loans have supported the introduction
of a value-added tax in the country, as well as the re-
structuring of the Department of Taxes and Customs.
Moreover, IDB loans have also supported key re-
forms in the country public financial management
and procurement laws to improve expenditure man-
Since 2011, the IDB said it has
been supporting Suriname
in implementing important
reforms to strengthen its
fiscal position. IDB loans have
supported the introduction of a
value-added tax in the country,
as well as the restructuring of
the Department of Taxes and
Links Archive July 5th 2017 July 7th 2017 Navigation Previous Page Next Page