Americas Quarterly - Winter 2012

duction facilities. Corridor programs generally involve the development or improvement of transportation infrastructure, coordination of trade facilitation activities, harmonization of logistics, and the development of related urban areas.

Figure 4 shows a number of regional trade arrangements (RTAs) in Asia and Latin America, their associated share of world trade (the proportion of that country’s exports plus imports in world exports) and intraregional trade (the amount that the member countries trade with one another) as a percentage of the RTA’s total trade with the world.

In Asia, intraregional trade is becoming increasingly important, largely geared toward the growing Chinese market. From 1990 to 2010 intraregional trade’s importance in total trade has grown from 18 to 26 percent for the ASEAN grouping and from 31 to 40 percent for the ASEAN+ 3, an agreement that adds the economies of China, Japan and South Korea to ASEAN.

The IDB estimates that Latin American intraregional trade has only reached 50 percent of its full potential. This shortfall is attributable at least in part to deficiencies in infrastructure investment (“hard infrastructure”) as well as trade facilitation (“soft infrastructure”). In its report on transportation costs in the region, “Unclogging the Arteries,” the IDB states that Latin American countries spend on average t wice as much as the U.S. to import goods. 8 If Latin America wants to compete with Asia in an increasingly integrated world market, it needs to address the infrastructure needs that are limiting its potential.

The most remarkable difference between the model of economic integration across the region is the countries’ growth rates [See Figure

5]. Most Asian countries have demon-
strated strong growth performance
in the past decade, with the average
annual GDP growth rate for ASEAN
in the past decade a remarkable 6
percent. In contrast, South Ameri-
ca’s nearly 4 percent growth and Me-
soamerica’s 3. 5 percent, though high
for the region, look anemic.
Another difference stands out:
the high levels of public investment
among Asian countries [See Figure
5]. ASEAN governments plus China, Ja-
pan and South Korea devoted on aver-
age 26. 1 percent of GDP to investment
and South Asia 29 percent, whereas
South America averages only 19. 9 per-
cent and Mesoamerica, 22. 8 percent.

Those higher levels of general public investment translate into higher levels of public infrastructure investment. Several East Asian countries invest more than 7 percent of GDP in infrastructure, according to the ADB. In contrast, an IDB study by Eduardo Lora and another by the World Bank place Latin American countries’ infrastructure investment at closer to 1 to 3 percent of GDP. 9 As a recent World Bank publication pointed out, the region needs a 4- to 6-percent increase in annual infrastructure investment if it is to catch up or keep up with South Korea or China.

These differences in investment manifest themselves in terms of the state of countries’ infrastructure [Fig-ure 1]. In Asia, Malaysia and Thailand have built up internationally competitive infrastructure networks, as has Panama, with its canal, in Latin America. Other countries’ infrastructure is less developed, but East Asian integration is helping move for ward the infrastructure underpinnings for economic growth better than in other regions. 10

SEEDING CROSS-
NATIONAL NETWORKS

A look at what is going on in East Asia reveals a wide network of robust cooperation in infrastructure initiatives.

For reasons of space, only transporta-
tion initiatives are detailed here; most
of the listed initiatives also have proj-
ects on connectivity and other trans-
border infrastructure initiatives. One
key constant in these initiatives is the
role of the ADB and the richer econ-
omies, which help fund many infra-
structure projects [See Figure 6].
In a major study on regional infra-
structure, “Infrastructure for a Seam-
less Asia,” the ADB staked out Asia’s
important role in the international
economy: “It is the world’s factory, its
biggest saver, and an emerging giant
in outsourced services.” 11 Key to this
role, it wrote, is infrastructure: “Physi-
cal connectivity is crucial to support
complementarities in the production
processes across the entire region.”
Asia now faces a second-order
challenge: shifting from the concen-
tration of infrastructure along the
thriving maritime corridor to pull
more remote regions from economic
isolation into Asia’s buzz of economic
activity. Doing so is necessary to fur-
ther bolster the regional market and
its ties to the global economy. 12
Figure 7 sets out the main Latin
American regional transport infra-
structure initiatives. One of the two
projects is the Iniciativa para la Inte-
gración de la Infraestructura Regional
Suramericana (IIRSA), launched in
2000 and covering the 12 South Amer-
ican countries. Three major regional
development banks are cooperating
in financial and analytical assistance.

In Mesoamerica the Corredor Pacífico del Proyecto Mesoamerica (MP) replaced Plan Puebla Panama. This project, largely supported by the IDB, has galvanized cooperation among Central American countries and Mexico in building roads, coordinating the electrical grid and cooperating on this type of soft infrastructure. It has also been given a boost by the strong demand from East Asia. Central America’s Pacific infrastructure is relatively more developed than its Atlantic side. In the past this has been a disadvantage; the new realities of Asian demand are pushing for greater development of this Pacific corridor.