Logistics as a Competitiveness Factor for Small and Medium Enterprises in Latin America and the Caribbean

International trade has experienced substantial changes in the past decade. The opening of world markets, as reflected in the reduction of tariffs and the elimination of non=tariff barriers in the 1990s, has given rise to remarkable changes in trade activities. Nowadays, it is common practice for companies to source, manufacture, and market their products beyond their own country’s borders.

The logistics industry is one of utmost relevance and principally serves as a motor of private sector development and growth of the economic sectors of a country or region.A logistics industry that is efficient and accessible to everyone is a key element for companies in a country or region in general, and its small and medium sized enterprises (SMEs) in particular, to successfully compete in this new global context.

Despite improvements in Latin America and the Caribbean (LAC) in recent years, structural logistics problems persist, creating obstacles to exports for firms in the region, particularly SMEs.

This paper emphasizes the main challenges faced by the logistics industry and proposes interventions to address these challenges. Moreover, on the basis of case studies the region, the paper analyzes what measures can be taken by SMEs to improve their logistics capacity, thereby improving their export potential-

Carlos Kirby and Nicolau Bros.Inter-American Development Bank Capital Markets and  Financial Institutions Division DISCUSSION PAPER No. IDB-DP-191.November 2011

Logistics as a Competitiveness Factor for Small and Medium Enterprises in Latin America and the Caribbean

z

Logistics as a Driver for Competitiveness in Latin America and the Caribbean

Logistics is becoming a critical element of competitiveness and economic performance both in itself and within the context of increasing globalization.Most Latin American and Caribbean (LAC) countries arefocusing on export:led growth strategies. For such strategies to succeed, a key component is an effective and efficient logistics framework that addresses the full spectrum— upstream, midstream, and downstream — of the value and production chain. 

A logistics framework includes hardware, which is the physical infrastructure needed to move goods effectively, and software, which is the associated services and processes needed to move and trade goods effectively.The impact of logistics costs on competitiveness, productivity, trade, integration, food prices, inequality, and poverty is significant. In LAC, logistics costs range from 18 to 35 percent of product value— and even higher for small and medium: size enterprises (SMEs) at about 40 percent — compared to benchmarks of around 8 percent of product value in Organisation for Economic Coooperation and Development (OECD) countries. 

While in recent years most LAC countries have realized the relevance of logistics and have taken some measures to improve this element of their markets, the region still lags behind in developing an effective logistics framework. This report illustrates the relevance and impact of logistics for competitiveness in LAC and provides a framework, priorities, interventions, and solutions to address the issues

Jose Luis Guasch.Inter-American Development Bank Capital Markets and  Financial Institutions Division DISCUSSION PAPER No. IDB-DP-193.November 2011

Logistics as a Driver for Competitiveness in Latin  America and the Caribbean

x

Mongolia.Logistics Capacity Development Project

ADB's country partnership strategy for Mongolia identifies the underdeveloped transport network and inefficient logistics as major sector problems. Components: "Institutional Plan for supporting logistics network development."Capacity development for managing logistics centers."Financing strategy for attracting private sector participation in logistics development 

Asian Development Bank.Project Number.45264-01

Logistics Capacity Development Project : Mongolia