Measuring Costa Rica´s participation in GVC´s
Department of Macroeconomic StatisticsICMTEG, Aguascalientes, México
Sep-Oct, 2014
OUTLINE
• Costa Rica in GVC´s• Research goals based on international IOT• Construction of international IOT• Results for Costa Rica.
2
Rol of Costa Rica in GVC´s
• What do we know?• Where we are?
3
Integration of Costa Rica to TiVA Initiative and other initiatives (Dynemp, STI Outlook) to track upgrading towards knowledge based activities and productive transformation.
Technical Guidance to Costa Rica's participation in global value chains and TiVA Initiative.
Technical assistance to include Costa Rica´s IO table in an international IO table and research to better understand the way in which Costa Rican firms interact with the main international players in GVCs.
Mapping Costa Rica´s position and upgrading trajectories in electronics, medical devices, aeronautic/aerospace and offshoring services GVCs
Technical assistance to build a firm level database that integrates trade statistics with other variables to analyze the performance of firms that integrate in GVCs
Strengthening the innovation ecosystem to drive the upgrading towards knowledge-based activities.
Strengthening Costa Rica’s Knowledge Base on GVCs
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There are three mayor networksbut Latin America participation is limited
Sourse: OECD Inter-country I-O model, 2011
North America Europe Asia
5
Trade and Investment
Source: COMEX, using PROCOMER data.
Source: COMEX based on Central Bank data.
* Data for 2013 are based on estimates
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
500
1,000
1,500
2,000
2,500
3,000
02,0004,0006,0008,00010,00012,00014,00016,00018,000
FDI inflows and exports (1990-2013*)
FDITotal Exports
FD
I U
S$ B
illio
ns
Expo
rts
US$
Bill
ions
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
500
1,000
1,500
2,000
2,500
3,000 FDI inflows (1990-2013*)
US$
Bill
ions
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
Composition of exports (1990-2013*)
Service exports
Merchandise exports
US$
Bill
ions
Source: COMEX based on Central Bank and PROCOMER data.
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Costa Rica’s Participation in GVCs
20120%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
62,9%
37,1%
Costa Rica: Participation of GVC-re-lated exports in total exports 2012
Other GVC-related exports
57%
35%
6%
1%1%
GVC-related exports by industry, 2012
Electronics Medical devices Automotive
Film & Broadcasting Aeronautic/Aerospace
Source: COMEX, based on PROCOMER data.7
Employment
2008 2009 2010 2011 20120
200
400
600
800
1000
1200
1400
842884
1,029
1,178
1,287
511535
637716
767
FZR wages National wages
US
$
Source: PROCOMER
Source: CINDE
Costa Rica: Average monthly wages, FZR vs. the economy at large (2008-2012)
Costa Rica: Employment generated by FDI
2013: 4X 2000
2013: 12X 2000
2013: 44X 2000
Advanced Manufacturing
Life Sciences
Services
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Manufactured components
Plastics molding and extrusion
Metalworking presicion
Electronicdeveloptment
Software production
Textiles and fabric
Assembly
Packaging
Sterilization
Assembly
Distribuidores Mayoristas
Individualpatients
Doctors and Nurses
Hospitals(Public/Private)
Cardiovascular
Orthopedics
Infusion systems
Other
Marketing and sales
Resins Metals
Chemicals Textiles
Imput providers
Disposables$575.546.086
Medicals$270.528.089
Capital goods$32.546.321
Terapeutics$301.026.155
Exports of final goods
Distribution
Type of products
Post sale services
Consultant
Repairs
Training
Buyers
R&D of the product
Regulatory approval
Development process
Engineering
Prototipe
Number of companies
0 < X ≤ 5
5 < X ≤ 10
10< X ≤ 15
15< X ≤ 20
>20
Participation of Costa Rica in the medical devices CGV
Source: Based on Bamber and Gereffi (2013). Duke University.
Research goals based on international IOT
1. Trade in Value Added• Participation in GVC has been documented (gross trade).• The “Made in the World” initiative of the WTO promoted the
concept of Trade in Value Added (TiVA).• Through TiVA there is a better understanding of the country
contribution to GVC´s (more consistent with the management of the GDP)
• Questions:• To what extent Costa Rica participate in the global economy in
terms of trade in value added?• How does it change the relationship with our trade partners?• What are the implications of these changes for our trade policy?
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Research goals based on international IOT
2. Comparative advantages• Based on the CGV’s the “trade of tasks” is predominant which
drives development countries to develop comparative advantages easily.
• Trade in value added statistics provide a new opportunity to measure the comparative advantages of the country.
• Questions• How competitive are the Costarrican industries?
• What are the comparative advantage characteristics of the industries in terms of TiVA?
• What industries does Costa Rica have advantages on?• Which ones are developing advantages and what are the policies to
strengthen those advantages?
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Research goals based on international IOT
3. Exports breakdown • The international IOT allows to breakdown the exports in its various components.• To understand the participation of Costa Rica in the global production it is crucial
to measure the domestic component and to what extend it provides to the global production.
• Questions:
•¿How to breakdown the gross exports value in its various components?
• What is the domestic component of the exports and how it compares to other countries?
• How that domestic component fit in the global production?
12
Construction of international IOT
• Main goal:– To integrate the domestic input-output table into
the international input-output table (WIOD)
13
Construction of international IOT
Indones
ia
Mal
aysi
a
Philip
pin
es
Sin
gap
ore
Thai
land
Chin
a
Tai
wan
Kore
a
Japan
U.S
.A.
Indones
ia
Mal
aysi
a
Philip
pin
es
Sin
gap
ore
Thai
land
Chin
a
Tai
wan
Kore
a
Japan
U.S
.A.
Exp
ort
to H
.Kong
Exp
ort
to India
Exp
ort
to E
U
Exp
ort
to R
.O.W
.
Dis
crep
ancy
Tota
l O
utp
uts
code (AI)(AM)(AP)(AS)(AT)(AC)(AN)(AK)(AJ)(AU) (FI) (FM)(FP) (FS) (FT) (FC)(FN)(FK) (FJ) (FU) (LH)(LG)(LO)(LW)(QX)(XX)
Indonesia (AI) A II A IM A IP A IS A IT A IC A IN A IK A IJ A IU FII FIM FIP FIS FIT FIC FIN FIK FIJ FIU L IH L IG L IO L IW Q I X I
Malaysia (AM) AMI AMMAMP AMS AMT AMCAMNAMK AMJ AMU FMI FMM FMP FMS FMT FMC FMN FMK FMJ FMU LMH LMG LMO LMW QM XM
Philippines (AP) API APM APP APS APT APC APN APK APJ APU FPI FPM FPP FPS FPT FPC FPN FPK FPJ FPU L PH L PG L PO L PW Q P XP
Singapore (AS) ASI ASM ASP ASS AST ASC ASN ASK ASJ ASU FSI FSM FSP FSS FST FSC FSN FSK FSJ FSU L SH L SG L SO L SW Q S XS
Thailand (AT) ATI ATM ATP ATS ATT ATC ATN ATK ATJ ATU FTI FTM FTP FTS FTT FTC FTN FTK FTJ FTU L TH L TG L TO L TW Q T XT
China (AC) ACI ACM ACP ACS ACT ACC ACN ACK ACJ ACU FCI FCM FCP FCS FCT FCC FCN FCK FCJ FCU L CH L CG L CO L CW Q C XC
Taiwan (AN) ANI ANM ANP ANS ANT ANC ANN ANK ANJ ANU FNI FNM FNP FNS FNT FNC FNN FNK FNJ FNU L NH L NG L NO L NW Q N XN
Korea (AK) AKI AKM AKP AKS AKT AKC AKN AKK AKJ AKU FKI FKM FKP FKS FKT FKC FKN FKK FKJ FKU L KH L KG L KO L KW Q K XK
Japan (AJ) A JI A JM A JP A JS A JT A JC A JN A JK A JJ A JU FJI FJM FJP FJS FJT FJC FJN FJK FJJ FJU L JH L JG L JO L JW Q J X J
U.S.A. (AU) AUI AUM AUP AUS AUT AUC AUN AUK AUJ AUU FUI FUM FUP FUS FUT FUC FUN FUK FUJ FUU L UH L UG L UO L UW Q U XU
Freight and Insurance (BF) BA I BAMBAPBASBATBACBANBAK BA J BAU BFI BFM BFP BFS BFT BFC BFN BFK BFJ BFU
Import from H. Kong (CH) AHI AHM AHP AHS AHT AHC AHN AHK AHJ AHU FHI FHM FHP FHS FHT FHC FHN FHK FHJ FHU
Import from India (GH) AGI AGM AGP AGS AGT AGC AGN AGK AGJ AGU FGI FGM FGP FGS FGT FGC FGN FGK FGJ FGU
Import from EU (CO) AOI AOMAOP AOS AOT AOC AON AOK AOJ AOU FOI FOM FOP FOS FOT FOC FON FOK FOJ FOU
Import from the R.O.W. (CW) AWI AWMAWPAWSAWTAWCAWNAWK AWJ AWU FWI FWM FWP FWS FWT FWC FWN FWK FWJ FWU
(DT) DA IDAMDAPDASDATDACDANDAKDA JDAUDFI DFMDFP DFS DFT DFCDFNDFK DFJ DFU
Value Added (VV) V I VM VP VS VT VC VN VK V J VU
Total Inputs (XX) X I XM XP XS XT XC XN XK X J XU
Duties & Import Taxes
Intermediate Demand (A) Final Demand (F) Export (L)
Ad
(producer's price)
Fd
(producer's price)Exports
Ad
(producer's price)
Fd
(producer's price)Exports
Am
(CIF price)
Fm
(CIF price)
Am
(CIF price)
Fm
(CIF price)
V V
Benchmark I-O Table (e.g.: 2003) Updated I-O Table (2005)
Update!
2005 data
Costa Rica´s domestic OIT
International IOT (WIOD)
35 sectors 42 countries
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1. Domestic IOT
Backdating: RAS algorithm2011 -> 2009
Preparing the structure: 1-period; 2-currency; 3-prices;
4-industries. 5-trade flows
Assigned trade by country: Imports table and exports vector
2. International IOT
Consistency testing:Some negatives and some
readjustmentsConsistency with national accounts
To fit into the international IOT: Breakdown of Costa Rica separated from the rest of the world (ROW)
Analysis with CGV indicators:TiVA, comparative advantages, Exports
breakdown
Methodology to construct the international IOT
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Preparing the domestic IOT
Origin Final Destination
1
Currency: colones -> dollars (official exchange rate for the year 2009, BCCR)
2
Period: Data from 2009 (last available year for the WIOD at that moment)
3
CIF:FOB:
Consistency of the trade flows: CIF / FOB adjustment for the imports WIOD is FOB (even when it is based on import data)
4 Concept consistency of industry /product: ISIC (SUT classification) Breakdown: Intermediate consumption, final consumption, capital) Classification of the WIOD
Price consistency : basic prices in IOT and WIOD
5
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Agri-culture
Manu-facture Services
Agriculture
Manufacture
Services
Exports
Imports
Labor
Capital
Total inputs
Total de production
House holds
Government
Intermediate demand
Final demand
External demand
Domestic supply
External supply
Value added
Intermediate demand
table
Final demand
table
Exports vector
Imports table
Value added table
Final addTrade data 2009Data from SUT
2009
“Backdating”: to2009
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Agri-culture
Manu-facture Services
Agriculture
Manufacture
Services
Intermediate demand
Domestic supply
Data from SUT 2009
Intermediate demand table from IOT 2011
Total intermediate supply (supply)
Intermediate demand (use)
RASAlgorithm
Intermediate demand
table
“Backdating”: to 2009
Agri-culture
Manu-facture Services
Agriculture
Manufacture
Services
Exports
Imports
Labor
Capital
Total inputs
Total production
House holds
Government
Intermediate demand
Final demand
External demand
Domestic supply
External supplyValue added
Intermediate demand
table
Final demand
table
Exports vector
Import table
Value added table
Assigning trade by countryData sources
Goods: Exports, imports database • DGA – imports FOB• PROCOMER - exports
Services: data and technical criteria• BCCR - transport, repairs• PROCOMER – ground transport• ICT - turism• DGAC – air transport• WIOD – several sectors
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Exports
External demand
Exports vector
United States China
AgricultureManufactureServices
Destiantions
Vector of exports by country and by sector
Electronics
Electronics
Canada
Intermediate demand
Final demand
Capital
Uses
AgricultureManufactureServicesAgricultureManufactureServices
Industries
United States
China
ROW
United States
China
ROW
Agric
ultu
reM
anuf
actu
reSe
rvice
s
AgricultureManufactureServices
Agric
ultu
reM
anuf
actu
reSe
rvice
sAg
ricul
ture
Man
ufac
ture
Serv
ices
AgricultureManufactureServices
AgricultureManufactureServices
Agric
ultu
reM
anuf
actu
reSe
rvice
s
ROW - CRCosta Rica
AgricultureManufactureServices
ROW - CR
Costa Rica
Usa Domestic
IOT
China domestic
IOT
Imports: China
from USA
Imports: USA from
China
Imports: Costa Rica
Costa Rica dissagregation to the rest of the world
Costa Rica domenstic
IOTExports: Costa Rica
Reduce negative number findings: Better assumptions and adjustments to minimize negative numbers.
e.g.: Tourism -> Hotels & restaurants Exports from CR to USA. National sources: $418,2MImports of EE.UU. USA data: $53,8MDiscrepancies ROW: -$364,3 M
National accounts consistency: Export data from CR, (no mirror data) to ensure consistency with the national accounts.
Consistency testing
1
2
3 Discrepancies vector: When Costa Rica data is more accurate than international data.
22
Results for Costa Rica
• Lessons lerned from the international IOT
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From gross value to value added
Gross value• Cumulative value exported to another country• E.g.: Korea – product to China: 65%• Accurate to measure value if trade is focused on
final goods
Value added• Contribution in the exported value to the final
destination• E.g.: Korea – manufacture: 15% to USA• Accurate to measure the value of the
international trade if it is focused on intermediate goods
40
10
Research and development
Manufacture of basic inputs
30Marketing and
Sales & customer service
15 Advanced manufacture
5 Assembly
100
% of the final value
of the product
7065
5040
0
EEUU
EEUU
China
Corea
Vietnam
24
New methodology shows different magnitudes on exports according to GV vs. VA
Costa Rica: Structure of the export by country2009
Exports detinationX gross value
X Added value
Rest of the world 41,6% 38,5%
USa 26,8% 28,2%
Western Europe 15,8% 17,1%
China 6,1% 5,4%
Mexico 4,1% 3,1%
Canada 2,3% 2,7%
Rest of Europe 1,7% 2,5%
Japan 0,9% 1,5%
Brazil 0,9% 1,0%
Total 100% 100%
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Also differences on imports GV vs. VA
Origin of
the imports
M gross
value
M value
added
USA 39.3% 34.9%
Rest of the world 29.6% 28.6%
Western Europe 8.0% 10.6%
China 7.0% 8.0%
Mexico 8.2% 6.7%
Japan 2.5% 4.0%
Resto of Europe 1.9% 2.7%
Brazil 2.5% 2.5%
Canada 1.1% 2.0%
Total 100% 100%
Costa Rica: Structure of the imports by origin2009
26
Implication por trade policy
• Goals of diversification in terms of value added• Real diversification according to final demand
• Reduce trade barriers direct and indirect trade partners on CGVs• Multilateral agreements to help create GVC´s:
• Alianza del Pacífico
• Agreements on the supply chains: • IT Agreement (ITA)• Anti-Counterfeiting Trade Agreement. (ACTA)
1
2
27
Implications for public policies
Encourage participation of CR in CGV
• Diversification: companies, markets, activities• High value FDI.• Expand trade platform
• Strengthen: Participation• Merging with local companies.• Entrepreneurship.
• To higher vale added activities• Continuous investment and human capital.• Promote innovation.
1
2
3
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What are the components of the exports
Source: Koopman, Shang, Zhi (2013)
Gross exports
Domestic content Foreign component
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Domestic content of the exports
• Intermediate and final product have the same weight.
• Exports indirectly to third parties.
Domestic con-tent, 74.3%
foreign con-tent; 25,7%
30
Implication for public policies• Trade policy towards intermediate goods
• Imports contribute to the competitiveness of the companies.• To reduce trade barriers on the supply chains.
• Strategy to increase domestic content• No restrictions for inputs with competitive prices.• Strength the capacity building for companies to provide inputs with a
clear competitive advantage.
1
2
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Measuring Costa Rica´s participation in GVC´s
Department of Macroeconomic StatisticsICMTEG, Aguascalientes, México
Sep-Oct, 2014