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International Monetary Fund. Western Hemisphere Dept.
This Cluster Report explores opportunities for trade integration in the Latin America and the Caribbean region. It finds that the region can reap significant growth benefits from further trade integration. With trade integration below that of other regions, there is scope for Latin America and the Caribbean to increase trade as an engine of growth to help offset the weaker economic outlook without damage to overall income inequality. There is potential to enhance both inter- and intraregional trade integration, but renewed political momentum within the region in support of greater trade openness could do much to further intraregional trade integration in particular.
Ms. Kimberly Beaton, Aliona Cebotari, and Andras Komaromi
We revisit the relationship between international trade, economic growth and inequality with a focus on Latin America and the Caribbean. The paper combines two approaches: First, we employ a cross-country panel framework to analyze the macroeconomic effects of international trade on economic growth and inequality considering the strength of trade connections as well as characteristics of countries’ export markets and products. Second, we consider event studies of past episodes of trade liberalization to extract general lessons on the impact of trade liberalization on economic growth and its structure and inequality. Both approaches consistently point to two broad messages: First, trade openness and connectivity to the center of the trade network has substantial macroeconomic benefits. Second, we do not find a statistically significant or economically sizable direct impact of trade on overall income inequality.
Ms. Kimberly Beaton, Aliona Cebotari, and Andras Komaromi

further expanding their number of their trading partners. Mexico and Panama are relatively less connected and may have potential to further diversify their networks. For Mexico, the limited diversification of its trading network is linked to the dominance of the U.S. market for its trade despite the existence of a broad spectrum of trade agreements, whereas for Panama, similar to the Caribbean, this may reflect the importance of trade in services. LAC Trade Connectivity: Trading Partners Being at the center of the world trade network is associated with

International Monetary Fund. Western Hemisphere Dept.

out as the relatively less central LA countries. 5 Similarly, the Caribbean remains on the periphery of the world trade network, but given the small size of many of these economies, the prospects to occupy a more central role in the global network are likely limited. LAC Trade Connectivity: Centrality in the World Trade Network 1/ 1/ Eigen centrality is standardized relative to the most central country in the world trade network and demeaned. Percentiles are based on the world distribution. Source: IMF Direction of Trade Statistics; IMF staff