IFT and CCLATAM present the latest policy paper from Victor Muñoz and Dr Ángel Melguizo
In 1824, as the new republics of Latin America shook off their colonial chains – with no shortage of British help – George Canning declared that he had “called the New World into existence to redress the balance of the Old”.
British capital followed British recognition: our merchants, engineers and bondholders built the railways of Argentina, the ports of Chile and the tramways of Brazil. For a century, Britain was Latin America’s chief trading partner. Then, slowly and for no good reason, we drifted apart.
This paper, which the Institute for Free Trade is proud to republish with the kind permission of CCLATAM, shows what is at stake in drifting back together. Latin America and the Caribbean: 660 million people, a continent of entrepreneurs, remain, in digital terms, a collection of small, walled gardens. Twenty-odd regulatory regimes, each with its own permits, audits and definitions, function as what the authors rightly call a hidden tax on scale. The result is familiar to anyone who has studied protectionism in any era: higher prices, fewer competitors, less investment, and talented people building their futures elsewhere.The remedy proposed here is not more regulation but better regulation: proportionate, evidence-based, consistently enforced, and, crucially, compatible across borders.
Where Europe’s Draghi report diagnosed fragmentation and complexity as the enemies of competitiveness, this paper draws the same lesson for the Americas, and resists the temptation simply to photocopy Brussels. Rules should fit the institutions that must enforce them. That is a principle the Institute for Free Trade have long championed, whether in trade agreements, in regulatory cooperation chapters, or in our own post-Brexit debates. The prize is considerable. The authors’ modelling suggests that an integrated, investment-friendly digital framework could add 1.3 percentage points to annual growth through 2030 – the equivalent, by the end of the period, of adding an economy the size of Colombia’s. And the gains would not accrue to Latin Americans alone.
An open, integrated, digitally connected LAC is a better partner for Britain: a bigger market for our services and technology, a deeper pool of investment opportunities, and an ally in keeping the global trading system open at a moment when it is under strain. Free trade, as ever, is not a concession we grant to foreigners. It is a policy we adopt for ourselves, whose benefits multiply when others adopt it too. We commend this paper to policymakers on both sides of the Atlantic.
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