Trade and Industrial Development in Globalization for Andean Countries

Abstract

The industrial development and the policies utilized in promoting rapid industrialization processes are parts of a promising study area. As a matter of fact, globalization and new international governance structure have redefined the role of state and policy-making process, changing production relations of local companies particularly for the sectoral leaders, their supply chains, and productive specialization. As a result the lead producers in different industrial sectors are now able to have easier access to cheap import supplies, and promote homologation processes with headquarters in transnational firms. The effects on local firms are reflected in decrease in demand of local inputs and debilitating the position of medium and small companies, creating a different structure for each industrial sector. This current phenomenon provides the justification to analyze each industrial sector by itself. The Andean countries are no exception to this problematic situation, which is also creating incentives to increase the willingness of the government´s policy makers into the industrial development. Therefore this comparative research aims to analyze the export performance as an indicator of the development of the automobile industrial sector in Andean countries. Selection of this sector is based on different aspects, like the lack of empirical studies in the Andean region related with the effects of their policies over productive sectors, the governments prioritization of the sector, moreover after the Complementation Agreement for the sector signed in 1999, and the increasing importance into the economy of the automobile industry. In addition, another important issue during the last decade is the different focus of the studied countries in their trade policies. In general, Colombia and Peru have taken policies of trade openness and facilitation, whereas Ecuador and Venezuela adopt trade restrictive policies by increasing import tariffs and quotas. The result of the analysis in this paper points out that although Ecuador has successfully implemented its trade policy by expanding its trade relations for the automotive sector and reducing the trade deficit, some specific characteristics in its structure may harm the industrys sustainability. Another important factor to note is that Peru has liberalized its trade, initiating bus export. On the other hand, Colombia initially experienced higher loss in the sector due to the trade restrictions by its main regional partners. However, this situation has eventually forced the industry to diversify its customers in the region and other parts of the world. On the contrary, Venezuela which is the main market in the region presents a decrease in export and import, resulting in an isolation of automotive sector in the region. Therefore, the following research has seven chapters. The first is introduction

the second contains the literature review about the topic and their conclusions made by specialized scholars, and the third, which addresses the methodology applied to obtain the results. Since the fourth chapter the document contains the empirical results, thus this chapter shows the direct and indirect policies applied during the study period reflected in the export performance, the fifth contains the comparison results among selected countries, and the sixth describes possible variables shaping the results. The conclusions retrieved are resumed in the seventh chapter.