The internationalization of production processes – the so-called global value chain (GVC) revolution – has opened a new pathway to industrial development. Nations initially join GVCs to become competitive internationally, and then go on to industrialize by intensifying their participation in the networks. To date, however, few Latin American nations have joined the GVC revolution; this needs to change. The brutal fact is that Latin America cannot industrialize the old way in a time when China and other nations are doing so the new way – by combining advanced know-how available in GVCs with cost effective labor to produce goods at unbeatable quality-price ratios. This report marshals the best available evidence and makes sense of the rapidly evolving economic thinking on the issue. It then applies this analysis to today’s policy challenges in the Latin American context.
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