What Is ‘Friendshoring’, and How Well Is Latin America Positioned to Harness It?

The trend revolves around countries that are considered economic and political allies, and Colombia is one of the Latin American countries that is viewed as such

A container ship sails out to sea from Yangshan Deepwater Port in China. Photographer: Qilai Shen/Bloomberg
March 30, 2023 | 05:16 PM

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Bloomberg Línea — Global trade faces a decade of inflation and stagnation, Boston Consulting Group (BCG) said earlier this year in a report, and which states that the annual growth rate of trade will average 2.3% until 2031, compared to an increase in global GDP of 2.5%.

This outlook reflects the reconfiguration of global supply chains in the wake of the Covid-19 pandemic and Russia’s invasion of Ukraine, which began a year ago. Since then, there has been much more talk of nearshoring, the relocation trend in which companies move their operations to a country with lower production and labor costs and closer to its end consumers.

But under these scenarios, some countries and governments are more strongly considering another trend, ‘friendshoring’, a model in which supply chains are centered in countries considered political and economic allies.

The trend has been strongly promoted in recent months by the US Secretary of the Treasury Janet Yellen.

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Latin America’s positioning with friendshoring

“Countries with strong and consistent bilateral relations with the United States have the greatest potential to attract ‘friendshoring’ in the region. For the US government, ties of shared values, such as the defense of democracy and security, are increasingly important and relevant within its geopolitics in the current international situation,” María Claudia Lacouture, president of the Colombian-American Chamber of Commerce, (AmCham Colombia), told Bloomberg Línea.

AmCham Colombia argues that the countries best positioned for this initiative of the Alliance of the Americas for Economic Prosperity are Colombia, Chile, Costa Rica, Ecuador, Mexico, Panama, Dominican Republic and Uruguay, particularly in view of the determination of the United States to consolidate strategies in the region regarding the rearrangement of supply chains, inclusive economic development and energy transition.

"Friendshoring means we have a group of countries that strongly adhere to a set of standards and values, and we need to deepen our ties with those partners and work together to make sure we can supply our needs for critical materials," Yellen said in recent months.dfd

Colombia: a key player due to its historical relationship with the US

According to Lacouture, the extensive relations, both political and commercial, that Colombia and the United States have maintained, position the Andean country as a protagonist in friendshoring and in attracting investment.


“At AmCham Colombia we have been following up on products with opportunities since the trade tension between China and the United States intensified, “ Lacouture says. “According to this analysis, among the sectors that grew the most in exports and which in turn represent opportunities between January 2022 and 2023, the following stand out: chemicals, with shipments of $16.3 million (+86.3%); leather, with exports of $534,191 (+83%); and minerals, with $120.1 million (+62.4%),” she said.

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This list would also include miscellaneous goods and products, timber, palm oil, knotted mesh fabrics, wadding, gauze and bandages and tanned furs, among others.

Lacouture also told Bloomberg Línea that beyond the nearshoring/friendshoring trend, the Colombian agroindustrial sector has an export potential of 677 products, although currently only 244 are sold abroad, which is why greater promotional actions are needed in the United States, so that more companies can intensify their internationalization.

Latin America’s international trade in 2023

A recent analysis by Americas Market Intelligence (AMI) noted that Latin America’s international trade will have a generalized slowdown in the economic and logistics sectors.

“The first half of the year will begin with the same economic weakness experienced in the fourth quarter of 2022, which will help supply chains return to normal at the expense of lower economic activity. Conversely, the second half of the year could become a wild card determined by the soft landing of the US economy and rebounding consumer demand in China,” said Diego Rodriguez, senior director of AMI’s Logistics Practice.

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The effects of the changes on supply chains

The Boston Consulting Group study specifies that the Covid-19 pandemic, the blockade of the Suez Canal and Russia’s war in Ukraine will have billion-dollar impacts on international trade relations.

For example, the European Union will likely boost its trade with the United States by $359 billion over the next nine years, largely due to US energy exports to Europe, while expanding its trade with Africa and the Middle East.

Likewise, US-China trade is projected to fall by $63 billion over the same time period.

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