Politics, Business & Culture in the Americas

Susan Segal: Deglobalization Means Fresh Challenges for Latin America

A shakeup in supply chains recalls past changes in the macroeconomic conditions facing emerging markets.
A port in Cartagena Colombia receives shipping containers as supply chains continue to shift creating challenges and opportunities.Containers arrive at the Sociedad Portuaria Regional de Cartagena (SPRC) terminal in Colombia in Dec 2021.David Lombeida/Bloomberg via Getty Images
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This article is adapted from AQ’s special report on supply chains

When considering the push toward modern globalization, I am reminded of the early 1980s. At the time, we were feeling the effects of inflation, high interest rates and (of course) high energy prices. Everywhere you turned, there were imbalances as emerging market countries ran high fiscal and current account deficits. Bank credit was abundant.

Then the music stopped, and countries needed to adjust their economic policies. They had to reduce their deficits, restructure their debt and return to growth. In the most simplistic of terms, this required new sources of foreign exchange. Foreign trade and investment became imperative in this new reality.

In many countries, the framework for foreign direct investment was liberalized and they negotiated trade agreements to ensure access to markets as well as preferential sale of their products abroad. Companies shifted production to the lowest-cost provider—in many cases to China and other Asian countries. With time, emerging markets became more and more dependent on China as an important purchaser of raw materials. In return, China provided the much-needed foreign exchange to keep these emerging markets competitive in the global market. In the intervening 40 years, the world and supply chains have become more integrated, and more interdependent, than ever before.

No one could have predicted a global pandemic that would interrupt international supply chains and expose the fragilities of global integration. And the rise of China as an economic power happened much more quickly than many expected.

Now we see the political world order being redefined yet again, for better or worse. We’ve learned that we cannot depend solely on distant international supply chains. Priorities have shifted from low-cost production and foreign exchange creation to finding dependable, reliable and secure paths to market.

And so, a march toward deglobalization has begun. We just don’t know where it will end. 


Segal is President and CEO of Americas Society and Council of the Americas.
Tags: globalization, nearshoring, Segal, supply chains
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Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
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