Blog: Relocation of supply chains: an opportunity not to be missed

For several months now, with the impact of the pandemic, there has been talk of reconfiguring the chains. Some talk about value chains and others about supply chains. These two chains, even if they are for the same good or service, are quite different, and under the current conditions it is the supply chains that will be reconfigured, not the value chains.
The main objective of supply chains is to achieve a continuous flow of product between the different links in the chain until it reaches the end consumer. This flow must have the conditions of quality, traceability, price, volume, among others that are the minimum necessary for participation within a supply chain. On the other hand, value chains determine where, how much, and how value is generated and distributed in the different links of the chain. It is a matter of generating and appropriating value (that which the consumer assumes as value and is therefore willing to consume).
Costa Rica has done very well in participating in supply chains. It is worth reviewing the status of exports and certain strategic sectors, as well as the import of intermediate products for re-export. There are sectors that support the country’s development, such as life sciences, manufacturing, agro-industry, technological services, and agriculture. This has been an important task for many years for the different institutions involved in supporting them, such as CINDE, PROCOMER and COMEX.
In terms of participation in global value chains, Costa Rica, most of the global value chains in which we participate keep us at the bottom of the “U” of value generation. This is the point that adds the least value to the products. Many of our companies finally take an intermediate import, transform it in some way and then export it again. Is that value generation, yes, it is, but it is not high added value. It is important here to separate the local from the global. At the local level, that value addition can be significant in the sense of the type of resources used, but at the global level it does not change the distribution of value in the global value chain.
However, there are some companies that have managed to add a lot of value to their products and services and bring to the country not only intermediate imports but also new productive processes and with this manage to generate scaling (upgrading) forward, integrating some new productive processes and improving the processes of innovation and sophistication of business in the country.
Without wanting to go into detail for those people to whom I have not been able to explain the studies of the value chain of the iPhone and observe how the configuration of the supply chain has changed and how the configuration of the value chain has changed. The real value of the iPhone is in the United States of America and the assembly is in China.
It is important for the country to take advantage of the relocation of supply chains to push for the relocation of the processes within these chains that can generate the most value.
These times bring us an opportunity to gain space in the new configurations of supply chains, we must take it. We must support the efforts of the CINDE, PROCOMER institutions with the leadership of COMEX to look for opportunities and show that our competitive advantages are well worth using and paying for.
But we must also think about the future and determine which part of the value chain we want to be in and develop. This requires communication, discussion and articulation among social actors to define the spaces in which we can take advantage.
An initiative such as this calls for coordination, articulation, negotiation, the flow of information and products, innovation, labor relations, waste management, management and access to financial resources, in short, it calls for the development of value chains within the country in order to integrate us into processes and links of greater value in global value chains. All of this is part of a plan to promote and transform the national production system.

About Guillermo Zuñiga

Guillermo is the Director of productive linking, Ph. D in Development Economics, Value Chains, Agribusiness and Marketing from Wageningen University in the Netherlands. He has extensive experience in chaining and employment generation programs.