Importance for trade of developing comparative and competitive advantages

All production, distribution and sales activities are focused on generating surpluses and profits that are fundamentally oriented towards making their sustainability possible over time. Added to this is the web of trade relations that flow in an increasingly globalized dynamic and in a scenario of greater technological advances that make the dynamics of trade between countries much more complex.

The relevance of a greater positioning in the dynamics of international trade is closely related to the generation of comparative and competitive advantages; advantages that respond to a sort of logic in economic exchange, and that translate into the efforts of the different actors to obtain higher income and greater market share, which will also imply an increase in leadership, whether at the business, corporate, organizational or State level, within the framework of an economy with features of growing competitiveness.

It is important to know that in any exchange process there is a persistent attempt to ensure that the products offered do not lose their efficiency and quality, since this would condemn them to a second or third place, generating a wide disinterest at the level of demand that would place them behind in terms of participation, leading inexorably to their future disappearance in the complex dynamics of the market. This is a very big risk that should not be taken in business activities, because it would imply the loss of effort, prestige, investment and huge amounts of money that will probably not be recovered in the short or medium term. 

When the less privileged countries begin to become aware of the resources they possess, they take advantage of all their contingent factors to undertake processes of production and export of goods, always aimed at lowering production costs and, to a certain extent, lowering the price of the product at the market level. This process of comparison, which is on a par with that of other products offered in the game of economic participation, is a relative advantage that allows to pave the way for the continuation of the path of participation and recognition, which is aimed at the final consumer. Here, it is important to emphasize that the comparative advantage lies in being able to specialize in carrying out the production of a certain good or service at a lower price than that of its production in another country or region of the world. This advantage comes from a process of choice, which reflects an exhaustive analysis of the status of the conditions or contingent factors, evaluated and measured in terms of availability of resources and their contrast with other economies in the world. In this regard, and by way of synthesis, all comparative advantage, in essence, responds to a model that allows the choice of the good that costs less to produce, thus generating a good profit or surplus.

Now, in order for individuals, companies, corporations and States to achieve a considerable level of success in the dynamics of world trade, obtaining participation in terms of price and quality at the national and international market level, and for this possibility to translate into sustained economic growth in the long term, the dimension of competitive advantage must be explored.

From a structural point of view, the possibility of materializing competitive advantages depends, first of all, on having the necessary human capital to satisfy certain needs, having an excellent economic infrastructure, implementing norms and statutes that promote competition and incentives to speed up international trade, deploying logistics to control the physical flow of materials and final products, from their points of origin to their points of commercialization and always entering into research centers that allow analyzing and evaluating, in contrast, the possibility of innovating in order to create and satisfy new needs. This is a task at the macro level, which is the generating matrix for obtaining a high per capita income at the level of Nation States, understanding that the sustainability of business competitiveness, that is, its constant improvement, is the product of renewal processes that must be carried out in the face of a competition that will always be willing to overcome itself in virtue of a greater positioning in market relations.

Below is a table prepared this year (2022) by the Competitiveness Institute (ADEN), which shows the competitiveness ranking of 18 Latin American countries, totaling 99% of GDP at the regional level.  

The table shows, following the structural idea related to the generation of competitive advantages, the positioning (from highest to lowest) of those Latin American countries that have been leading the process of profitability and value creation, making use of different areas such as: infrastructure, macroeconomic stability, market competition, technological innovations, institutional support, investment in education and research, among other elements that make up the framework of factors that make it possible for a given country to be at a certain level of competitiveness, and from there to understand its status in terms of productivity. 

Finally, it is important to understand that if a given country specializes in increasing the production of a good in which it has fewer disadvantages, this will not only favor its trade balance, but will also allow it to occupy an important position in the ebb and flow of the global trade of goods. Similarly, if a given company is able to transform investment and labor costs into profits, exhibiting high levels of competitiveness, this will serve as an impetus for other companies to leverage resources, create higher quality products and invest in the development of technological innovations to create unique products and steadily increase their levels of competitiveness.