U.S. Firms in Latin American Service Industries

The participation of U.S. service industry firms in Latin American markets for services consists mainly of the activities of U.S.-owned affiliates operating in Latin America and very little of direct exports of ser- vices from the U.S. The important policy issues thus involve barriers to the establishment and operation of affiliates in host countries rather than trade barriers. Since direct investment rather than trade is at issue, the comparative advantages that are important are those of U.S. multinational firms rather than those of the U.S. as a country. The characteristics we observe in U.S. multinationals in these industries, particularly their low R & D intensity, are not those usually associated with the comparative advantages of U.S. multinationals. However, their skill intensity is relatively high. A more detailed breakdown of the sector does show at least some industries, particularly in finance, in which skill levels are very high, and these are the most likely candidates for major gains for U.S. multinationals. Nevertheless, U.S. shares in the Latin American service sector are very small overall and not likely to reach the levels in manufacturing or petroleum in the foreseeable future.