CAJICA, Colombia – Three countries have emerged as the key engines of growth for Latin America’s medical devices sector, accounting for the largest share of exports and investment in the space across the region and experiencing growth over the past decade that may have been supercharged by the COVID-19 pandemic.
“Latin America and the Caribbean have achieved a good export position in medical devices, driven precisely by transnational companies, with the case of Mexico, Costa Rica and the Dominican Republic standing out,” says the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
These three countries accounted for 95.5% of the regions’ med-tech exports between 2014 and 2018. Not surprisingly, powerhouse Mexico hoarded over 70% of exports but much smaller Costa Rica and the Dominican Republic now punch well above their weight.
Dominican Republic steps up
Costa Rica and the Dominican Republic are increasingly fierce competitors for investment through strong free trade zones regimes, legal stability, infrastructure and convenient location.
“It is not just the legal regime. The country is investing in making sure that we have the infrastructure to continue integrating and to have a vertical integration,” Omar Jimenez, a Dominican Republic-based executive at Edwards Lifesciences Corp., from Irvine, Calif., told BioWorld. The Dominican Republic is actively promoting a med-tech cluster within the Dominican Republic Free Zone.
Med tech is the most important manufacturing sector in the Dominican Republic, recording steady average growth of 6.6% over the few years before COVID-19.
“For 2019, we were the number 1 export sector of the Dominican Republic, even higher than gold,” Jimenez said.
Average exports out of the Dominican Republic between 2014 and 2018 topped $1 billion, according to ECLAC data while local figures show med-tech exports surging to $1.6 billion in 2019. There are no official figures yet for 2020 but expectations are that exports surged through the pandemic.
“We were able to maintain the manufacturing sector running in 2020. We actually grew during the pandemic, with almost 2,000 more employees and we were able to help the [economy] to balance, with the loss of jobs to tourism,” said Jimenez.
The addition of 2,000 new jobs in a year in a country with a population of around 11 million underlines the sector's growth during the pandemic. About 27,000 people are now employed by companies like Edwards, or Germany’s Fresenius Kabi AG and B. Braun Medical Inc., to mention a few.
“We haven't seen any divestment, or slowdown. There were companies that grew and moved to new buildings, hired more people and expanded. We don't expect to see contractions in 2021,” said Jimenez.
“Many companies will grow this year, with new lines coming to the country and that will continue to happen. We expect a big surge in the second half of the year, due to all the postponed elective surgeries that will have to take place. Overall, we expect to grow. Probably in the high single digits,” he said.
Vertical integration is also helping the Dominican Republic move forward and keep its position as a key med-tech player even as the government shores up its infrastructure and logistics capabilities.
“We used to do smaller transformations on the products, on the value. We had sister plants in other countries, where they were sterilized and shipped. Now we can do all of that here, since there has been a huge investment in logistics centers and we can do a whole supply chain,” Jimenez explained.
Dominican Republic exports most of the medical devices that it manufactures, while it only imported a yearly average of $164 million worth between 2014-2018, according to the ECLAC, ranking tenth in the region in terms of med-tech imports.
Mexico, with a population of 126 million, was the largest importer of medical devices, with imports of $3.2 billion every year but exports, at $11.1 billion, are much larger.
The giant of the region, Brazil, with a population of about 210 million, imported $2.6 billion worth of medical devices and exported just $430 million. Just on sheer size, Brazil attracted about 19% of total foreign direct investment (FDI) in med tech in the region between 2010 and 2019. Still, that was enough to put the country in third place regionally. Tiny Costa Rica, with a population of just over 5 million, came in first by attracting 43% and Mexico was second at 26%. The Dominican Republic was fourth with 7% of all FDI into medical devices.
Room to grow
“In Latin America and the Caribbean, the COVID-19 crisis shows the growing importance of stimulating regional cooperation and the development of a regional market for health and medical devices and cross-border industrial centers,” said the ECLAC.
The region may be well positioned to ramp up the industry, with all the necessary capabilities creating potential.
“Those potentialities were revealed in the face of the health emergency,” according to the ECLAC. Many countries in the region have been working around the clock during the past year in the development of ventilators and other products to fight COVID-19.
“The development of national industrial and technological capacities and the improvement of access to medical devices for the inhabitants of Latin America and the Caribbean is a strategic challenge, and to face it successfully, national and regional policy guidelines will be required,” said the ECLAC.