the consumer, covering transport, storage, inventory management and packaging processes, and the administration and control of these flows.

For most countries, logistics costs are a more important component of total trade costs than tariff barriers<sup>3</sup> . The gradual unilateral tariff reduction implemented in recent years by a large number of countries, together with free trade agreements, brought about an increase in the relative share of logistics costs in total trade costs. This motivated several public policy initiatives aimed at improving the performance of the components making up logistics costs. One example is the trend towards the signing of open skies agreements. Empirical evidence [Micco and Serebrisky, 2006] indicates that import-related transport costs fall by up to 9 percent five years after the signing of an open skies agreement.

# **3.2 Definition and Estimation of Logistics Costs**

There is no agreement on a precise definition of logistics costs. A review of the literature shows significant discrepancies regarding the activities that should be included in the definition of logistics costs. In this paper, we consider logistics costs to include: transaction costs (those related to transport and trade -processing of permits, customs, standards), financial costs (inventory, storage, security), and non-financial costs (insurance).

By lacking a uniform definition, international logistics cost comparisons tend not to be precise. In addition to the difficulties common to any survey carried out across countries, the lack of a precise definition of logistics costs, on the components that form them and how to measure them, adds to the complexity for comparison. For this reason, much care is necessary when concluding that one country has higher or lower logistics costs than another based on international comparisons that use different methodologies, heterogeneous databases, and were conducted in different years for each country that is part of the comparison.

In recent years various studies have been carried out with the aim of making international comparisons of logistics costs. Taking into account the limitations detailed in the previous paragraph, estimates and international comparisons can provide valuable information. The added value of international comparisons lies basically in the relative ranking of the countries (or regions, if that is the way the grouping has been made) and not so much in the percentage difference of the cost indicator used. Below are the results of the principal studies that include the Latin American countries within their sample.

- **World Bank. Doing Business, Analysis of regulations** . The Doing Business database provides measurements of trade regulations and their application. Doing Business indicators make it possible to compare 155 economies, and can be used to analyze concrete regulations that favor or restrict investment, productivity and growth. The data base contains a category denominated “Trade Among Borders” that provides information on aspects of trade facilitation that have a direct impact on transaction costs, one of the components of logistics costs.

> 3 For example, in Latin America, average tariffs were lowered from 40% in the 80s to 10% in the present decade.

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