Article Summary
Argentina, Chile, Thailand, and the Philippines are emerging as leading supply chain diversification markets, offering sector-specific advantages in manufacturing, critical minerals, and agribusiness while demonstrating improved risk trajectories compared to established diversification hubs like Vietnam and Malaysia.
- Four rising stars: Argentina, Chile, Thailand, and the Philippines show the strongest improvement trajectories among 16 Southeast Asian and Latin American emerging markets analyzed.
- Market openness gains: Thailand achieved the second-highest overall improvement driven by significant upgrades in market openness and regulatory quality, while the Philippines showed comparable improvements in market openness.
- Sector-specific advantages: These markets provide targeted opportunities in autos, electronics, precision manufacturing, critical minerals, and agribusiness rather than simple alternatives to Vietnam or Malaysia.
- Established hubs declining: Vietnam and Malaysia have deteriorated on market openness, regulatory quality, and labor rights over the last five years, creating openings for emerging alternatives.
- Trade agreement catalysts: The U.S.-Argentina reciprocal trade agreement and EU-Mercosur deal are poised to drive strategic shifts in critical minerals, energy, and industrial exports from Latin American contenders.
Vietnam, Malaysia, Mexico and Brazil have been the main beneficiaries of increasing competition and declining direct trade between China and the United States, but risks to multinational supply chains in all of these jurisdictions are increasing, according to Verisk Maplecroft.
In fact, a second wave of diversification markets are outperforming their peers.
Out of a group of 16 South East Asian and Latin American emerging markets, Thailand and the Philippines, Argentina and Chile stand out for their improving risk trajectories.
“The next supply chain advantage will come from matching diversification ambition with risk-adjusted execution,” says Mariano Machado, principal Americas analyst at Verisk Maplecroft. “Thailand, the Philippines, Argentina, and Chile do not offer simple interchangeable alternatives to today’s top connector economies rather, they provide specific plays across sectors ranging from autos, electronics and precision manufacturing to critical minerals and agribusiness.”
Verisk Maplecroft
Key takeaways:
· Vietnam and Malaysia, Southeast Asia’s leading diversification hubs, have both deteriorated on Verisk Maplecroft’s measures of market openness, regulatory quality and labor rights in the last five years, while the region’s largest economy, Indonesia, has regressed on market openness due rising resource nationalism.
· Against these sliding scores, the region’s top two improvers, Thailand and the Philippines, are worthy of attention. Data indicates that procurement teams willing to take a longer-term view will find these markets as viable options.
· Thailand showed the second-highest improvement overall, driven by the largest upgrade for market openness, as well as significant regulatory improvement. These factors are reflected in the country’s strength in select manufacturing industries.
· The Philippines performs second-best across the Southeast Asian economies analyzed, also due to significant improvement for market openness. Despite lower infrastructure quality and governance challenges, including recent corruption scandals, the Philippines shows notable opportunities in sectors like electronics, auto parts and food manufacturing.
· Latin America still trails Southeast Asia as a scaled manufacturing platform, but Western efforts to reduce exposure to China are creating new supply chain contenders. The Southern Cone is seeing an improving risk environment; Central America still matters, but more selectively.
· In the Southern Cone, Argentina is emerging as a leading contender. Despite its medium-risk profile, Argentina shows the strongest overall improvement among the countries assessed, with gains across market openness and regulatory strength.
· Together, the United States-Argentina Agreement on Reciprocal Trade and Investment and the EU-Mercosur trade agreement are poised to drive a strategic shift across critical minerals, energy and industrial exports.
· Uruguay offers the region’s strongest risk-adjusted operating profile, with Latin America’s best overall score thanks to strong market openness, low regulatory risk and improving labor-rights performance. Sound trade relations with China, the EU and United States give that profile practical force, turning agrifood, beef, dairy and pulp access into a test of readiness, customs reliability and logistics capacity.
· Chile is the lower-risk Pacific-side play, combining an improving overall trajectory, driven by market openness and improving labor-rights performance, despite a weaker regulatory trend. Its critical minerals base and dense trade-agreement network make it extremely relevant. However, U.S.-China competition requires Chile to carefully balance its geopolitical alignment, while fragmented domestic politics keep permitting reform and security policy exposed to execution risk.
· Central America’s risk trajectory is trending in the other direction, as other countries such as Costa Rica and Panama still perform comparatively well but are seeing deterioration in key risk indicators.
