LatAm, Caribbean exports rebound in first half after 25 months of contraction

LatAm, Caribbean exports rebound in first half after 25 months of contraction

15/11 - Latin America and the Caribbean left behind the longest trade downturn in recent history in the first half of this year, with exports rising 13.2 per cent after shrinking 3.3 per cent in 2016, the Inter-American Development Bank said in a new study.

Crack open the champagne? Not yet. That bright figure hides the fact that Latin America is lagging the rest of the world and suffering a growing lack of competitiveness, the bank said
in its Trade and Integration Monitor 2017.

First the good news: After 25 months of uninterrupted contraction, exports of goods from Latin America and the Caribbean rose 13.2 per cent in the first half and exports of services rose 9.7 per cent. The trend was most marked in South America, where exports rose 16.1 per cent and the Caribbean, where they rose 17.9 per cent. “A lot of this is due to an increase in commodities prices,” Paolo Giordano, principal economist in the IDB’s Trade and Integration Sector and the report’s editor, told FastFT.

Mexico saw a 10.4 per cent rise in exports in the first half driven by fears over the future of the North American Free Trade Agreement, which the US, Canada and Mexico are struggling to update.

“What we’re seeing is very different to the rest of Latin America ... Anticipating changes in trade policy in the US [it appears] companies have moved inventory to the US [early],” he said. Much of that was in manufacturing. “It’s hard to tell if it will continue but that was an unusual movement for the time of year,” he added.

But the bad news for the region is that despite the growth, Latin America is getting left behind. Between 2010 and 2015, in the wake of the global financial crisis, regional exports rose 2.5 per cent while global trade rose 4.1 per cent. That translates into a loss of $14.3bn for the region. The loss of market share was not only due to the region’s limited number of export commodities but also reduced competitiveness.

Interestingly, Mexico was the only country in the region that managed to increase its market share significantly – by 30.4 per cent, accounting for nearly 40 per cent of total regional exports in 2015.

“Beyond the recovery, Latin America and the Caribbean is facing a trade scenario that is substantially less favorable than before the global financial crisis. The region needs a new generation of international integration policies. It is all about boosting competitiveness, regaining global share and make the most of the opportunities that come with disruptive technologies like e-commerce,” Mr Giordano said.

One of those hot prospects is e-commerce, which remains small in the region but is growing fast. Business-to-consumer sales grew by a quarter in 2015 compared with 2014. Brazil, Argentina and Mexico, the region’s top three economies, concentrate 70 per cent of e- commerce in the region. “In the context of low growth both of GDP in the region and world trade, e-commerce emerges as a potential revitalizing force,” the report said.

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