Globe, Latin America, United Kingdom, World

Latin America’s economy is at a standstill

Exports from the region are predicted to have fallen by 2% in 2019, while imports to have dropped by 3%. The situation presses the need to rethink strategies for the region’s entry into international markets and for greater efforts in promoting trade between regions.

 

Ivette Fernández Sosa 

 

The downturn has been predicted by the United Nations Economic Commission for the region. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), the pronounced slowing of the global goods trade this decade, which has deepened since the end of 2018, will negatively affect the performance of the region’s international trade this year.

In the Commission’s report, Perspectives on Latin America and the Caribbean’s International Trade 2019, the most serious risks mentioned were an exacerbation of existing tensions, lower global demand, the growing replacement of imports with domestic products in certain economies, a reduced proportion of exports going to China and a drop in global value chains.

According to the analysis, regional trade performance shows remarkable heterogeneity by subregion.

In South America, for example, the value of exports is predicted to fall by 6.7%, much higher than the regional average.

According to ECLAC, this is due to the period of economic stagnation experienced by the subregion – with a prediction of 0.2% growth in 2019 – and the prominent position basic products hold in its export portfolio, many of which have seen their price fall.

In South America, the greatest reductions in export value are predicted for Venezuela, Paraguay and Peru, while Bolivia is the only country in the region where the prices of exports will not suffer a decline.

On the other hand, Central America, the Caribbean and Mexico will see their exports rise in value (by 2.3%, 3.7% and 2.8% respectively) which can be attributed to a lower dependency on basic products and closer trade links with the United States, according to the organisation.

In the case of Mexico, the report highlighted that this countries products are replacing Chinese products in the market of the United States, which became, in 2019, a more important trading partner. For Central America, an increase in export volume will more than compensate for the fall in the prices of some of their basic export products like coffee, bananas and sugar. In Caribbean economies, it is predicted that the rise of export value will be due to an increase in volume.

The investigation also indicated that the value of interregional trade was predicted to fall by 10% in 2019.

The decline in rates of exterior trade in the region is also a response to problems noticed in economic activity on a global scale from the middle of 2018.

According to the World Trade Organisation, progress of global trade is disheartening and growth was revised and reduced to 1.2% for this year.

But other entities related to the sector also reported declines.

At the beginning of October, the International Air Transport Association (IATA) revealed that the August drop in air freight marked the tenth consecutive month of reduction in this area.

Global orders of exports continue falling, ruled the IATA.

The World Bank, for its part, forecasted that prices of basic energy products and metals, fundamental sectors for some economies on the American continent, will continue to fall in 2020 following their plummeting this year in the face of a weaker prospect of growth and consequential lower demand.

Like the study, it estimates prices of metals will fall 5% in 2019 and will continue to drop next year, since the reduction in global demand is heavily weighing on the market.

Regional foreign trade, revealed ECLAC, registered a drop in the first half of 2019, more keenly felt by goods than services, and on a sector by sector level, exports most feeling the effects are the mining and petroleum sectors, whose value plummeted 15% in the first six months of 2019.

Until June 2019, 12 of the 19 countries with available data registered reductions in their export value, and the rest a downturn in growth, added the organisation.

Only Guatemala, Mexico and the Dominican Republic reported increases, moderate ones at that, of goods being imported and exported.

The performance of imports of goods during the first half of 2019 was negative in every economic category and it was the same picture across services, especially in the international transport and travel sectors.

Projections of trade between Latin American and Caribbean countries and their main partners show that the greatest falls will occur in the flux of trade with the European Union and within the region itself, in the case of both exports and imports.

Only exports to the United States and Asia will slightly increase (by 1%), while imports from all countries will generally reduce, ECLAC agreed.

Thus, trade within the Southern Common Market (Mercosur) and the Caribbean Community was recorded to have suffered the greatest drop-off (of 21.5% and 18.5% respectively). (PL)

(Translated by Elizabeth Dann – Email: elizabethdann@blueyonder.co.uk) – Photos: Pixabay

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