SANTIAGO, Chile – The Economic Commission for Latin America and the Caribbean (ECLAC) says the region’s international trade will experience a significant rebound in 2021 after the sharp drop recorded last year.
Photo courtesy of CARICOMBut ECLAC said in a new annual report that this recovery will be “asymmetrical and very heterogenous between the region’s countries, in a context of great uncertainty due to the crisis stemming from the COVID-19 pandemic”.
The United Nations regional commission released its flagship report, “International Trade Outlook for Latin America and the Caribbean 2021”, and according to the document, ECLAC projects a 25 per cent increase in the value of regional goods exports for 2021 – after a 10 per cent drop in 2020 – driven by a 17 per cent rise in export prices and an eight per cent expansion in the volume of shipments.
Meanwhile, the value of goods imports is seen increasing by 32 per cent, with a 20 per cent expansion in volume and a 12 per cent rise in prices.
In 2022, the document estimates that the value of regional exports and imports of goods will grow by 10 and nine per cent, respectively, in a context of lower regional and global economic growth.
South America is seen experiencing the biggest increase in the value of exports in 2021 (34 percent) since, “given its export specialization, it will particularly benefit from higher commodities prices,” the report notes.
It anticipation a similar situation in the Caribbean, “which will benefit from high prices for the oil, gas and bauxite exported by Guyana, Trinidad and Tobago and Jamaica, respectively”.
The document states the value of Mexican exports, which are mainly manufactured goods, is seen rising 17 per cent, due mainly to greater volume; Central America faces a similar scenario.
Meanwhile, the value of imports is seen growing in excess of 25 percent in all the sub regions and Mexico.
“The increase in the region’s goods exports in 2021 is due mainly to higher prices for basic products – above all minerals, hydrocarbons and agro-industrial products – more than greater volume,” it says.
In addition, the report says regional exports of services have still not recovered from the decline suffered as a result of the pandemic.
“Specifically, the regional dependence on tourism is much greater than the global average, which has meant that the uncertainty surrounding the reopening of this sector negatively affects the prospects of various economies, especially those in the Caribbean,” the document warns, adding the recovery of regional trade in 2021 shows “significant weaknesses.”
ECLAC’s executive secretary, Alicia Bárcena said “this situation should prompt reflection about the urgency of deepening regional economic integration.
“Moving towards an integrated regional market is indispensable, not only for generating efficient scales of production and promoting processes of productive and export diversification, but also for achieving greater autonomy in strategic sectors.
“This last goal has acquired particular relevance in light of the disturbances caused by the pandemic in global supply chains,” she added.
In fact, the ECLAC report indicates that there are several factors creating uncertainty for global trade: an uneven pace of vaccination and new variants of the virus; inflationary pressures and difficulties for maintaining fiscal stimulus; trade tensions and risks in China’s real estate sector; disruptions in supply chains; and increased freight costs.
On increased freight costs, the report calculates that the average global cost of maritime container shipping has risen by more than 660 percent from June 2019 to date.
According to the report, the greatest dynamism is seen in trade with China and within the region itself, “although they exhibit very different dynamics.”
In 2021, the report notes the annual variation in the value of regional exports to China is 35 per cent, whereas that figure within the region of Latin America and the Caribbean is 33 per cent.
The report says shipments are seen growing by 23 per cent to the European Union, and by 19 per cent to the United States.
Despite the recovery in intraregional exports in 2021, the document states their participation in total goods exports from the region will amount to just 13 per cent this year, far below the historic peak (21 per cent in 1994 and 2008).
Meanwhile, the report forecasts that the region as a whole will have a surplus of US$24 billion in 2021, below the US$64 billion recorded in 2020, “which is mainly due to the sharp rebound in the volume of imports.”
The document also states that Latin America and the Caribbean has a persistent trade deficit in the pharmaceutical sector, with just 13 per cent of its imports come from within the region, “which puts it in a vulnerable situation when there are disruptions in external supply.”
In the vast majority of the region’s countries, the report says the local market is “not enough to foster a competitive scale of production in the pharmaceutical sector or in that of medical devices.
“This shows the importance of implementing policies that would promote greater integration of national markets, with the aim of creating a broader, stable market that could provide the incentives needed to expand regional production,” according to the report, which dedicates a third chapter to the contribution of international trade to the circular economy.
“This economy seeks more sustainable use of materials and products, preserving their value and utility for the longest amount of time possible.”
In this area, ECLAC calls on regional countries to incorporate the perspective of the circular economy into their trade agendas.
It also urges for harmonizing rules and regulations among countries and reducing trade barriers, with the aim of creating regional markets, as well as increasing recycled inputs and products in the chains of natural resource-exporting sectors, such as mining, agro-industry and forestry.
