El value of exports of goods from Latin America and the Caribbean will fall 2 percent in 2023, in a context of "great weakness in world trade," announced the Economic Commission for Latin America and the Caribbean (ECLAC) from its headquarters in the Chilean city of Santiago.
Last Thursday (02.11.2023) ECLAC presented its report "Latin America and the Caribbean Trade Outlook, 2023. Structural Changes and Trends in Global and Regional Trade: Challenges and Opportunities» at a press conference led by the Executive Secretary of the United Nations agency, José Manuel Salazar-Xirinachs.
The authority said that the challenge of diversifying and sophisticating the export basket to reduce excessive dependence on raw materials, especially in South America, remains.
«For this It is crucial to implement productive development policies with a focus on clusters in strategic sectors," he added.
The report states that the region will increase 3 percent of the exported volume, which will not be enough to offset the 5 percent drop in the prices of its export products.
According to the document, the value of imports of goods in turn will fall 6 percent, a figure that reflects "the weakness of regional economic activity," with projected Gross Domestic Product (GDP) growth of only 1,7 percent in 2023.
According to the recommendations presented in the publication, in a context of increasing regionalization of world trade, «it's crucial deepen regional integration"as this would reduce vulnerability to a more uncertain global trade environment and "generate efficient scales of production for the region's industries."
He also indicated that the weakness of world trade is the result of the "slowdown of the global economy" in a context of high interest rates in the United States and Europe, a real estate crisis in China, and growing geopolitical tensions.
"The most recent projections from the World Trade Organization (WTO) indicate that the volume of global trade in goods would grow by only 0,8 percent in 2023," ECLAC said.
He added that by 2024, "the WTO projects a 3,3 percent expansion, which if realized, should boost the region's exports."
Latin America and China
In this context, the document addresses the trade relationship between Latin America and the Caribbean and China. In the period 2000-2022, Trade in goods between the region and China has multiplied by 35, while the region's total trade with the world only multiplied by 4. Bilateral trade, which in 2000 barely exceeded 14.000 billion dollars, in 2022 approached 500.000 billion dollars. "Thus, in 2010 China has displaced the European Union as the region's second largest trading partner and has become South America's first trading partner.
Exports to China consist almost exclusively of raw and processed natural resources; and imports, almost exclusively of manufactured goods. In this way, “the gap between the two countries has deepened.” primary-export specialization, especially in South America,” says ECLAC.
“The food sector is the one that offers the best prospects for diversifying and sophisticating the export offer to China in the short term,” adds ECLAC. In this regard, it recommends Addressing existing non-tariff barriers and strengthening market intelligence to better meet the needs and tastes of Chinese consumers.
However, ECLAC reflects: “This trend is worrying, as it distances the region from an export trajectory marked by the growing incorporation of knowledge in goods and services, as well as by greater environmental sustainability.”. In this context, the Cooperation with China in science and technology should become a central pillar of the economic relationship with that country in the coming years. Several promising areas of collaboration, such as renewable energy, digital technologies, advanced manufacturing, biomedicine and biotechnology, are identified for this purpose.
Without neglecting the complex global geopolitical context, which also offers opportunities to the region in the framework of its economic relations with China. Among them, ECLAC highlights the opportunity to attract greater investments in the framework of processes of near-shoring (nearshoring), since the region offers critical resources for the green transition, such as copper and lithium, among others.
Trade facilitation in the region
Additionally, the document discusses the progress made by Latin American and Caribbean countries in implementing their respective trade facilitation agendas.
In this regard, ECLAC points out that the region exhibits differentiated levels of implementation of the different categories of trade facilitation measures. The highest levels of implementation are observed in the categories of formalities and transparency. This is explained – says ECLAC – mainly because “the measures included in both categories correspond almost entirely to provisions of the Trade Facilitation Agreement, which already shows a high level of implementation in the region.”
Meanwhile, Lower levels of implementation correspond to the category of paperless cross-border trade; which requires not only the support of a sophisticated information and communications technology (ICT) infrastructure, but also close cooperation between the authorities of the countries that exchange documents electronically.
According to ECLAC, they are the greats challenges facing the region in trade facilitation, for which international cooperation plays a crucial role in overcoming these limitations. To this end, it is essential to accelerate the implementation and interoperability of the electronic one-stop shops, As is also very positive the almost universal establishment of National Trade Facilitation Committees in the region.
Connectivity and transport infrastructure
The report also highlights the need to gradually close the regional gap in transport and logistics infrastructure. To do so, and given the current context of limited fiscal space, it is essential to explore innovative financing options such as funds for green infrastructure and institutional investors.
Finally, it is recommended to move towards the multimodality (for example: Corridors in South America and cargo ferry between the Port of La Unión in El Salvador and the Port of Caldera in Costa Rica), reducing the current excessive dependence on road transport and giving more space to rail and river transport.
We recommend going deeper with the annual publication of ECLAC
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