In its efforts to promote integration processes in Latin America and the Caribbean, the Inter-American Development Bank (IDB) has presented the Trade and Integration Monitor 2024, noting that, although trade in goods in the region faces risks, services continue to experience sustained growth. This performance underscores the strategic importance of services in boosting regional competitiveness.
The annual report, entitled «Challenging the trend: the potential of knowledge-based services», offers an insight into the opportunities in this sector. According to the research, the Recovery of foreign trade in Latin America and the Caribbean (LAC) The recovery in the first half of 2024 was driven by increased export volumes, while prices remained stable. However, despite this rebound, projections suggest that the recovery will not follow a sustained expansion path.
Researchers point out that after a 1,6% drop in 2023, the value of goods exports from Latin America and the Caribbean experienced a 3,2% growth year-on-year in the first half of 2024. This increase is attributed to the stabilization of prices - with a decrease of 0,5% - and to a 3,3% increase in export quantities, especially in South America. On the other hand, service exports also continued to grow in a context of general uncertainty.
This growth in goods exports was mainly driven by extra-regional demand, while intra-regional exports continued their downward trend.
According to data for the first half of 2024, the extra-regional exports experienced a growth of 4,1%, while intraregional shipments registered a fall of 4,5%. Shipments to United States and China continued to expand, although a decrease in demand from China was observed. At the same time, an increase in the share of non-traditional destinations in Asia, such as India and the Middle East, was noted.
El export behavior was heterogeneous across countries. In particular, Mexico stood out for its dynamism in the automotive sector towards the United States, while Brasil experienced growth in its agricultural and extractive exports. In the case of Argentina, The higher exports were explained by the recovery in shipments of the main crops such as wheat, soybeans and derivatives, and corn after the lack of rain in 2023, as well as oil.
At the level of Regional integration, intraregional trade and trade with the European Union continued to lose ground, with LAC being the region with the largest decline in 2023 (-2,4%). This slowdown was mainly driven by the deterioration in the physical and productive dimensions, particularly in infrastructure and imports of intermediate goods.
The report also highlights that within the framework of the evolution of regional integration of the main integration schemes, the MERCOSUR The bloc has made progress on various initiatives on its agenda. These include the modernization of the Origin Regime in July 2023 and the entry into force, in April 2024, of the Competition Defense Agreement, which promotes cooperation between the States Parties in the application of antitrust laws. In addition, an agreement was approved to eliminate international roaming charges in the bloc and progress was made on border management, intellectual property and support for MSMEs projects. At the external level, the bloc signed a Free Trade Agreement with Singapore and continued negotiating with the European Free Trade Association, while Bolivia ratified its accession to MERCOSUR.
Visualize the opportunity
Following the development of this chapter, the report focuses on visualizing development opportunities for the region. Particularly in the trade of knowledge-based services in the medium term, highlighting its potential to foster economic development and innovation. Regarding these opportunities, knowledge-based services, such as business and IT, its sustained growth in Latin America and the Caribbean was highlighted, with a average annual increase of 4,7% over the last decade(2013-2023). This growth has outpaced that of exports of goods and other services, reflecting a positive trend in the region. “The impact of knowledge-based services on intermediate and final demand in all goods-producing sectors globally has increased in recent decades,” the report states. Examples of this include software applied to agriculture and livestock, forestry and fishing, biotechnology, engineering services for mining, among others. However, according to the IDB, countries face challenges in taking full advantage of the potential of this sector.
For its development and to improve the quality of life of its populations, the IDB suggests that Latin America promote national agendas based on evidence, promoting investment in knowledge aligned with international standards and the adoption of advanced technologies that optimize the classification and registration of trade flows. At the internal level, it is relevant to implement regulatory reforms that strengthen institutions, simplify regulations and encourage innovation and digitalization, facilitating the creation and expansion of service companies. Externally, the region is suggested to negotiate multilateral and bilateral agreements to counteract protectionism and promote integration. And it maintains that Regional policy initiatives aimed at completing liberalization, trade facilitation and customs cooperation will boost intraregional trade, while digital agendas will open up new business opportunities.
The end of the year is an ideal time to analyze the challenges and opportunities that the region faces, based on the changes outlined by the IDB. “Flexible and efficient trade integration is essential to face global challenges and develop a competitive advantage,” the report concludes.
We invite you to read carefully the Trade and Integration Monitor 2024.
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