In 2020, international trade in Latin America and the Caribbean had its worst performance since the 2009 global financial crisis, plummeting by 13%, although the drop was 10 points less than expected due to the rebound in demand from the region's main partners, especially China, the Economic Commission for Latin America and the Caribbean (ECLAC) reported this Friday (22.01.2021).
Un new report of the aforementioned United Nations Commission, presented by the Executive Secretary, Alicia Bárcena, has highlighted the sharp reduction in the value of exports and imports of goods during the pandemic.
ECLAC's assessments by subregion indicate that Central America showed the smallest drop in its exports (-2%), This is particularly due to the fact that trade in the countries in this area is focused on essential products, such as agri-food and pharmaceutical products.
Meanwhile, Trade with South America and Mexico would each see a contraction of 13%, similar to the regional average, and 16% the Caribbean Sea.
Bárcena explained that the pandemic disrupted production and consumption around the world, significantly affecting Latin American trade.
During the first half of 2020, demand for goods and services in the region plummeted. The most affected activities were those associated with the service sector, with falls of around -30% in exports and -26% in imports. The most affected goods and services were those linked to travel, with falls of over 50% in both exports and imports.
In this context, the Dichotomy between two models of commercial specializationOn the one hand, there is the South American model, focused on a primary sector oriented towards the Chinese market, and on the other hand, that of Central America and Mexico, oriented towards manufacturing exports.
Among the region's trade shortcomings, the report highlighted the region's trade dependence on China, since while exports to the Asian country increased in 2020, imports from China fell "precipitously."
Furthermore, the analysis highlighted the lack of intraregional integration in terms of trade. Thus, Mexico and Brazil, the two main economies in the region, only imported between 2% and 3% of goods and services from Latin America and the Caribbean.
In that framework, ECLAC calls for “deepening integration to boost regional recovery.” To accelerate this process, it proposes convergence in trade facilitation, the improvement of regional transport and logistics infrastructure, and cooperation in digital matters.
What are the growth prospects for 2021?
In 2021, ECLAC estimates that the value of exports could grow between 10% and 15%The organization projects a 7,2% growth in the volume of trade in goods.
However, the Executive Secretary has warned that these forecasts are subject to the new wave of infections that has hit the continent since the last quarter of 2020, as well as the slow progress of vaccination programs, which deteriorates the outlook.
Another projection points to the fact that although the Intraregional trade is expected to recover this year, with the Chinese market remaining the most dynamic, thus accentuating the re-primarization of exports and the dependence of Latin America and the Caribbean on the Asian giant.
On the other hand, trends for this year suggest that service exports will continue to be severely affected by the decline in international tourism. In this sense, countries with the closest commercial ties to the United States, such as Mexico, could benefit from nearshoring processes by multinational companies.
This is because in The new commercial scenario will produce a geographical reconfiguration to seek to reduce dependence on China, which will include some important players such as the United States and Japan.
Likewise, This new regionalized globalization will mean the strengthening of regional blocks, but it will also entail high costs for developing countries, which will depend on pre-existing capabilities and will require high levels of coordination.
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