The Inter-American Development Bank (IDB) published estimates of international trade flows in Latin America and the Caribbean for the year 2020 and the first quarter of 2021. The note shows an 8,9% year-on-year growth, after a contraction of 9,0% in 2020, which indicates a regional trade rebound despite the COVID-19 pandemic.
However, the international financial organization warned that the change in trend is mainly due to a increase in export prices, while volumes continued to decline.
The report stated that the prices of several commodities exported by Latin America approached historical highs in the first four months of 2021. Thus, the year-on-year increase was more noticeable in the mineral of iron which rose 93,6%, cobre 57,9% and the oil 41,7%. The rise in the soybean was 60%, sugar 27% and the café had a growth of 11,9%.
The evolution of prices was influenced by the revival of global economic activity (at the behest of massive fiscal and monetary aid packages) and the weakening of the dollar American, the IDB said.
In terms of exported volumes, in the first quarter of 2021, there was an estimated 2,2% year-on-year drop, although there were differences. According to the report, "economies with exports concentrated in minerals and fuels such as Chile, Colombia, Peru and Venezuela continue to register contractions in the quantities exported, while those specialized in agricultural products such as Argentina, Brazil, Paraguay and Uruguay, and in manufacturing such as El Salvador and Mexico, show signs of recovery."
Uruguay recorded the strongest recovery in the entire region, with export volumes up 20,5% in the first quarter of 2021, driven by meat, wood and wheat. Brazil's export volumes increased 2,4% due to shipments of iron ore, sugar and coffee. Exports of Argentina increased 2,1% year-on-year, due to increased shipments of soybean oil, flour, and pellets.
Despite this, the IDB warns that Latin America is not taking full advantage of the momentum generated in the growth of its main extra-regional trading partners: United States and China.
China was the main driver of trade recovery in Latin America, while there was a smaller boost in demand from the United States and the European Union.
Exports to China rose 34,7% year-on-year in the first quarter. Shipments to the US and EU also increased but at a slower pace, by 3,9% and 4,0% respectively.
Performance was very heterogeneous across subregions. In South America, particularly benefiting from increased Chinese demand, external shipments grew 14,4% year-on-year in the first quarter of 2021, after a 9,5% drop in 2020. Exports of Mesoamerica had an estimated increase of 4,0% year-on-year in the first quarter of 2021. For its part, shipments of Central America expanded 11,3% during those months, where Panama's exports stand out. In the last two subregions, demand from the United States acted as the main factor of expansion, and for the countries of the isthmus, the subregion itself also contributed to the increase, the analysis highlighted.
In short, at the beginning of 2021, Latin America has overcome the recessionary trade impact of the pandemic. “Sustaining this growth trend will be key to supporting the incipient economic expansion,” the IDB note concluded. (Estimates of international trade flows in Latin America and the Caribbean, 2021 edition)
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