The month of April reflects a significant fall-off in exports for Latin America and the Caribbean, says a new report by the Inter-American Development Bank (IDB) with the drop in the value estimated to be around 30 per cent year-on-year.
This follows contraction in the first quarter of 3.2 per cent in the compared to the same period in 2019.
The contraction in global demand put downward pressure on the prices of the region’s main export commodities.
The price of oil fell by 32.0 per cent year-on-year between January and April 2020, when inventories built up in response to plummeting global demand.
The report was produced by the IDB’s Integration and Trade Sector and its Institute for the Integration of Latin America and the Caribbean (INTAL).
Other products that saw prices drop in the same period include copper (-11.9 per cent), soybean (-2.2 per cent), and coffee (-4.4 per cent). Iron ore was the only major export commodity from Latin America whose price rose in the January-April period (2.9 per cent).
The IDB analyses the trade performance of 15 countries in the region. The research source says the contraction is a continuation of a downward trend that began in early 2019, when exports from the region declined by 2.2 per cent, and to the first effects of the economic crisis triggered by the COVID-19 pandemic.
The downturn in global demand hit the region through both the price and volume channels, according to the latest edition of Trade Trend Estimates for Latin America and the Caribbean.
The drop in intra-regional export flows within Latin America (-8.6 per cent) was the main contractive factor in the first quarter.
The drop in the value of the region’s exports is estimated to be around 30 per cent year-on-year in April and the downward trend will continue at least until June 2020, according to IDB estimates.
“Looking ahead, it is likely that regional exports will contract even more severely than during the Great Trade Collapse of 2008–2009, when they fell at an average annual rate of 24 per cent over 13 months,” said Paolo Giordano, Senior Economist at the IDB’s Integration and Trade Sector, which coordinated the report.
Latin America’s export volumes fell by an estimated 1.2 per cent year-on-year in the first quarter of 2020, after growing 0.5 per cent in 2019.
The first sub-region to experience the trade contagion of the COVID-19 pandemic was South America, whose exports are concentrated in commodities and for which China is a core partner. Its exports contracted at an estimated rate of 7.6 per cent after dropping 6.2 per cent on average in 2019.
Exports for Central America and the Caribbean slowed from 2.5 per cent in 2019 to 1.3 per cent in year-on-year in the first quarter of 2020, which reflects the downturn in the growth of Mexico’s external sales (0.6 per cent).
Continuing a trend that began in mid-2019, exports from Central America accelerated remarkably, increasing by 9.1 per cent year-on-year in the first quarter of 2020. However, both trends reversed in March, mainly because of declining demand from the United States.
The IDB said that the region’s total imports fell by 4.0 per cent, evidencing the deepening of the contraction of economic activity in several countries of the region as a result of the health crisis and the policies implemented to contain it.