The Inter-American Development Bank (IDB) has estimated that the value of exports from Latin America and the Caribbean will decrease by 2.4 per cent for 2019.
Driven by slowing global demand, volatility in the commodities markets, and uncertainty around global trade tensions, the downturn in exports from the region comes after two years of consecutive growth. In 2017, trade in the region grew by 12.2 per cent and lowered to 8.7 per cent in the year after.
According to the IDB, the decline in exports is consistent with global trends, as the value of global trade fell by 3.1 per cent year-on-year in the first three quarters of 2019.
“While advanced economies are beginning to display a cautious return of optimism, emerging economies continue to pose risks to exports from Latin America and the Caribbean,” said Paolo Giordano, principal economist at the IDB’s Integration and Trade Sector.
Giordano was responsible for coordinating the latest edition of Trade Trends Estimates for Latin America and the Caribbean.
Based on the study, the region’s only source of growth for the year was trading partner the United States of America, with sales to that country rising by a meagre one per cent. On the other hand, exports to the European Union contracted by seven per cent and sales to China fell 2.3 per cent.
At the same time, intraregional exports shrank by 10.8 per cent.
Furthermore, the report indicates that whereas South American exports for the year declined by 7.2 per cent and shipments from the Caribbean fell by 10.8 per cent, trade the Mesoamaerican region (Mexico, the Dominican Republic and Central America) grew.
“Exports from Mesoamerica grew 3.1 per cent as a result of a 3.3 per cent increase in shipments from Mexico and a 1.5 per cent rise in those from Central America. While foreign sales from these countries remained on positive ground, they grew at significantly lower rates than in the previous year,” a release from the IDB stated.
A closer look at South America reveals that Argentina, Uruguay and Ecuador recorded growth rates of 5.0 per cent, 4.0 per cent and 3.0 per cent respectively. However, exports from the subregion’s biggest economy, Brazil, fell 6.8 per cent, along with with Bolivia (4.8), Colombia (4.7), and Peru (7.2).
Venezuela and Paraguay suffered sharp declines in exports with the former recording 42.7 per cent contraction and the latter falling by 15.4 per cent.
In Mesoamerica, exports from Mexico grew 3.3 per cent, foreign sales in the Dominican Republic rose 5.3 per cent, Panama’s shipments increased 3.1 per cent, external sales from Costa Rica moved up 1.4 per cent, and Guatemala’s external trade improved by 0.8 per cent. In the meantime, exports from El Salvador remained stagnant Honduras recorded a 1.0 per cent falloff in sales.
The Bahamas, Belize and Haiti led export growth in the Caribbean with rates of 28.4 per cent, 12.3 per cent and 4.1 per cent, respectively. In contrast, Trinidad and Tobago, Suriname, Jamaica, Guyana and Barbados all recorded declines in shipments.
The IDB’s Trade Trends Estimates reports that the reduction in the value of exports was due to declines in the price of the region’s main commodities.
Despite volatility, the average price of oil from Latin America and the Caribbean fell by 12.9 per cent between January and October 2019. For the same period, the value of copper also fell, at a rate of 8.3 per cent. Soybeans contracted 5.8 per cent for the corresponding period in 2018.
On the other hand, the price of sugar remained “relatively stable” for 2019, while iron ore rose by 39.4 per cent due to disruption in production affecting supply.
“Looking ahead, the leading indicator does not yet forecast a trend reversal in the coming months. The outlook for trade in Latin America and the Caribbean depends on a balance of external and internal risks that are moderately tilted to the downside, despite some emerging green shoots,” the IDB study noted.