The recent update of the Latin American Trade Trends reveals that the rate of export contraction has slowed after the 15% collapse of 2015.
Latin American exports shrunk 9% in the first quarter of 2016 in comparison with the same period in 2015, which marks a deceleration in comparison with the 15% drop of 2015, according to a new report from the Inter-American Development Bank (IDB). Following 18 months of contraction in trade, Latin America and the Caribbean is experiencing a downturn that is less intense than the collapse of 2009 but that has lasted longer.
The update to the report entitled “Trade Trend Estimates: Latin America and the Caribbean” reveals that the stabilization of commodity prices and the growth in export volumes have led to a slight increase in the region’s trade performance.
The slowing of the contraction in exports—the sustainability of which remains uncertain—is largely due to the prices of the main commodities that Latin America exports, which seem to have bottomed out in January 2016 and have increased slightly in recent months.
Export contraction slowed in South America as a result of the reversal in the trend for Argentina, the only country in South America to see a growth in exports, and the relative deceleration of the rate of decline in exports from Brazil, Chile, and Peru, and Paraguay and Uruguay, to a lesser extent. The greatest contractions in the region continue to be in Bolivia, Colombia, Ecuador, and Venezuela, whose economies specialize in hydrocarbons.
In turn, contrary to expectations, the drop in exports from Mexico and some Central American countries such as El Salvador, Guatemala, and Honduras has worsened. The downturn slowed slightly in Nicaragua, Panama, and the Dominican Republic, while Costa Rica managed to reverse its recent export performance and experienced growth in this regard.
This report from the IDB’s Integration and Trade Sector includes detailed data for 18 Latin American countries.
In the current context, this contraction in exports is mainly due to the drop in demand from the United States and within the region itself. The latter has a notable effect on South American economies, while the fact that economic growth in the United States is not being transmitted via the trade channel is disadvantaging Mexico and Central America.
The report concludes that the outlook for exports from Latin America and the Caribbean continues to point downwards and that the possibilities of reversing this negative trend are associated with a context of stable commodity prices and an eventual improvement to these, together with an acceleration in the external demand from the United States and China.