This latest report, Downshifting, argues that a dramatic shift is needed in the region’s international integration policies if they are to adapt to the changing pace of globalization.
The IDB’s Trade and Integration Monitor, written by the IDB’s Integration and Trade Sector, analyzes different aspects of the downshift in global trade and the effects this is having on the region. It focuses on the evolution of Latin America and the Caribbean’s integration into the global trading system by using the data available from INTrade, the IDB’s information system on integration and trade.
The study explains how deteriorations in the terms of trade and fluctuations in the already weak growth of trade volumes have depressed the value of regional exports and generated deficits in the current account of the balance of payments in most countries. These trends are disaggregated by country, subregion, product, and export destination market, and the study analyzes short- and long-term outlooks for regional trade, taking into account how recent shifts in exchange rates have affected these, along with the structural transformations to trade over the last 20 years.
Latin America’s exports of goods shrunk at annualized rates of 14.8% in 2015 and 8.5% in the first seven months of 2016. Exports of services contracted for the first time since the financial crisis (-2.5% in 2015).
The 2016 Trade and Integration Monitor points to the presence of challenges both old and new in a region that is increasingly polarized when it comes to tackling these, a situation that urgently needs to be addressed. The intensity and duration of this downturn suggest that the global trading system seems to be entering a new normal characterized by low growth.
In the short term, bilateral trade arrangements are not expected to have a positive effect on intraregional exports, particularly within South America. The publication foresees disincentives to diversification, as intraregional trade is where the share of manufactures in the total is greatest.
“From a long-term perspective, prioritizing policies that promote trade diversification is more urgent than ever.”
The authors insist on the need to fast track the international trade negotiations agenda in countries that are still lacking a sufficiently deep, well-articulated network of agreements, where they believe the years ahead will pose greater challenges than the last two decades have. This is due not only to economic factors but also to a political context that is increasingly skeptical of market openness, particularly in developed countries.
Giordano, Paolo, ed., and Ramos, Alejandro. 2016. Trade and Integration Monitor 2016: Downshifting: Latin America and the Caribbean in the New Normal of Global Trade. Washington: IDB/INTAL IDB.