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Trade Trend Estimates in Latin America and the Caribbean

By Federico Mazzella ,
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A new report describes possible scenarios for trade dynamics in the region, which vary at the subregional level

Trade Trends Estimates: Latin America and the Caribbean, a new report from the Inter-American Development Bank’s Integration and Trade Sector, reveals that the value of exports from the region in 2016 will have continued to decline in most countries, but to a lesser extent than in previous years.

According to the research published in the report, exports from Latin America and the Caribbean shrunk by an estimated 6% in 2016, which points to a tempering of the severe 15% contraction of 2015.

It also suggests that the slump in commodity prices has continued to be the main factor behind the export performance of the region, which is rich in agricultural products, hydrocarbons, and metals. Slow growth in export volumes has not favored the recovery of external sales.

Is a return to growth in external sales to be expected in the near future?

The report highlights that an upturn in the global economy based on the economic expansion of the United States would help to shore up LAC’s export performance, but the foreseeable appreciation of the dollar will continue regardless of the prices of the region’s main export products.

It also points out that the combined impact of the evolution of prices and export volumes points to a varied outlook for LAC. There was a marked deceleration in the downturn in exports in South America, where the estimated contraction of 8% for 2016 is far below the 23% drop of 2015.

In Mesoamerica, foreign sales are expected to shrink by 3%, a rate similar to that of 2015. The rate of export decline has yet to slow in the Caribbean, which saw an estimated drop of 21% in 2016, similar to the 22% fall of 2015.

Could the downward trend be reversed?

The authors argue that the possibility of a reversal in the current downward trend reverses depends on whether commodity prices continue to improve despite the foreseeable appreciation of the dollar, and whether the region returns to a path of growth by reigniting intraregional trade.

There are multiple possible outlooks: an acceleration in external demand, particularly from the United States and China, would bolster exports, while a return to protectionism would skew this forecast in the opposite direction.

The report concludes that LAC seems to have moved past the worst phase of the downturn in trade. However, whether this recovery is sustainable will depend fundamentally on the capacity of the region’s economies to overcome the structural shortcomings that characterize their trade specialization and their excessive dependency on commodity exports.

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