The new technical paper from IDB/INTAL, “Extraregional Exports of Manufactures from South American Countries (link in Spanish),” by Jorge Lucángeli, is the result of a process of compilation and statistical analysis that focuses on the characteristics of a segment of South American exports that have been largely unexplored.
The manufacturing sector is contributing to the goal of diversifying exports in terms of both products and markets and reducing the region’s vulnerability to the ups and downs of some markets. The paper (link in Spanish) shows that exports to outside South America of non-natural resource–based manufactures increased from US$40 billion to US$55 billion in ten years, a total increase of 37.5%.
From 2011 onwards, the behavior of exports from Latin America and the Caribbean has been lackluster, as a result of the weakened demand from its main foreign trading partners and the fact that the growth rates of economies in the region have been below their potential. This is in stark contrast with the exceptional export boom that preceded this stage, which began in the early 2000s and was interrupted by the severe crisis that shook the global economy in 2008 to 2009.
The methodology used in the paper centers on the quantification and description of extraregional sales of South American manufactures according to indicators of the technological complexity, concentration, and sophistication of the export basket. The study presents a comprehensive overview of the characteristics of these flows, which is a useful basis for considering the possibilities for diversifying products and markets, a task that is currently on the agenda of governments, private sectors, and researchers who are concerned with these questions.
The section of the study that examines the current situation in the sector makes it clear that the export boom of 2003–2011 did not substantially alter the proportion of South American exports going to extraregional markets, which remained at around 80% of the total throughout this period. Nor did it affect the shares of primary products and manufactures within South America’s total extraregional exports, which are distributed into roughly equal parts.
Total South American Exports, Intra- and Extraregional, by Technology Content
However, the one substantial modification to the shares of segments within extraregional manufacture exports arose in relation to natural resource–based goods. Before the boom, this segment represented half of extraregional exports while by the end of the period it had reached 70% of the total. This took place to the detriment of non-natural resource–based manufactures, which are generally associated with more technologically complex processes that are not determined directly by commodity markets.
It is worth noting that this shift away from more technologically complex products particularly affected Brazil. A second major effect of the 2003–2011 export boom was related to the breakdown by destination market of extraregional exports from South America. A substantive drop was observed in the USA’s share as a destination market, which affected all categories of products in terms of technology content and which unfolded in parallel with the substitution of South American suppliers with ones from other areas.
At the same time, China’s share as a destination market for South American manufactures increased, although this is strongly related to the notable dynamism of natural resource–based manufactures.