• Falling prices and lower volume growth accounted for the contraction in goods exports.
• Services exports are still growing.
• Intraregional trade flows fell less than extraregional flows.

The value of goods exports from Latin America and the Caribbean fell by 2.7% year-on-year in the first half of 2023 after expanding 17% in 2022, marking the end of the post-Covid recovery, according to a new report by the Inter-American Development Bank (IDB). 

The decline is due to falling prices and lower growth in export volumes. 

During the same period, world trade went from 11.9% growth to a 5% year-on-year decline. The deterioration in the global trade environment is due to several shocks, including geopolitical conflicts, monetary tightening, more frequent adverse weather events, and slower global economic growth.

According to the latest edition of the annual Trade and Integration Monitor, projections for the rest of the year confirm the consolidation of the contractionary trend for exports. 

The report finds that growth of services exports from Latin America and the Caribbean slowed slightly in the first quarter of 2023, reaching 27.8%, compared to 37.7% in 2022. However, they continued to grow faster than the global average (1.3%).

“Once the post-Covid recovery faded, the region’s exports weakened faster than expected. However, this challenging new scenario also comes with opportunities. Specifically, Latin America and the Caribbean has the potential to boost exports and contribute to global food security if the region implements policies to rebuild the competitiveness of the agricultural sector,” said Paolo Giordano, Principal Economist at the IDB’s Integration and Trade Sector, who coordinated the report.  

GOODS EXPORTS FROM LATIN AMERICA AND THE CARIBBEAN

(Annual growth rate, billions of US$, 2020–S1 2023)

After climbing by 8.8% in 2022, the region’s export prices fell by 4.7% year-on-year in the first half of 2023, while export volumes grew by 2.9%. 

Although volume growth was above the global average (-1.3%), it was lower than the previous year and concentrated in a handful of Latin American and Caribbean economies. Import prices fell by 1.5%, less than export prices, causing the region’s terms of trade and trade balances to deteriorate.

The report notes that goods exports to every destination market fell. However, the decline of intraregional sales (-0.6%) was less than that of extraregional sales (-2.2%), and the share of intraregional trade increased to 15.2%. 

The report concludes that Latin America and the Caribbean is facing a challenging external environment marked by less dynamic demand, greater geopolitical fragmentation, more active industrial policies among global competitors, and new regulatory requirements dictated by the climate agenda. 

As the world’s leading net exporter of agricultural products, the region has an opportunity to expand supply and contribute to global food security. 

To make the most of this potential, governments need to work alongside the private sector to increase productivity and regain competitiveness through integrated public policies that address multiple objectives and help find a way around the trade-off between increasing production and reducing the impact on the environment and climate change.

The Trade and Integration Monitor was prepared by the IDB’s Integration and Trade Sector and its Institute for the Integration of Latin America and the Caribbean (INTAL).