After three years of stagnation, the region’s exports saw the steepest drop since the 2009 world trade collapse, says new IDB report

SAN JOSÉ, Costa Rica – Exports of Latin American and Caribbean goods fell 10.9 percent in the first half of 2015 compared to the same period of 2014, the steepest drop since the 2009 trade collapse, according to a study released today by the Inter-American Development Bank (IDB).

The IDB’s Trade and Integration Monitor 2015 states that the contraction in exports, which had begun in mid-2014, has worsened this year as a result of a substantial decline in China’s demand and steep reductions averaging 37.1% in the prices of commodities between June 2014 and June 2015. The drop in the region’s exports also reflects the overall contraction in global trade.

“The favorable conditions that fueled the region’s exports over the last decade have waned, and so it is crucial to diversify our exports through the implementation of trade promotion policies as well as policies to make use of trade agreements and enhance productivity,” said Paolo Giordano, Principal Economist of the IDB’s Integration and Trade Sector, and coordinator of the report.

In 2014, the region’s exports had dropped by 2.8 percent , and in the first half of 2015, numbers deteriorated further. The South American countries were the most affected (-17.7 percent) due to a fall in the price of raw materials and a shrinking regional manufacturing market. The Caribbean countries (-14.9 percent) experienced this deterioration in a context of overall economic vulnerability. In Mexico (-2.2 percent) and Central America    (-3.4  percent) there was a negative trend shift vis-à-vis the previous year in spite of a greater diversification of exports.

Exports of services also were affected, as they grew by only 1.8 percent, compared to 4.7 percent the previous year.

The report analyzes the region’s overall economic situation, characterized by greater exchange rate volatility and prospects of higher international financing costs, and underlines the urgent need to implement public policies aimed at promoting trade diversification.

The Integration and Trade Monitor 2015 was presented in a seminar organized by the IDB and INCAE Business School in the capital of Costa Rica. The report compiles the most recent statistics, analyzes the trade performance of the region, and includes a chapter on the evolution of export diversification over the last decade. The analysis is based on the indicators provided by INTrade, the IDB’s trade and integration database.

According to the Monitor, the slowdown in the growth of the developing countries, both intra- and extraregional, has not yet been offset by the emerging momentum of the United States economy and the troubled recovery of the European countries. Furthermore, the sustained appreciation of the US dollar and the low demand worldwide account for the reduction in primary commodity prices affecting regional exporters.