The trend in trade performance in Latin America and the Caribbean points to a slight improvement, but the uncertainty caused by the COVID-19 pandemic continues to dampen prospects for a return to sustained export growth in the coming months, according to a new report from the Inter-American Development Bank.
The value of exported goods from Latin America and the Caribbean is estimated to contract in 2020 between -13.0 percent and -11.3 percent, after having fallen by 27.5 percent year-on-year in the second quarter.
The downturn in global demand has hit Latin American and the Caribbean primarily on the volume front, although prices have also dropped, according to the latest edition of Latin America and the Caribbean Trade Trend Estimates. The report analyzes the trade performance of 25 countries in the region and is one of two publications of its type that the IDB produces. The other, the Trade and Integration Monitor, assesses the current state of trade based on data from the first half of the year.
“Although Latin America has not yet returned to pre-pandemic export levels, the impact of the crisis is beginning to ease, and the outlook has improved. However, instability persists and a change in trend towards a sustained growth trajectory is not yet in sight,” said Principal Economist at the IDB’s Trade and Integration Sector, Paolo Giordano, who coordinated the report.
Export flows between countries in Latin America and the Caribbean are estimated to fall by 20.2 percent, the most intense drop in the region’s overall performance, followed by the downturn in imports from the region of the European Union (-16 percent) and the United States (-14.6 percent). China’s imports from the region are estimated to increase by 2.1 percent in 2020, despite the contraction observed in the first half of the year.
Trade values contract
The health emergency affected every subregion. Export values in 2020 are estimated to shrink by 12.4 percent in South America, 14.4 percent in Mexico, 5.7 percent in Central America, and 18.9 percent in the Caribbean.
In turn, total imports are estimated to fall by 19 percent in 2020, revealing how the activity has contracted in several countries in Latin America and the Caribbean in response to the health crisis and the economic impact of the policies implemented to contain it.
Export volumes and prices
Export volumes from Latin America and the Caribbean will fall by an estimated 10.4 percent 2020 after growing 0.9 percent in 2019.
Oil prices dropped by 33.5 percent year-on-year between January and October 2020, causing a major impact on the export performance of the region. Copper prices also dropped by 1.5 percent in the same period, while those of iron ore were 7.9 percent higher than in the same period in 2019.
Agricultural products performed comparatively better during the pandemic. Coffee prices stagnated between January and October (0.1 percent year-on-year), while there were increases in those of sugar (2.3 percent) and soybean (2.5 percent) compared to the same period in 2019.
The report was prepared by the IDB’s Integration and Trade Sector and its Institute for the Integration of Latin America and the Caribbean (INTAL).
About the IDB
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance, and training to public and private sector clients throughout the region.