The Economic Commission for Latin America and the Caribbean (ECLAC) presented today its annual report Latin America and the Caribbean in the World Economy 2016, which highlights the importance of a proactive response by the region to the tensions associated with globalization and to growing uncertainty in the global economic scenario.
The combination of a persistent recessionary bias and protectionism has given rise to an especially difficult situation for the region’s economies, which should rethink their pattern of global insertion, which for years has served as a structural limit on long-term growth. This situation also runs the risk of producing rollbacks that could erase the social gains made in the previous decade, the report states.
This debate is particularly relevant at a time when it is apparent that global governance has been ineffective in tackling persistent trade, financial and regulatory imbalances that already sharply affect developed countries and are beginning to have an impact on the region, the United Nations regional organization indicates.
“We must diversify the productive structure of Latin America and the Caribbean to drive economic recovery. We must continue betting on diversification, on value chains, on production chains as the foundation and on intraregional integration, which are more necessary than ever,” Alicia Bárcena, Executive Secretary of ECLAC, said in Santiago, Chile during a press conference where the report was released.
ECLAC’s new estimates demonstrate that the foreign trade dynamics of Latin America and the Caribbean are having their worst performance in eight decades. In 2016, the value of the region’s exports will fall for a fourth straight year and contract 5% due to reduced dynamism in global demand for its products and to the growing uncertainty. That said, this decline is substantially less steep than in 2015 (-15%). Meanwhile, imports will fall 9.4%, which is similar to the figure from 2015 (-10%).
In this context, the reduction in intraregional trade, estimated at -10%, marks a much sharper fall than that of exports to the rest of the world, as seen in the previous three-year period, with an especially negative trade dynamic among South American economies.
The report stresses that the region’s participation in global exports of goods and services has stagnated at around 6% in the last 15 years, and has lost ground in the case of high-tech goods and business, financial and telecommunications services when compared with developing Asia, and China in particular.
In this report, for the first time ECLAC presents projections for regional foreign trade in the 2017-2020 period, which point to a modest recovery: their value will grow at an average annual rate of around 3% both for exports (2.9%) and imports (3.1%).
To overcome the tensions of globalization and the difficult trade context faced by the region, the report recommends that the region’s countries advance with diversification and integration; accelerate progress on the trade facilitation agenda; promote the convergence of integration blocs; move toward a regional digital market; implement an infrastructure program; and implement industrial and trade policies that are consistent with the technological revolution and an environmental big push.
The Latin America and the Caribbean in the World Economy 2016 report also analyzes the potential effects of the Trans-Pacific Partnership (TPP), the approval of which is increasingly uncertain. If it comes about, the market covered by this mega agreement would represent 38% of global Gross Domestic Product (GDP) and 24% of global trade in goods.