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Latin America and the Caribbean in the world economy, 2009-2010: a crisis generated in the centre and a recovery driven by the emerging economies: briefing paper

October 2010 | Latin America and the Caribbean in the World Economy
NU. CEPAL. División de Comercio Internacional e Integración
28 p. : gráfs., tabls.
Latin America and the Caribbean in the World Economy
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Version en español (VERSIÓN FINAL) Versão português The 2009-2010 edition of Latin America and the Caribbean in the World Economy, which discusses the crisis generated in the developed world and the recovery driven by the emerging economies, is divided into five chapters. Chapter I undertakes a short- and medium-term analysis of the post-crisis international economic situation, concentrating on its implications for international trade prospects in Latin America and the Caribbean. It examines the recovery of the global economy, which has centred mainly on the Asian economies (especially China) and other emerging economies, together with the role played by international trade in this recovery both globally and regionally and the heterogeneity of trade performance between different regions of the world. Some latent uncertainties that could throw the recovery off course are also identified, including: (i) the difficult task of sustaining growth and ensuring fiscal stability in the main economies by ensuring an orderly transition in the sources of global demand from public-sector stimuli to private-sector spending and from stimuli provided by economies running external deficits to stimuli generated by economies in surplus; (ii) weak final demand in the industrialized countries and the possibility of economic and financial contagion from the euro area, which could negatively affect commodity prices and demand; (iii) asymmetries in monetary policies between emerging and industrialized economies that could send destabilizing capital flows into the former, setting them up for eventual overheating and speculative bubbles that could affect macroeconomic stability; (iv) large differences in economic growth rates and interest rates between emerging and industrialized economies which, if not moderated, could progressively be reflected in currency appreciation in Latin America and the Caribbean and other emerging regions, affecting the potential for progress in diversifying exports; (v) a shift in the main sources of economic, trade and financial growth towards developing Asia and emerging countries generally, which highlights the importance of South-South trade and initiatives to strengthen it. Chapter II reviews developments in regional trade during and after the crisis from both a longterm and a more immediate perspective, as well as the trade policy applied by the region's countries during this period. It offers a detailed analysis of the evolution of goods trade flows by origin and destination and of their sectoral composition over the past two decades, finding a high degree of heterogeneity between the region's countries: export growth has been stronger in the countries of South America than in Mexico, Central America and the Caribbean, owing to strong demand for commodities from Asia, particularly China. Consequently, while the recovery in regional trade has been substantial, particularly in South America, it has heightened an already somewhat excessive reliance on commodities that incorporate little know-how or technological progress. The challenge, then, is to find a way of taking advantage of this upsurge by strengthening the linkages between natural resources, manufactures and services, encouraging innovation in each of these links and coordinating them into clusters in which there is room for small and medium-sized enterprises, so that a vigorous export performance has greater spillover effects on the rest of the economy and so that the results of this growth are distributed more equally. This means there is a need for an integrated approach to stimulating competitiveness and innovation, as argued in the document presented at the thirty-third session of the Economic Commission for Latin America and the Caribbean (ECLAC) in Brasilia,(1) with a view to coordinating policies on export promotion and diversification, technological innovation and dissemination, inward foreign direct investment (FDI) and human resources development. (1) ECLAC, Time for equality: closing gaps, opening trails (LC/G.2432(SES.33/3)), Santiago, Chile, May 2010.