The Economic Commission for Latin America and the Caribbean (ECLAC) estimates the growth in the value of regional exports at 20% in 2022, driven by a 14% rise in prices and an expansion of 6% in exported volumes. These are the figures reported by the United Nations organization in its latest flagship annual report published today in a press release.
In the report International Trade Outlook for Latin America and the Caribbean 2022, the Commission also indicates that the value of regional goods imports increased by 24%. Like exports, the bulk of the increase in regional import value is attributable to the price component.
According to the report, regional goods exports had their second year of double-digit growth in 2022, after growing by 27% the previous year. However, just like in 2021, the expansion was driven mainly by external factors (the rise in prices of raw materials, particularly fuel), and not by the capacity to increase export volumes or to diversify regional export supply toward new sectors.
In contrast to the slowdown in goods commerce, services trade in the region showed a significant recovery, growing by 45% in the first half of 2022 compared to the same period in 2021. This is mainly due to the reactivation of tourism, followed by “other services”, which include the so-called “modern services.”
The report warns that in a context marked by the conflict in Ukraine, high inflation, slowed growth, geopolitical tensions and the persistence of the pandemic, world trade experienced strong deceleration in 2022, which will worsen in 2023: after expanding by 9.8% in 2021, the volume of world trade in goods is projected to grow by 3.5% in 2022, and just 1% in 2023.
Among the region’s main trade partners, exports to the European Union are estimated to have been more dynamic in 2022, with growth in value of 26%. For the first time since 2015, exports to China were less robust, growing by just 8%. Meanwhile, intraregional trade is estimated to have expanded by 22% – which is good news for manufacturing exports in the region.
According to the report, the largest estimated increases in exports were in fossil-fuel exporting countries: Trinidad and Tobago (69%), Venezuela (63%), Colombia (49%) and Guyana (45%).
On the other hand, 25 of the 33 countries of the region suffered a negative shock on their terms of trade in 2022; i.e., the price of imported products increased more than that of the products they export. This situation reflects the rise in food, fuel and fertilizer prices since 2021, which rose even higher in 2022 due to the conflict in Ukraine. The only countries to see a positive impact on their terms of trade were net fuel-exporter countries.
In its 2022 edition, International Trade Outlook includes a chapter that examines the performance of manufacturing exports from Latin America and the Caribbean in the 1990-2021 period. According to the report, the region as a whole performed weakly in manufacturing exports: after a slight increase between 1995 and 2001, its share in global manufacturing exports has not surpassed 5% in the last 20 years. In addition, the region shows a persistent, growing trade deficit in manufacturing exports, which grew from 3% of GDP in 1995 to 6% in 2021. Latin America and the Caribbean only show significant surpluses in the automotive and food, drink and tobacco sectors; and its manufacturing exports are heavily concentrated by origin: only one country (Mexico) accounts for 57% of the total between 2019 and 2021.
The report goes on to note that the COVID-19 pandemic and the war in Ukraine have highlighted the region’s heavy dependence on external supply of strategic products like medicines, medical devices and fertilizers. “For this reason, it is urgent to revitalize regional integration and implement policies to encourage production to energize manufacturing exports,” says ECLAC in the report.
“Given its importance for manufacturing exports, we must advance toward a large and stable regional market through initiatives that foster regulatory convergence, trade facilitation, strategic use of public procurement and improved connectivity,” it emphasizes.
Therefore, policies are needed to foster production and raise export competitiveness in all segments of manufacturing supply chains, including their associated service activities (research and development, design, logistics, etc.), underscores the United Nations regional commission.
Finally, chapter three of ECLAC’s report examines the profound disruptions in maritime supply chains, which mobilize 80% of world goods trade, since the beginning of the pandemic. The massive closures of productive activities, increased congestion at ports and limited availability of containers, in addition to the heightened concentration within the shipping industry, have led to scarcity of final imported consumer products and inputs, as well as imported capital assets for production; lost reliability of shipments; and increased inflation due to higher shipping costs.
One of the key effects of these disruptions is the notorious increase in shipping rates. For instance, the cost of transporting exports from the region to the United States in June 2022 was four times greater than it was in January 2019, whereas transportation costs for imports from Asia are currently 4.3 times higher than in January 2019.
ECLAC holds that global maritime supply chains are key to advance toward sustainable development in the region. Here, Latin America and the Caribbean face a double challenge: on one hand, it needs to catch up on infrastructure and interconnectivity, and on the other, it must tackle the impacts that, at the present juncture, threaten to reconfigure the structure of international trade in terms of routes, stakeholders and interests for the coming years.
“The coordinated channeling of public and private resources through public-private partnerships (PPP) can contribute to the advancement of new projects and to improving the existing infrastructure that the region demands. We must make way for PPPs that put the interests of people first and are aligned with the Sustainable Development Goals,” says the report.