Latin America's exports to Europe increase while trade with China slows down

The value of goods exports from Latin America and the Caribbean grew by 20% in 2022, driven by a 14% rise in prices and a 6% expansion in the volume exported, while that of goods imports increased by 24%.
 
These are the main data on trade performance in the region, according to the new annual report of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), which reveals a number of details about this trade behaviour.
 
For example, one of the most significant data is that for the first time since 2015, trade with China slowed down, which accounted for only 8% of the value of the region's exports, while sales to the European Union grew by 26%, making it one of its main partners.

Despite the increase in exports, exports decelerated compared to 2021 when they grew by 27%. In both years, the expansion was driven more by exogenous factors, such as the rise in the price of raw materials, than by the capacity to expand the volume of exports or the possibility of diversifying supply into new sectors.
 
According to the International Trade Outlook for Latin America and the Caribbean 2022, the largest estimated increases in exports were recorded in hydrocarbon exporting countries: Trinidad and Tobago (69%), Venezuela (63%), Colombia (49%) and Guyana (45%), revealing Latin America's Achilles heel, the manufacturing sector.
 
The region's share of global manufacturing exports has not exceeded 5% in the last 20 years. Moreover, Latin America has a persistent and growing trade deficit in manufactures, from 3% of GDP in 1995 to 6% in 2021.
 
Moreover, Latin America and the Caribbean only has significant surpluses in the automotive and food, beverages and tobacco sectors, and its manufacturing exports show a high concentration by origin: a single country (Mexico) accounted for 57% of the total between 2019 and 2021.
 
The COVID-19 pandemic and the conflict in Ukraine have highlighted the region's high dependence on external supplies of strategic products such as medicines, medical devices and fertilisers: "It is therefore urgent to revitalise regional integration and implement productive development policies to boost manufacturing exports," the Commission says in the study.
 
Latin America has a high regional dependence on external supplies of strategic products such as medicines, medical devices and fertilisers.
 
IAEA/Dean Calma Latin America has a high regional dependence on external supplies of strategic products such as medicines, medical devices and fertilisers.

It emphasises that "given their great importance for manufacturing exports, it is necessary to move towards a large and stable regional market through regulatory convergence initiatives, trade facilitation, strategic use of public procurement and improved connectivity".

Likewise, productive development policies are needed to increase export competitiveness in all segments of manufacturing value chains, including associated service activities (research and development, design, logistics, etc.), the UN regional body stresses.
 
For the region as a whole, a trade deficit of $58 billion is projected for 2022, or $45 billion more than in 2021.
 
In contrast to the slowdown in trade in goods, trade in services 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.
 
In a context marked by the conflict in Ukraine, high inflation, lower growth, geopolitical tensions and the persistence of the pandemic, the report indicates that world trade suffered a sharp slowdown in 2022, which will worsen in 2023 with growth of just 1%.

The report also examines the profound disruptions in maritime supply chains, which mobilise 80% of the volume of global trade in goods, since the onset of the pandemic and their effect on the region.
 
Massive closures of productive activities, increased port congestion and limited container availability, coupled with the high concentration of the shipping industry, have resulted in shortages of imported final goods for consumption and imported inputs and capital goods for production; loss of shipment reliability; and increased inflation due to higher transport costs.
 
One of the main effects of these disruptions has been a marked increase in the price of ocean freight. For example, the cost of transporting the region's exports to the United States in June 2022 was four times higher than in January 2019. Meanwhile, the cost of transporting imports from Asia today is 4.3 times higher than the January 2019 value.
 
ECLAC argues that global seaborne supply chains are key to progress towards sustainable development in the region.
 
Latin America and the Caribbean faces a double challenge: on the one hand, it is necessary to overcome the lag in infrastructure and interconnectivity and, on the other, it must face the impacts that, at the current juncture, threaten to reshape the structure of international trade in terms of routes, actors and interests for the years to come.
 
"The coordinated channelling of public and private resources through Public-Private Partnerships can help to advance new projects and improve existing infrastructure demanded by the region. Partnerships that put people's interests first and are in line with the Sustainable Development Goals must be pursued," the report says.