IDB projects 29 per cent growth in Latin American exports

Latin American exports to the world grew by a projected 29 per cent in 2010, to approximately US$853 billion, reversing a 23 per cent fall in 2009, according to preliminary estimates by the Inter-American Development Bank’s Integration and Trade Sector.

Intra-regional exports grew 27 per cent, while extra-regional flows expanded nearly 30 per cent. Intra-regional trade as a share of Latin America’s total trade with the world stands at an estimated 17.5 per cent, slightly lower than last year’s 17.8 per cent.

South-South integration and trade with China, in particular, has provided a counterbalance to weak demand in the developed countries. In the case of Brazil and Chile, exports to China did not suffer to the same extent as they did to the rest of the world during the crisis period; and, in fact, they exhibited positive growth for some months. Furthermore, Latin America’s overall exports to China grew nearly 50 per cent this year over 2009 levels.

On a sub-regional level, exports by Mercosur and the Andean Community each grew by 28 per cent. Paraguay led the Mercosur regional grouping with 39.7 per cent growth in total exports; while Brazil, Uruguay, and Argentina saw their exports grow by 29.7, 24.6, and 24.0 per cent, respectively. Regional deepening in Mercosur continued, with intra-bloc trade rising 41 per cent year-on-year, and all members increased their intra-regional exports by at least 30 per cent, with Brazil’s exports to the rest of the group growing by 50 per cent over the first 10 months of the year.

In the Andean Community, exports by Peru grew 35.2 per cent, Ecuador 28.8 per cent, Bolivia 27.5 per cent, and Colombia 21.2 per cent. Intra-Andean trade rose 36 per cent. Chile once again experienced substantial export growth, driven by more favourable copper prices and dividends from the government’s growing number of trade agreements, among other factors. Chile’s exports rose 38.5 per cent. Chilean exports to China, its top destination of exports, grew by nearly one half. In this hemisphere, sales to Mercosur rose 54.7 per cent, and those to the United States, 15.5 per cent.

Mexico’s exports are projected to grow by a third this year, more than offsetting last year’s 21 per cent decline. Overall results for both 2009 and 2010 closely tracked trade patterns with the U.S., Mexico’s largest trading partner. Sales to Mexico’s Central American Common Market neighbours to the south are on track to grow 29.2 per cent.

Central American exports, which fell by less than those from the other Latin American sub-regions last year, similarly rose by a more muted 14.1 per cent in 2010. Nicaragua (30.0 per cent) posted the strongest results, while Guatemala, El Salvador, Honduras, and Costa Rica grew at respective rates of 16.0, 15.9, 13.8, and 9.1 per cent. It should be noted, however, that these estimates may not capture all of the effects of the recent CAFTADR agreement, as data for maquila exports are not yet available for all countries. 

While this is an impressive performance, the overall recovery in exports is fragile and depends on a number of external factors. Slower-than-expected growth in the U.S., or a deepening of the debt crisis in the Eurozone, could cause demand for Latin America’s exports to fall once more. Also, some of the growth is due to the strengthening of commodity prices in 2010. Diversification towards the Chinese market helped mitigate the damage from the recent crisis, but a double-dip global recession or prolonged slowdown would likely reduce China’s demand for the region’s primary products.