A new study released by the Economic Commission for Latin America and the Caribbean (ECLAC) is predicting that Latin America and the Caribbean countries will in 2017 leave behind half a decade of declines in the prices of their export basket and a weak increase in exported volume, achieving 10% growth in the value of its shipments abroad.
ECLAC in its annual report on ‘International Trade Outlook for Latin America and the Caribbean, 2017’ notes that the region’s imports will also recover after four years of declining values, since they are projected to grow seven per cent in 2017. ECLAC said although there is great uncertainty in macroeconomic, technological and geopolitical arenas at an international level, various factors have contributed to the trade recovery in Latin America and the Caribbean.
It said these factors include greater dynamism in aggregate demand in some of its main trading partners; a return to economic growth in the region itself, which is expected to grow 1.2 per cent in 2017 and 2. Per cent in 2018, after two years of recession; higher prices for several of its basic export products; and the dismantling of tariff and non-tariff barriers in some of its countries, the report indicates.
According to the document, the recovery in regional exports in 2017 will be led by shipments to China and the rest of Asia, estimated at (23 and 17 per cent value increase, respectively, while exports to the United States and within the region will expand at a rate near the average of nine and 10 per cent respectively.
Sales to the European Union will be less dynamic estimated at six per cent increase.
ECLAC said with regard to trade within the region, a rebound is expected in all its sub regions, especially in South America.
It said for the year as a whole, growth in the value of intraregional exports is forecast at 10 per cent. Their weight as a percentage of the region’s total shipments abroad is seen at 16.8 per cent below the maximum level of nearly 22 per cent reached in 1994, the report states.
The study adds that intraregional trade offers great potential for the export of manufactured goods and more elaborated products generally.
‘This highlights the urgent need to deepen regional integration, even more so considering the recent shift in U.S. trade policy and the uncertainty associated with the renegotiation of the North American Free Trade Agreement (NAFTA),’ it indicates.
In the new study, ECLAC also analyses the performance of the region’s trade in modern services, meaning those that have high value-added and are intensive in the use of Information and Communications Technology (ICT).
It said this category includes telecommunications and IT services, financial services, insurance and pension services, royalties for the use of intellectual property, and diverse business services. For example, several of these activities offer the region’s countries interesting opportunities to attract foreign investment, linked to outsourcing processes.
According to the document, in this area Latin America and the Caribbean continues to be a marginal actor. Its participation in total global service exports in 2016 was just 3.1 per cent, compared with 5.6 per cent of global goods exports. More specifically, its share of the export of modern services was just 1.8 per cent.
‘The region’s exporting dynamism depends on implementing active, long-term public policies. Also needed are public-private strategies with clear objectives for promoting human capital and the digital ecosystem, incentivizing exports and attracting foreign direct investment, as well as for deepening regional integration in services,’ said Alicia Bárcena, ECLAC’s executive secretary.
The document addresses the challenges of Latin America and the Caribbean with regard to global agricultural trade. It verifies that the region as a whole is a net exporter of agricultural products.
The weight of the farm sector in regional exports has increased sharply in this century, rising from 17 per cent in 2000 to 26 per cent in 2016. Meanwhile, the region’s participation in global agricultural exports has also grown, although to a lesser extent: from 10 per cent in 2000 to 13 per cent in 2016.
In this sense, the United Nations regional organization emphasizes that Latin America and the Caribbean’s agricultural exports showed greater resilience than its total shipments in the 2012-2016 period, which marked the region’s worst export performance since the 1930s. While the value of regional agricultural exports fell just one per cent during that period, the contraction in total exports was 21 per cent, as a result of four consecutive years of declines.
The figures included in the study reveal a great heterogeneity within the region. In the last decade, South America has accounted on average for 80 per cent of the value of the region’s agricultural exports, with the Caribbean just one per cent.
The regional export basket is dominated by basic products such as raw cane sugar, coffee, not roasted or decaffeinated, soybeans, soymeal, maize and frozen beef. In contrast, the region shows a poor export performance in processed products.
According to ECLAC, the current high concentration in raw materials imposes the urgent challenge of ‘decommoditizing’ the export basket, which is also true of other sectors related to natural resources.
‘For this to occur, it is necessary to develop attributes that differentiate products, such as quality, brand, traceability, safety and international certifications…which allow for fetching higher prices in global markets, the organization indicates.
‘Furthermore, officials must generate conditions that are more favourable to processing those products that today the region exports almost exclusively in their raw form. To achieve all this, more active industrial policies – implemented in the context of public-private alliances – are essential,’ ECLAC added.
(Caribbean News Agency)