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(CMC) – The Economic Commission for Latin America and the Caribbean (ECLAC) predicts that regional trade will grow in 2018 amid global tensions that require greater regional integration.
According to ECLAC, the value of regional goods exports will rise 9.7 per cent in 2018, registering a second straight year of growth after the notable decline seen between 2012 and 2016.
This increase can be broken down into a 7.6 per cent increase in prices and a 2.1 per cent rise in volume, ECLAC indicates in its annual report, “International Trade Outlook for Latin America and the Caribbean 2018”.
The report, which analyses the impact of divergent global growth and trade tensions on the region’s trade, was released here by the United Nations regional organization’s Executive Secretary, Alicia Bárcena.
But the report notes that despite the increase, the region’s export volume is seen growing by less than half the pace of shipments from developing economies as a whole which, according to World Trade Organization (WTO) projections, are seen expanding 4.6 per cent.
“The evolution of the region’s foreign trade in 2018, in addition to being a reflection of each country’s level of economic activity, will be determined by the structure of export and import baskets, as well as by the external demand of its main trading partners,” the report notes.
In South America, for example, the report says the growth forecast for exports (10.2 percent in value) fully responds to an increase in commodities prices, especially for oil and minerals and metals.
The report indicates a similar trend is seen in the Caribbean, where the expected sharp rise (12.1 percent) is “strongly influenced by higher prices for the oil and gas exported by Trinidad and Tobago.”
With regard to the main trading partners of Latin America and the Caribbean, the report says shipments to China – made up almost entirely of raw materials and natural resources-based manufactured goods – are seen notching the highest increase (28 per cent) in 2018.
“This situation reinforces the region’s specialization in commodities exports, particularly in South America,” it said, noting that exports within the region and to the United States, which tend to have greater manufactured content, are seen growing at significantly lower rates of 12 per cent and 7.1 per cent, respectively.
With regard to imports, the report states it is also those coming from China – which is the second country of origin for the region’s imports, after the United States – that show the most dynamism.
These are composed nearly entirely of manufactured goods that compete with regional production in various sectors, the report states.
“International Trade Outlook 2018” states that the backdrop to current trade tensions between the United States and China is the dispute for global economic and technological leadership, as well as the debate over the coexistence of different development patterns.
According to report, in the short term, “these tensions could have a positive impact on regional exports, but a scaling-up of protectionism would entail serious risks for the global economy and, therefore, for the region as well.”
“Regional integration is indispensable for making progress on the diversification of exports and on the transition toward a more knowledge-intensive export basket, considering the elevated industrial content of intraregional trade and its importance for SMEs (Small Medium Enterprises) that export,” said Bárcena.
“It is necessary to intensify efforts aimed at building an integrated regional market given the context of slowed growth, net capital outflows and growing protectionism that the region faces, and which will likely worsen in 2019,” she added.
The report notes that the region as a whole is a net exporter of minerals and metals, with 8 percent participation in global exports in this sector.
But it says the region’s shipments are characterized by a low degree of processing.
The report says participation of raw materials in the region’s exports of minerals and metals, currently 37 per cent, has nearly doubled in the last 20 years due largely to demand from China and the rest of Asia.
“This situation is worrisome“because of the known problems associated with dependence on the export of raw mineral products, such as the vulnerability of exports, economic growth and tax income to price fluctuations; little value added or diversification toward new products and services; and diverse types of environmental harm,” ECLAC said.
The report analyzes the potential of cross-border e-commerce for invigorating and diversifying regional exports.
It states that the region has rapidly increased its consumption of imported products through foreign-owned electronic platforms, but added that “it has not increased its exports through this means to the same extent.”
The report notes that the participation of Latin America and the Caribbean in global cross-border electronic commerce rises from 2.6 per cent in 2014 to 5.3 per cent in 2020.
To promote electronic commerce in the region, ECLAC proposes forging the regional digital market; promoting digitalization and simplified financing for trade; modernizing customs offices and postal services; and reducing the costs of online cross-border payments.
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