MercoPress. South Atlantic News Agency

Latam foreign trade forecasted to plunge a record 13% this year

Cepal Director Alicia Barcena says the region should prepare for when full –recovery

Latin American and Caribbean countries total volume of trade is expected to fall 13% in 2009 from the previous year due to the impact of the global economic crisis, according to a report from the United Nations' economic commission for the region, Cepal.

The contraction is greater than the 10% drop seen in global trade this year, Exports will fall 11% the worst drop since 1937 in the midst of The Great Depression, while imports will plummet 14%, their worst drop since 1982 said the Cepal report.

Trade is the sector most affected by the crisis, suffering an “unprecedented” slowdown as a result, the report said. Demand for Latinamerican goods in the US, the European Union, Latinamerican countries and to a lesser extent Asia has dropped off sharply, partly offset by Chinese demand for commodities, which remains strong.

“Policies are urgently needed to reactivate trade because a post-crisis future will keep rewarding export-oriented economies as well as progress in competitiveness and technological innovation” said Cepal Director Alicia Barcena during the report's presentation.

Venezuela and Ecuador (which are oil exporters), Colombia (oil and coal) and Bolivia (natural gas) could see their exports slashed by as much as 32.6% this year, according to Cepa.

In the first half of 2009, mineral and oil exports from the region slumped by 50.7%, while exports of manufactured and agricultural products showed lesser falls of 23.9% and 17% respectively. The steepest fall was in exports to the European Union (-36.3% in total) and the US (-35.3%).

According to Cepal the global crisis has affected the region's economy in four main ways: lower foreign investment; lower remittances from migrant workers abroad; lower prices for basic products; and reduced trade volume.

Foreign investment in Latin America and the Caribbean is expected to fall up to 45% in 2009 due mainly to a slowdown in the manufacturing sector. “The external shock is much greater than the Asian crisis or the debt crisis of the 1980s,” the report said.

However, the crisis has not “drastically affected” GDPs or employment in the region, which shows it was “better prepared this time owing to the favorable economic cycle in 2003-07 and improved macroeconomic policies”.

Cepal expects global trade to recover in “two or three years,” which means the region should be prepared. The report proposes increased regional integration, export diversification and the creation of a program to stimulate intra-regional trade.

In related news the Inter-American Development Bank, IDB, reported that the remittances from Latin American and Caribbean migrants to their countries of origin are expected to drop 11% in 2009.

IDB said that cash remittances are expected to reach 62 billion U.S. dollars this year, down 11% from last year, reflecting the impact of the global economic crisis on migrants, most of them living in industrialized countries such as the US, Spain and Japan.

“The crisis is clearly limiting migrants' capacity to send money to their countries of origin,” said IDB President Luis Alberto Moreno. “Nevertheless, remittances have decreased less than other private financial flows to the region, as migrants continue to make sacrifices to aid their families.”

The report was based on data from a survey carried out between March and June on 1,350 Latinamerican and Caribbean migrants, combined with desk research and statistical analysis of migration and unemployment.

Remittances from the US are likely to drop by 11% to 42.3 billion dollars this year, while those from Europe are expected to decrease by 14% to about 9 billion dollars. From other countries a drop of 4.5% equivalent to 10.4 billion dollars is forecasted