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UN economic office warns on South America’s export trade vulnerability

Friday, September 28th 2012 - 02:47 UTC
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Alicia Bárcena, Executive Secretary of ECLAC: companies exporting one single product for one single market prevail Alicia Bárcena, Executive Secretary of ECLAC: companies exporting one single product for one single market prevail

Foreign trade in Latin America and the Caribbean will suffer from the economic slowdown that started in the second half of 2011. The value of regional exports will increase by 4% in 2012, whereas imports will grow 3% - according to estimates presented in the new Economic Commission for Latin America study released on Thursday.

In its annual report entitled “Latin America and the Caribbean and the World Economy 2011-12”, the UN organization states that the current recession in the Euro-zone, the lack of economic dynamism in the United States and Japan and growth moderation in China's and other emerging economies will impact trade in the region, which, in 2012, will be 20 percentage points lower than the expansion rates shown last year.

The prospects for 2012 show that foreign trade value in Mexico and Central America will grow above the regional average (7.3% in exports and 5% in imports), whereas South America will see lower rates (1.1% and 3.2%, respectively). Caribbean countries will witness a fall in their trade exchange, a fact that can be explained because of strong links to the European Union.

According to ECLAC, Latin America and the Caribbean was the region with the highest export volumes growth in the last quarter of 2011 and the first four months of 2012, amidst the global trade slowdown. Nonetheless, the European crisis and a global risk aversion affected its export performance in the following months.

This slowdown has affected trade with the main trade partners in the region, especially regarding exports to the EU, which fell by 5% in the first half of 2012 compared to the same period in 2011. The weak export performance to the EU will prevail for the rest of the year, although there will be differences among sub-regions (Caribbean countries, -19%; South America, -7%; Mexico and Central America, up 16%).

In the short term, the report foresees that developing countries will continue to be the engines of world economy and trade, although they will eventually also slowdown. “For this reason, ECLAC stresses that, in order to increase potential growth in the future, it is necessary to make a special effort on ongoing challenges concerning production: productivity, innovation, education, infrastructure, logistics and transport,” said Alicia Bárcena, Executive Secretary of the Organization, on launching the document.

Amid the current international uncertainty, ECLAC foresees that the total value of regional exports will continue to grow in the next three years, yet at a lower rate that in the past years, i.e. an annual growth of 5% between 2013 and 2015 compared to an annual average growth of 20% in the second half of the last decade.

In this context, ECLAC warns on opportunities and challenges linked to the strong relevance of commodities in the region's export basket, especially among South American countries. One of these challenges is the presence of broader production chains, be it national, regional or global, as well as the recent integration of small and medium-sized enterprises into the production process of exports; the boost of interregional trade relations; and the strengthening of links to China and Asia-Pacific.

In its report, ECLAC sets forth that Latin America and the Caribbean continue to show low intraregional trade levels and a low productive integration. In spite of the fact that more than 50% of the exports of intermediate goods (excluding Mexico) are directed to the region, the proportion of the latter among intraregional exports amounts to only 10%. “Therefore, it is necessary to establish an adequate environment for a better productive integration among the economies of the region,” reads the document.

In the report, other gaps in the region's export performance are highlighted. For instance, the percentage of exporting enterprises is below 2% in most of the countries of the region, and below 1% in many of them. On the other hand, the first percentile of exporting enterprises directs a proportion equal to or above 70% of their total exports to most countries of the region. Likewise, companies selling one single product for one single market prevail: from the 108,000 exporting enterprises existing in 10 countries of the region in 2010, 36% (most of them small and middle sized) exported only one product to one destination.

Finally, the report highlights the need to continue strengthening the links with other developing regions, especially to Asia-Pacific, currently, the main economic locomotive in the world. Accordingly, the Organization calls on the countries to urgently coordinate at a regional level in order to respond to the broad cooperation agenda between China and Latin America and the Caribbean, proposed by the Chinese Prime Minister Wen Jiabao, in his last visit to the ECLAC Headquarters in Santiago, Chile.
 

Categories: Economy, Politics, Latin America.

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  • British_Kirchnerist

    “For this reason, ECLAC stresses that, in order to increase potential growth in the future, it is necessary to make a special effort on ongoing challenges concerning production: productivity, innovation, education, infrastructure, logistics and transport,”

    Which is the opposite of European austerity, no?

    Sep 28th, 2012 - 12:23 pm 0
  • LEPRecon

    @1 - BK

    The difference is that the EU already has good infrastructure in place. The EU already has good education systems in place. The EU is already very productive and innovative. South America doesn't have these things, especially outside of the major cities.

    If you had actually ever been to South America you would know this.

    If you actually had an inkling of what economics is about, you would understand that having a good transport network is vital for trade. Educating your people is vital, and giving them good job skills that will help them attain good jobs with good wages.

    Not only that, but each countries problems are unique and therefore require different approaches.

    So no, the EU cannot 'spend' its way out of debt. Didn't Gordon Brown try that and didn't he put the UK in a worse off position prior to him being booted out of power?

    So austerity is the only answer, and it is working. Slowly admittedly, but the world didn't get into this financial mess overnight, and getting out of the mess will take time. But this recession is nothing to the one in the late 70's. It took a conservative government to clean up labours mess then too, as I recall.

    In the words of that great lady Margaret Thatcher: “the main problem with socialism is that you eventually run out of other people's money.”

    I believe your beloved CFK is facing that problem right now, isn't she? She's stolen all she can, and can't borrow any more. Oh but she's not a socialist. Socialists care about people, even though they sometimes get it wrong. CFK is a fascist (a national socialist) and she only cares for herself and her lackeys.

    Sep 29th, 2012 - 09:51 pm 0
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