MercoPress. South Atlantic News Agency

Latam international trade expansion second only to China

Saddled on a significant improvement in foreign trade exchange terms the volume of Latinamerican exports in 2006/07 is forecasted to expand at the 2005 rate, 7 to 8%, which is the highest behind

A report from the United Nations Latinamerican and Caribbean Economic Commission, CEPAL released this week in Chile anticipates that exchange terms for the region's exports and imports are forecasted to expand 20 and 17% in 2006.

Cepal's report also points out that the current sustained growth of regional trade is based on a favourable evolution of the world economy which in 2006 is scheduled to complete four years running of growth above 4% measured in PPP (Purchasing Parity Power) terms, and all this despite the fact that a slight deceleration of the global economy is expected towards the end of 2006 and 2007.

Emerging economies have been the locomotives of the world economy, particularly China, India and Russia, says Cepal, pointing to the fact that China and India together contributed with one third of the world's GDP growth in 2005 calculated on PPP terms.

The two emerging Asian countries had a stronger impact than United States, the European Union and Japan added.

This fact makes Cepal believe that the current dynamics of the world economy will continue to offer an encouraging framework for the expansion of the region's trade, both domestically and globally.

However there are risks in the horizon: the impact of oil prices given the increasing world demand and geopolitical tensions in the Middle East. High energy prices are having an impact not only in prices and inflation, but have also forced some central banks to hike basic interest rates which could determine a less fluid access of Latinamerican and Caribbean countries to international financial markets.

Besides Beijing authorities have not managed, as has been expected, to cool the booming Chinese economy and the Yuan remains pegged to the US dollar.

Therefore the evolution of the world's energy markets and the Chinese economy are the factors which pose a greater vulnerability to the region's economies.

In this context Latinamerican and Caribbean exports are taking advantage of the persistent strong global demand, China and India, plus the rebounded gain of Europe and Japan.

South American exports actually expanded faster than those of Mexico and Central America because they are basically commodities which have shown a sustained demand and higher prices.