MercoPress. South Atlantic News Agency
In spite of the boom in exports, Latam’s decade report is far from encouraging
Cepal Secretary General Alicia Bárcena: modest, but not near good enough Latin American and Caribbean exports are forecasted to grow 21.4% this year propped mainly by South American commodities according to the latest report from the United Nations Economic Commission for Latin America and the Caribbean, Cepal. However the overall balance of the last ten years is negative compared to the nineties and looks closer to the eighties.
According to the report, “Latam and Caribbean International insertion 2009/2010: crisis originated in central countries and recovery pushed by emerging economies” the strong rebound in exports to Asia, mainly China and a demand normalization from the US should help achieve those estimates.
Export growth rate to China soared from minus 2% in the fist half of 2009 to 44.8% in the same period this year, but the recovery is not homogeneous: it has been sustained with the commodities exporting countries (agriculture, livestock and minerals) mainly South America, and very modest for those that depend on tourism and remittances, such as Central America and the Caribbean.
Sub-regions also show different performances: Mercosur exports are forecasted to expand 23.4%; the Andean Community, 29.5% but the Central American Common market only 10.8%: The same can be said about some country examples: Mexico, 16%; Panama, 10.1% and Chile, 32.6%.
However the biggest jump is expected from Caricom, the Caribbean Community which should leap from minus 43.6% in 2009 to 23.7% this year.
The report also includes a trade growth review of this decade compared to the nineties, which is not favourable since the export rate has been inferior in value and volume. However here again there is a bifurcation: in South America the export growth rate doubled but for Mexico and Central America it was only 50%.
This is mainly because the most dynamic exports have been natural resources from South America in detriment of manufacturing and services with different degrees of technology. This in practical terms means South America has returned to a scenario of 20 years ago based on the export of primary goods.
While in 1999, commodities made up 26.7% of total exports in 2009 they totalled 38.8%. This has meant that the growth in commodities exports compared to manufactured goods has Mexico loosing influence to South America.
Mexican exports as percentage of the region’s total dropped from 40% in 2000 to 30% in 2009, while Brazil soared from 13% to 20%. Argentina, Chile, Colombia and Peru also increased their shares because of minerals, grains and oilseeds exports expansion in volume and value.
The report from Cepal concludes that the region has been unable to improve the quality of its international insertion and the expansion of sectors linked to natural resources have not contributed significantly to the creation of new technological capacities.
“Export diversification, a strong boost to competitiveness and innovation and a greater regional cooperation should enable Latin America and the Caribbean to improve the quality of its insertion in the global economy, closing productivity gaps and taking advantage of global trade opportunities to grow with equality”, said Cepal’s Secretary General Alicia Bárcena in the presentation of the report in Chile.
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Read all commentsThe 2000-2010 decade was almost a lost decade for Mexico. It started out with an economic internal economic crisis, devaluation and high interest rates and it ended up with the worst economic year, 2009, in decades where the Mexican economy not only did not grow but it actually shrinked by about 10%,
Sep 03rd, 2010 - 10:20 am 0In 2000, 40% of all latam exports camen from Mexico, in 2010, only 30%, and Brazil's exports have increased to become 20% of all Latam's.
However I sincerely believe the Mexican economy has gained in manufacturing specialization. Our labor force is the most sofisticated and prepared in the region and our manufacturing of airspace and other high tech industries has boomed in the last decade in spite of the economic troubles we encounter.
All Mexico needs is more reforms and the country is ready for those reforms. President Calderon has launched a very agressive deregulation program eliminating tons of red tape that affect our economic activitiy for both exports and imports. Mexico has signed more trade agreements with more nations and this should also increase the country's competitiveness.
70% percent of our exports still go to the US, so it is necessary to expand markets but there's a trade agreement between Mexico and the EU and this is expected to increase our exports to that continent. However our trade dependence with the US is not unusual in the region, about 67% of all Canadian exports also go the US and they don't talk much about diversification or economic dependece.
In my view, Mexico's main problem is precisely its high degree of economic opening. Both its trade balance and current account have been in deficit for years, something that is likely related to its extreme market deregulation. At least I can't see whatelse can be accounted for that, for the Mexican peso is not spoken about as an overappreciated currency.
Sep 03rd, 2010 - 11:01 am 0Another problem of the country is that most of its manufacturing sector is in foreign hands, that is to say, under the domain of multinational indutries in the search of cheap labour. I am yet to know of a truly Mexican world-class company that is not related to either the petrochemicals or the telecommunication industries. And finally, there is the fact that most of its production activity is directed towards exportation. For that reason, Mexican industries are very sensitive to international - specially American - market vicissitudes. Mexico has both a great population and a large middle-class. Instead of sending its production to the international market, couldn't Mexico direct it to the domestic one?
All these facts together paint me a picture of Mexico as a country of extreme economic dependency. Is it possible to reach true development under such scenario?
Mexico's growth has been the greatest during the 1960-1980 period. Which economic model it followed during that period, I don't really know. But Brazil, just like Mexico, had its highest growth during those same decades. And the model it followed was one of economic nationalism, that is to say, of consciously reduced dependency on foreign capital and increased stimulus to national industries. It seems to me that economic opening should be implemented only after national industries are fully mature and can no longer expand in the national market. And this situation, I don't think has already been achieved by most Mexican industries.
Forgetit87
Sep 03rd, 2010 - 12:22 pm 0Thanks for those interesting insights on the Mexican economic situation.
I just want to take you on something here, the 1960-1980 expansion of the Mexican economy was marked by nationalism too, the Mexican government nationalized 'strategic' industries like telecommunications, energy, the banks were also nationalized too and there was a incredible dependence on oil exports, oil accounted for more than 75% of Mexico's total exports and when the oil prices collapsed in 1982, the Mexican economy went bust and the country bankrupted.
It was actually the 90's when Mexico grew the fastest, there was a complete diversification of industries in the country and today manufactured goods represent more than 70% of total exports and oil represents less than 8% of Mexican exports. Mexico went from a commodity exporter to a manufactures exporter.
I think Mexico, just like all of Latin America, has issues to solve as well as great areas of opportunity.
Mexico's proximity to the US makes it atractive to direct foreign investment and even though our salaries are much higher than in China, manufacturing in Mexico is sometimes cheaper because of proximity and other advantages, all manufactured products can be shipped by truck to the US in matter of hours. Mexico is not an intensive labor country like China or India, in fact many intensive labor maquiladoras have already moved to China. Mexico's labor is more sophisticated, Boeing, Airbus, Hitachi, IBM, Bombardier and many other high tech companies have labs and factories in Mexico, they also demand parts and services manufactured in the country. So there's a transition in the industry of the country.
In general I see a few challenges for Mexico and many golden opportunities in coming years.
Of course I have never underestimated the incredible ability of Mexican politicians to ruin golden opportunies.
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