MercoPress. South Atlantic News Agency

ECLAC foresees slight rebound in foreign trade

Salazar-Xirinachs highlighted the importance of public-private cooperation

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) foresaw this week in its its annual Latin America and the Caribbean International Trade Outlook that regional exports of goods would bounce back in 2024 after last year's 1% contraction while service exports will complete their fourth consecutive year of double-digit growth.

The three-chapter document analyzing the evolution of foreign trade of the region's economies during the first half of this year was launched Wednesday at the ECLAC headquarters in Santiago, Chile, by Executive Secretary José Manuel Salazar-Xirinachs. Projections for the remainder of 2024 were also described in the study made by ECLAC's International Trade and Integration Division.

The first part delves into the recent situation and prospects for trade at the global and regional levels; the second discusses the links between trade and food security in the region; and the third examines the potential of services to boost exports from Latin America and the Caribbean.

According to the document, the value of the region's goods exports will grow by 4%, as a result of a 5% expansion in volume and a 1% drop in prices. For imports, a 4% increase in volume and a 2% drop in prices is foreseen, resulting in a projected 2% increase in value, the largest of which will be in agricultural exports (11%), followed by mining and petroleum (5%) and manufacturing (3%).

By subregion, the largest increases are projected for the Caribbean (23%) boosted by significant increase in the volume of oil shipments from Guyana and Suriname, and South America (5%) thanks to additional volumes of agricultural products such as soybeans, corn and wheat.

Sorted out by destinations, shipments to China are expected to grow by 6%, the United States 4%, and the European Union 3%. However, intra-regional exports are to fall from 14% in 2023 to 13% in 2024.

ECLAC projects that the value of regional services exports will increase by 12% in 2024, the fourth consecutive year of double-digit growth, driven mainly by tourism and modern digitally delivered services. In contrast, regional services imports are projected to grow by only 1% in 2024, in line with the economy's weak dynamics.

The report also warned of challenges stemming from geopolitical tensions and growing protectionism.

“The implementation of productive development policies with a cluster approach, based on close public-private cooperation and a sustained effort over time, appears to be an ideal mechanism for moving in that direction, as well as for positioning the region competitively in the face of the ongoing reconfiguration of global value chains,” Salazar-Xirinachs said.

In its second chapter, the ECLAC report addresses the role of trade in food security in Latin America and the Caribbean. It points out that the successive crises suffered by the world economy in recent years have caused setbacks in the achievement of target 2.1 of the Sustainable Development Goals: by 2030, to end hunger and ensure access by all people to healthy, nutritious and sufficient food all year round.

According to the document, in Latin America and the Caribbean, 41 million people (6.2% of the regional population) suffered from hunger in 2023 (4.7 million more people than in 2019). The prevalence of hunger in the Caribbean (17.2%) triples that recorded in South America (5.2%) and Central America and Mexico (5.8%). In 2023, 30.3% of adult women in Latin America and the Caribbean were moderately or severely food insecure, 5.2 percentage points more than men. Likewise, food insecurity affects the rural population (32.2%) more than the urban population (26%).

In this regard, international trade plays a crucial role in food security. Imports provide access to foods whose local production is impossible or too costly due to climatic conditions or insufficient availability of land or technology. They can also supplement local production in the event of temporary shocks such as pests, conflicts or extreme weather events. On the other hand, the income generated by exports can be used to purchase food.

Latin America and the Caribbean is the world's leading net food exporting region. Its food shipments reached US$ 349 billion in 2022, its highest level ever. South America accounts for the bulk of regional exports and surplus, while the Central America and Mexico sub-region is slightly in surplus and the Caribbean is in persistent deficit. The value of food imports exceeds 20% of total exports of goods and services in 15 countries, 12 of them in the Caribbean.

ECLAC maintains that strengthening regional integration is essential for a more stable and lower-cost regional food supply. On the one hand, an integrated regional market expands the supply of food and inputs from nearby sources, reducing exposure to supply shocks from third markets. On the other hand, greater regional integration favors the creation of production chains that promote economic and social development by generating employment, thus contributing to greater food security.

To strengthen the contribution of trade to food security in the region, the report recommends progress in the following areas: 1) facilitation of food trade (full implementation of single windows, streamlining of border inspections, etc.); 2) harmonization or mutual recognition of sanitary, phytosanitary and technical regulations; 3) improvement of food trade logistics, especially in the Caribbean; 4) strengthening of the network of trade agreements between countries and groupings in the region; and 5) coordination in multilateral forums.

In its third chapter, the ECLAC document examines the potential of services to boost regional exports. In a context of stagnating per capita income in Latin America and the Caribbean over the last decade and low growth in the volume of its goods exports (1.6% per year over the same period), services exports could be a new growth engine for the external sector. In 2023, regional exports of services reached US$ 221.7 billion, surpassing their pre-pandemic level. However, services account for only 14% of the region's exports of goods and services, below their global share of 25%.

Leading service sectors include tourism, transport, and modern digitally delivered services. The latter had the highest share in Southern Common Market (Mercosur) exports (59%) and the lowest in shipments from the Caribbean Community (Caricom) (10%). Tourism is the main services export in all subregional groupings except Mercosur.

The report concludes that to take advantage In short, Latin American and Caribbean countries should strengthen joint productive policies with private entrepreneurs through improving the digital and language skills of the population, closing digital infrastructure gaps, and implementing programs aimed at promoting services exports and attracting foreign direct investment (FDI), which is key to bringing new technologies, improving productivity and generating clusters and value chains around services.