ECLAC - Aug. 26, 2009 -- The volume of trade in Latin America and the Caribbean will drop 13% in 2009, surpassing the 10% decline in world trade expected this year, stated ECLAC in its most recent report.

This confirms that the sector most affected by the global economic crisis in the region is trade, which is suffering an unprecedented contraction.

The volume of exports from the region will decrease 11%, the worst figure in 72 years (since 1937), while imports will diminish 14%, the steepest drop in 27 years (since 1982), according to the report Latin America and the Caribbean in the World Economy 2008-2009: Crisis and opportunities for regional cooperation, launched today by ECLAC Executive Secretary Alicia Bárcena at ECLAC headquarters in Santiago.

"Policies to reactivate trade are urgently needed, because the post-crisis future will continue to reward economies with a greater focus on exports and advances in terms of competitiveness and technological innovation," said Bárcena.

The decline in trade has been caused by a strong contraction of world demand, lower prices of some basic commodities, difficulties in financing for trade and the pro-cyclical performance of intra-regional trade flows, particularly in South America.

In spite of the strong contraction in trade, the report underscores that the region has addressed the effects of the current crisis better than during prior crises, due especially to the strong macroeconomic scenario that resulted from the favorable economic cycle in 2003-2007.

ECLAC estimates that after a two to three-year slowdown, international trade should once again become a source of opportunities, and the region should be prepared for that.

According to ECLAC, the world crisis has been transmitted to the real economies of the region through four channels: foreign direct investment, emigrant remittances, commodity prices and trade. Services and tourism also suffered the effects of the crisis.

Practically every country in the region has experienced a fall in trade flows with its main trade partners (United States, the European Union, Asia and other countries in the region). Only China has sustained its demand for commodities, which has allowed the region to partially counteract the general decline in international trade.

Commodity-export countries, especially exporters of oil and minerals, have been the most affected by the deterioration in terms of trade, which is expected to fall 32.6% this year for Venezuela, Ecuador (oil), Colombia (oil and coal) and Bolivia (natural gas).

Mineral and oil exports from the region fell 50.7% during the first semester of 2009, while the export of manufactured and agricultural products diminished 23.9% and 17%, respectively. The steepest fall was in exports to the European Union (-36.3% in total) and the United States (-35.3%).

Exports to other countries in the region also experienced a significant decrease in the first semester of this year (a 33% decrease in the value of exports with regard to the same period last year). This confirms the pro-cyclical behavior that intra-Latin American exports have traditionally shown.

Regional cooperation

The report highlights actions in seven areas that concentrate the best opportunities for regional integration in a post-crisis context: investment in infrastructure, encouraging intra-regional trade, fomenting regional cooperation in innovation and competitiveness, reducing asymmetries, strengthening social cohesion, making the most of ties with Asia-Pacific, and addressing the challenges of the environment and climate change.

With regard to trade, ECLAC suggests creating a programme for cooperation to stimulate intra-regional trade, coordinate the participation of countries and multilateral and regional bodies to make the most of their advantages, and strengthen the mobilization of financial resources.

ECLAC underscored the importance of diversifying the productive and export base and incorporating greater value and know-how in exports of goods and services. This requires greater coordination within governments and with the private sector to stimulate innovation and training human resources.

See also:Presentation by Alicia Bárcena, ECLAC Executive Secretary

• Graphs: 
  • Latin America and the Caribbean:  Historical Evolution of Exports
  • Latin America and the Caribbean:  Historical Evolution of Imports 
  • Latin America and the Caribbean: Growth Rates of Exports and Imports of Goods, 2005-2009