Exports from Latin America and the Caribbean fall sharply, warns IDB

Merchandise exports from Latin America and the Caribbean fell sharply in the first quarter of the year, dragged down mainly by the drop in the price of oil, metals and agricultural products sold by South America, according to a report released Thursday by the Inter-American Development Bank.

Between January and March the value of the region’s exports grew 2.9% compared to the 16.4% expansion it had registered in the same period of 2022, according to the IDB report.

This slowdown in exports It takes place at a time when the economy of the region and the world have been affected by a drop in activity as a result of restrictive monetary policies that seek to curb inflation, uncertainty about the resolution of the war in Ukraine and the end of China’s expansionary policy.

The World Bank forecasts that global growth will slow from 3.1% in 2022 to 2.1% in 2023, while in the region that slowdown will be even more pronounced to 1.5% this year.

The level of exports in the first quarter of 2023 is similar to what it was before the coronavirus pandemic and although there is a pronounced slowdown, the performance is better than that of global exports as a whole, which contracted by 2.8% in the same period, according to the IDB report.

“We are returning a bit to the normality we had before COVID, which was a business normality that was already slowing down,” IDB economist Paolo Giordano said in a telephone interview with The Associated Press. “We are returning to an environment where trade is going to be less dynamic than it has been in the past,” he said.

slowdown It responds both to lower prices and to the drop in export volumes and although it has been noted throughout the region, it is more evident in South America, especially in Argentina, Bolivia, Peru and Venezuela.

In South America, exports fell 0.3% in the first quarter of 2023 compared to the same period in 2022 after having grown 16.2% on average the previous year.

On the other hand, in Mesoamerica -which includes Mexico and Central America- they increased by 6.3%, after having grown by 16.1% in the same period of the previous year. Mexico had an increase in sales of 6.8%, helping to sustain regional performance.

The IDB does not anticipate major changes in trends for the remainder of the year, with a drop in the second quarter and a subsequent stabilization.

“We expect a fairly modest performance from exports, but we don’t think there will be major disruptions in the rest of the year,” Giordano said. He explained that there will be “much less dynamism” than in 2020, 2021 and 2022.

Given that trade helps create jobs and stimulates economic growth, experts say it is essential that governments implement policies that improve external competitiveness and integration in the region.

In a context like the current one, where public resources are limited and necessary to alleviate the impact of the economic crisis on the most vulnerable sectors, policies that do not require outlays of money should be considered, such as lowering the costs of international trade, promoting exports, attract investment and simplify procedures, Giordano said.

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