Foreign trade in Latin America and the Caribbean will suffer from the economic slowdown that started in the second half of 2011. The value of regional exports will increase by four per cent in 2012, whereas imports will grow three per cent - according to estimates presented in a new Economic Commission for Latin America and the Caribbean (ECLAC) study.

In its annual report entitled Latin America and the Caribbean in the World Economy 2011-2012, the UN organisation states that the current recession in the Eurozone, the lack of economic dynamism in the United States and Japan and the modernization in China's and other emerging economies' growth will affect trade in the region - which, in 2012, will be 20 percentage points lower than expansion rates shown last year.

The prospects for 2012 show that foreign trade value in Mexico and Central America will grow above the regional average (7.3 per cent in exports and five per cent in imports), whereas South America will see lower rates (1.1 per cent and 3.2 per cent, respectively). The Caribbean countries will witness a fall in their trade exchange (-0.7 per cent in exports and -2.1 in imports), a fact that can be explained by their strong linkages to the European Union.

According to ECLAC, Latin America and the Caribbean was the region with the highest export volumes growth in the last quarter of 2011 and the first four months of 2012, amidst the global trade slowdown. Nonetheless, the European crisis and a global risk aversion affected its export performance in the months afterwards.

This slowdown has affected the exchange with the main trade partners in the region - especially regarding exports to the European Union, which fell by five per cent in the first half of 2012 compared to the same period in 2011. The weak export performance to the European Union will prevail for the rest of the year, although there will be differences among subregions (Caribbean countries, -19 per cent; South America, -seven per cent; Mexico and Central America, 16 per cent).

In the short term, this report foresees that developing countries will continue to be the engines of world economy and trade, although they will eventually also slowdown. "For this reason, ECLAC stresses that, in order to increase potential growth in the future, it is necessary to make a special effort on ongoing challenges concerning production: productivity, innovation, education, infrastructure, logistics and transport," said Alicia Bárcena, executive secretary of the organisation, when launching the document.

These topics, together with the regional need to move forward on the path of equal growth and environmental sustainability, were recently presented in a document entitled Structural Change for Equality: An Integrated Approach to Development, launched by ECLAC during its thirty-fourth session, held at the end of August, in El Salvador.

Amid the current international uncertainty, ECLAC foresees that the total value of regional exports will continue to grow in the next three years, yet at a lower rate that in the past years, ie an annual growth of five per cent between 2013 and 2015 compared to an annual average growth of 20 per cent in the second half of the last decade.

In this context, ECLAC warns on opportunities and challenges linked to the strong relevance of commodities in the region's export basket - especially among South American countries. One of these challenges is the presence of broader production chains, either national, regional or global, as well as the recent integration of small and medium-sized enterprises into the production process of exports; the boost of interregional trade relations; and the strengthening of links to China and Asia-Pacific.

Challenges for the Region

In its report, ECLAC sets forth that Latin America and the Caribbean continue to show low intraregional trade levels and a low productive integration. In spite of the fact that more than 50 per cent of the exports of intermediate goods (excluding Mexico) are directed to the region, the proportion of the latter among intraregional exports amounts to only 10%. "Therefore, it is necessary to establish an adequate environment for a better productive integration among the economies of the region," reads the document.

In the Latin America and the Caribbean in the World Economy 2011-2012 report, other gaps in the region's export performance are highlighted. For instance, the percentage of exporting enterprises is below two per cent in most of the countries of the region, and below 1% in many of them. On the other hand, the first percentile of exporting enterprises directs a proportion equal to or above 70 per cent of their total exports to most countries of the region. Likewise, companies selling one single product for one single market prevail: from the 108,000 exporting enterprises existing in ten countries of the region in 2010, 36 per cent (most of them small and middle sized) exported only one product to one destination.