ECLAC says Caribbean's foreign trade marks worst performance since global financial crisis due to COVID-19

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ECLAC says Caribbean's foreign trade marks worst performance since global financial crisis due to COVID-19

Saturday, January 23, 2021

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SANTIAGO (CMC) — The Economic Commission for Latin America and the Caribbean (ECLAC) says the region's foreign trade in 2020 had its worst performance since the global financial crisis of 2008-2009 because of the economic crisis prompted by the global COVID-19 pandemic and the restrictions imposed by governments to stop its spread. 

In its annual report, unveiled on Friday, ECLAC estimated that the value of regional exports dropped -13 per cent in 2020 while imports shrank by -20 per cent.

ECLAC's Executive Secretary Alicia Bárcena held a press conference to present the new edition of ECLAC's flagship annual report, “International Trade Outlook for Latin America and the Caribbean 2020”. 

The document indicates that this contraction in the value of exports is smaller than what was forecast in early August of last year (-23 per cent), when the institution released its “Special Report COVID-19 No 6”, because, at that time, “the rebound in demand among the region's main trading partners, and China in particular, was not yet visible”. 

“It is necessary to deepen integration to drive the regional recovery,” Bárcena said. “The region has been disintegrating in terms of trade and production since the middle of the last decade, coinciding with its lowest growth in seven decades.”

“This is very worrisome because intraregional trade is the most conducive to productive diversification, the internationalization of companies (especially MSMEs — Micro, Small and Medium Enterprises) and gender equality,” she added.

Bárcena insisted that, in order to reverse this disintegration, it is important to move ahead on a shared agenda regarding trade facilitation, transportation and logistics infrastructure, and digital cooperation “to generate regional synergies in key dynamic sectors”.

“It is urgently necessary to reinvigorate regional integration to support the post-pandemic recovery,” Bárcena emphasised. “Greater convergence is needed between distinct integration mechanisms in order to overcome the fragmentation of the regional market and to support a sustainable and inclusive recovery.”

“It is also critical to foster the participation of female workers and entrepreneurs in dynamic sectors and in regional productive chains, for a transformative recovery with gender equality and sustainability,” she added. 

According to the report, the COVID-19 pandemic has intensified various tendencies that were already developing in global trade, including trade and technological tensions between the United States and China; growing economic nationalism and conflicts in trade relations; the weakening of multilateral cooperation; the digitalisation of production and trade; and the trend towards regionalising production through nearshoring (locating suppliers in countries that are closer to the target market) and reshoring (relocating strategic productive and technological processes to the country of origin). 

The document indicates that the recovery in the prices for commodities and the increase in demand from the United States, China and Europe have created the conditions for an incipient recovery in regional exports since the second half of 2020. 

However, that improvement is subject to considerable uncertainty, due to the renewed outbreaks that have occurred in numerous countries, as well as slow access to vaccination, the report says. 

ECLAC's 2020 estimates by subregion indicate that Central America exhibited the smallest decline in its exports, notching -2 per cent. 

ECLAC said this is due largely to the fact that trade among Central American countries, which represents around 25 per cent of the subregion's exports, is concentrated in essential products, such as agro-food and pharmaceutical products. 

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