Trade integration more important for Lat Am/Caribbean as growth slows — World Bank

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Trade integration more important for Lat Am/Caribbean as growth slows — World Bank

Thursday, October 10, 2019

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WASHINGTON, United States (CMC)—The World Bank Thursday said Latin America and Caribbean (LAC) region has entered a new phase of weak economic performance, but increased integration in international trade and global value chains could reinvigorate economic growth.

It said steps toward greater trade integration include the United States, Mexico, Canada (USMCA) and the EU-Mercosur agreements signed in the last year.

These agreements could have substantial positive effects on growth, but environmental impacts and the potential for negative effects in some areas must be addressed, according to “Trade Integration as a Pathway to Development,” the latest semi-annual report from the World Bank’s Chief Economist Office for Latin America and the Caribbean.

World Bank Chief Economist for Latin America and the Caribbean, Martín Rama, said after rapid economic growth due to high commodity prices during the first decade of the 21st century, the region is in a new phase of lacklustre performance.

“The years of high commodity prices are now clearly behind us, and we need to focus on areas like trade integration to boost the region’s productivity,” he added.

Gross Domestic Product in the Latin America and Caribbean region, excluding Venezuela, is expected to grow 0.8 per cent in 2019 and 1.8 per cent the following year, according to the report.

Countries in the Pacific sub region, as well as in Central America and the Caribbean will continue to experience faster economic growth, on average, than countries on the Atlantic. The largest economies in the region have faced recession, macroeconomic turbulence or growth deceleration.

The report however notes that the short and medium-term outlook is not particularly encouraging. Export performance has been relatively weak and limited fiscal space leaves little room to stimulate domestic demand.

Trade tensions have so far benefitted several countries in the region. For example, Mexico overtook China as the US’s top trade partner and Brazil is capturing market share from American soybean exporters in China.

The report shows how the region’s relatively low integration in international trade and global value chains has hindered growth. Limited openness is the result of policy choices that have led to higher trade restrictiveness than in most other developing regions. Tariff and non-tariff barriers are especially high among countries on the Atlantic.

The World Bank said for decades, Latin American and Caribbean countries focused on preferential trade agreements as a way to boost their international integration. However, a vast majority of these agreements were intra-regional. Only in recent years have South-North agreements become more common, especially among countries in the Caribbean and on the Pacific.

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