New study finds trade recovery in Caribbean still uncertain due to COVID-19Friday, November 20, 2020
WASHINGTON, United States (CMC) — A new study by the Inter-American Development Bank (IDB) has found that trade recovery in Latin America and the Caribbean (LAC) is still uncertain due to new outbreaks of the coronavirus (COVID-19) and the economic impact caused by the pandemic.
In its “Trade and Integration Monitor” bulletin, the IDB said there has been a 16 per cent drop in the value of exports from the region in the first half of 2020.
The “Trade and Integration Monitor”, which analyses trade flows in the region, notes the downturn was mainly caused by a drop in export volumes, which, in turn, were driven by the economic impact of the pandemic.
The study found that the value of exports from Latin America and the Caribbean contracted more than global trade, which dropped by 13.3 per cent year-on-year in the first half of 2020.
“The pandemic affected international trade in services more severely than trade in goods. Service exports from Latin America and the Caribbean entered negative ground for the first time since 2015, contracting at an estimated rate of 29.5 per cent year-on-year in the first half of 2020.”
Principal economist at the IDB's Integration and Trade Sector, Paolo Giordano, who coordinated the report, said that “so far, the trade shock has been less intense than was initially predicted,” adding that “we are beginning to see some signs of recovery”.
“However, new outbreaks and lockdown measures may affect the recovery of global trade, which had already weakened even before the health crisis hit.”
The IDB study noted that Latin America and the Caribbean's trade performance was particularly affected in the first half of 2020 by the downturn in exports to large markets, such as the United States (-19.5 per cent), the European Union (-18.6 per cent) and China (-1.0 per cent).
However, the drop in intraregional trade was sharper, with the study indicating that these flows fell by 30.3 per cent in the Andean Community, 24.6 per cent in MERCOSUR, 24 per cent in the Pacific Alliance, and by 8.8 per cent in Central America and the Dominican Republic.
As a result, the study also found the share of intraregional flows in total trade from Latin America and the Caribbean continued to shrink, accounting for just 12.8 per cent of the total.
Imports from Latin America and the Caribbean fell 17.1 per cent year-on-year in the first half of 2020, according to the report, urging regional countries to adopt “an ambitious international integration agenda and consolidate the regional value chains to attract new investments and take advantage of near-shoring opportunities in both goods and services”.
The study says priorities should include strengthening export promotion and investment attraction agencies, improving trade facilitation and modernising customs facilities, diversifying the services sectors and promoting trade digitalisation, among others.
The report also notes that “pragmatic initiatives” to reduce transportation costs will be critical if Latin American and Caribbean economies hope to compete in the global production networks of the future.
Additionally, it recommends strengthening regional integration and cooperation initiatives “to ensure the region's economies are operating in an efficient, reliable, regulatory space that is attractive for investors”.