BUENOS AIRES: The value of Latin America’s exports will continue to decline through 2015 by 14 percent, with Argentina faring slightly worse with a reduction of 17 percent, according to the UN Economic Commission for Latin America and the Caribbean (ECLAC), which also indicated that the value of imports to Argentina are set to fall by a smaller 10 percent.
ECLAC figures showed that the 2013-2015 period featured the worst regional export performance in the last eight decades, as 2015 marks the third consecutive year that export values fall in the Latin American and Caribbean region, and the second consecutive year that they fall for Argentina.
“The region is at a crossroads: either it continues along the current path restricted by the global context, or it commits to a more active international insertion that favours industrial policy, diversification, trade facilitation and interregional integration,” said ECLAC’s Executive Secretary Alicia Bárcena. She highlighted that the sharp drop in commodity prices and lower international demand for the products that the region exports, have affected its overseas shipments. In 2014 and 2013, for example, they declined three percent and -0.4 percent, respectively.
According to the United Nations organization, it is likely that regional exports will fall again in 2016, because the outlook for a rebound in prices over the next year is not likely. ECLAC highlighted that the recession that has affected the global economy since 2008-2009, prevented trade from recovering dynamism.
The report outlined various factors that have hindered the regional economy — excess liquidity, the fall of aggregate demand, China’s deceleration, a drop in capital flows towards the region, and an increase in financial instruments that go beyond the real economy.
Mercosur declines
The report highlighted that the largest decline in intra-regional trade was in South America. In the first half of 2015, trade within the Mercosur trading bloc contracted by 23 percent. Trade between Argentina and Brazil (the two largest countries in Mercosur) fell by 17 percent in the first half of 2015, with reciprocal purchases of industrial manufactured goods (mainly consumer durables, intermediate goods and capital goods) falling by more than 25 percent.
This was in contrast to the Central American region, which slightly increased its intra-regional trade during the same period.
ECLAC predicts that the value of intra-regional exports will drop by 21 percent in 2015, an estimated seven percentage points more than shipments to the rest of the world. This will mark the second consecutive year that shipments in the region and outside the region decline. The UN organization said that this was due to the lack of dynamism in the regional economies, and because they received less for their exports regionally than outside of the continent.
The ECLAC’s Executive Secretary said that due to the regional economic situation, there was more pressure for countries to implement economic austerity measures.
Trouble in the region
ECLAC has previously warned about growing problems in Latin America, with a report this year saying that poverty reduction has stalled across the continent, barely budging since 2012, as economic growth has slowed down too following a decade of strong economic growth which led to a rising middle class.
Twenty-eight percent of the region’s population, or 167 million people, were mired in poverty in 2014. The figure remained stable between 2012 and 2013, when it affected 28.1 percent of the population. Destitution, meanwhile, rose to 11.7 percent in 2013 from 11.3 percent in 2012, which supposes an increase of three million people, raising the total to 69 million.
“It seems countries were unable to sufficiently take advantage of the recovery from the international financial crisis to strengthen social protection policies that reduce vulnerability from economic cycles,” said Alicia Barcena at the time. “Now, in a scenario with a possible reduction of available fiscal resources, more work is needed to strengthen these policies.”
Multiple international organisms have warned this year about the fiscal effects of reduced commodity prices, which will give states less resources to fight poverty and destitution, as demand from China slows down.
The change in the global scenario will also mean reduced economic activity, which could make it harder to create jobs.
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