Latin America to See an Asymmetrical Recovery: ECLAC

The Economic Commission for Latin America and the Caribbean’s (ECLAC) annual “International Trade Outlook” report for 2021 shows a significant rebound after the losses recorded in 2020. The recovery, however, will be asymmetrical and heterogeneous across the region. There is still great uncertainty due to the crisis stemming from the COVID-19 pandemic, warns the association. 

In its report, ECLAC estimated that the value of regional exports increased by 25 percent in 2021 after the 10 percent drop suffered in 2020. The increase was driven by a 17 percent rise in export prices and an 8 percent expansion in the volume of shipments. The global situation asks for the reconfiguration of value chains and productive self-sufficiency agendas.

ECLAC warns that uncertainty will remain a constant during 2022, especially after the spread of the Omicron variant. The factors that keep driving the uncertainty in global trade include “the uneven rates of vaccination, inflationary pressure and difficulties in maintaining fiscal stimulus, disruption in supply chains and rises in freight charges and, finally, extreme events caused by climate change,” reads ECLAC’s report. Maritime freight charges, for example, increased by 660 percent due to the concentration of the maritime transport sector, vertical integration of ports and shipping companies and alliances among large shipping companies. 

In Latin America, regional goods that had a sharp recovery in 2021 are expected to slow down in 2022. Services will also take longer to recover from the hit given by the pandemic, which led to a 29 percent contraction in 2020 and a further 10 percent fall in 2021. Goods fell by 16 percent in 2020 but recovered by 31 percent in 2021.

Exports grew mainly because of prices, while imports increased primarily because of volumes and the rise of commodity prices drove the recovery in regional goods exports in 2021. Tourism continues down, given that no country has managed to recover the pre-pandemic levels of international tourist arrivals.

ECLAC forecasts that Mexico, Guatemala, Dominican Republic, Nicaragua, Panama, Honduras and El Salvador will increase the manufacturing of goods. Agricultural products and minerals are expected to vary in volume and price, mostly in Peru, Chile, Ecuador, Paraguay, Brazil, and Argentina. Hydrocarbons are expected to see the strongest price variations in Colombia, Venezuela, Bolivia and Trinidad y Tobago. 

The most likely scenario for the coming years is one of “regionalized globalization,” with shorter supply chains and an increasingly important role for megaregional agreements, said ECLAC. The region’s recovery in exports will follow each country’s static comparative advantages rather than the diversification into new products and services. Meanwhile, integration will become vital for greater productive autonomy in strategic sectors.