Amid Uncertainty LatAm, Caribbean Trade Booms

Latin American and Caribbean economies are set to grow this year following a welcome rise in foreign trade, but the region will have to evolve if it wants to sustain growth in a rapidly-shifting landscape.

After four years of poor performance, foreign trade from Latin America and the Caribbean finally showed an upswing in 2017–and looks set to continue that trajectory through 2018. However, the Economic Commission for Latin America and the Caribbean caution that this growth will only be sustainable if the region is prepared to collaborate, innovate and remain agile in the face of global uncertainty, Staronline reported.

World trade has been weak since the global financial crisis of 2008/2009, hampered by reduced trade liberalization, faltering demand and stifled global value chains. However, increased growth in the United States, the eurozone and China had a positive impact in 2017, boosting global trade by 3.6% in comparison to a pre-financial crisis growth rate of 2.2%.

Latin America and the Caribbean are expected to grow by 2.2% in 2018, according to the ECLAC report, International Trade Outlook: Recovery in an Uncertain Context. Both imports and exports performed well in the region over the past year, with the former predicted to rise by 7%, and the latter 10%.

Although signs are positive, ECLAC still predicts global uncertainty in the medium-term. The growing emergence of populist political movements combined with the digital revolution overtaking more traditional trade will create a challenging environment, forcing the Caribbean region to be more agile and resourceful.

 Tardy Policymakers 

Thanks to an increasingly digital world, trade now encompasses not only physical goods and services delivered by traditional means, but also physical goods and services delivered through digital platforms, as well as those goods and services that are entirely digital and intangible. This shift has sometimes left regulators scrambling to keep up, with tardy policymakers contributing to market uncertainty.

Despite the uncertainty, digital is the fastest growing segment of global trade, with huge potential. According to figures from ECLAC, ‘modern’ services i.e. those traded over the internet (telecommunications, computer and information services, financial services, insurance and other business services) show the most activity, growing by 6.7% per year between 2005 and 2016. In contrast, traditional services such as transport, travel and construction services grew by 4.5% annually in the same period.

Unsurprisingly, Latin America and the Caribbean lag in the provision of modern services, accounting for just 2% of exports in this category. The countries that have made successful inroads into these markets are those with developed digital ecosystems with, for example, digital platforms used by governments, producers and consumers. The creation of e-platforms, along with legislation on data protection and cyber security, are necessary to encourage thriving modern services exports.

Another profitable area is agriculture, worth $1.69 trillion annually. In 2015, Latin America and the Caribbean contributed 13% to the world’s agricultural exports, with most going to Asia, closely followed by the US. Over the past decade, staples such as shrimp, orange juice and wheat fell out of favor and were replaced by more in-demand products such as maize, poultry and soybeans.