WASHINGTON, D.C. – The SARS-CoV-2 coronavirus pandemic has exacerbated the downward trend in exports from Latin America that had been observed since last year and the future does not seem encouraging, revealed a report by the Inter-American Development Bank (IDB).
The latest edition of the Estimates of Trade Trends in Latin America and the Caribbean report, which analyzes the performance of 15 countries in the region, shows that the value of shipments contracted by 3.2% in the first quarter of 2020 compared to the same period from the previous year, when it decreased 2.2 per cent.
The most important factor in the contraction was the reduction in export flows between Latin American countries, by less 8.6%, followed by the decrease in shipments to the European Union, by less than 7.1% and to the United States, by less than 1 per cent.
China, the engine for the region’s external sector in recent years, has paralyzed its demand to the region, by less than 0.1%, the report points out, pointing to the rest of Asia as the only expansion factor for Latin American external sales. According to IDB estimates, the contraction in the value of the region’s exports is around 30% year-on-year in April and will continue at least until June 2020.
“Looking ahead, the region faces a contraction in exports that is deeper than that of the Great Trade Collapse of 2008-2009, when external sales contracted at an average rate of 24% for 13 months,” said Paolo Giordano, economist. Head of the IDB Integration and Trade Sector and coordinator of the study.
The study shows that the reduction in global demand hit the region from both the volume and the price side. The volume of exports from the region registered an estimated drop of 1.2 percent year-on-year in the first quarter of 2020, after to grow 0.5 percent in 2019. And the contraction in global demand pushed down the prices of the main basic products exported by the region.
In January-April 2020, the price of oil fell 32% year-on-year, but the value of copper also collapsed, by minus 11.9%; soybeans, at less 2.2% and coffee, with less 4.4%. The main basic product of the region whose price increased in the first quarter was iron ore by 2.9%.
The effects of the global economic crisis caused by the Covid-19 pandemic on the external sector of the region began to be felt in March, three months after the report of the first case of the disease in China, South America, a large exporter of products basic that has China as a central partner, was the first subregion to suffer contagion through the commercial channel.
Its exports fell 7.6% year-on-year, after having fallen 6.2% on average in 2019. The slowdown in Mesoamerica’s exports, from 2.5% in 2019 to 1.3% year-on-year in the first quarter of 2020, reflects the lower growth rate of Mexico’s external sales, which expanded only 0.6% year-on-year in the accumulated January-March 2020, the study indicates.
On the other hand, shipments from Central America showed a notable acceleration, with an increase of 9.1% year-on-year in the first quarter of 2020. Still, in both cases the decreasing trend began in March, explained by the decline in U.S. demand.