Latin American exports this year will post their highest growth rate in two decades, reaching $445.1 billion, a 23 percent increase over the region’s 2003 exports, according to preliminary estimates released by the Inter-American Development Bank.
The region’s export performance consolidated the recovery started last year, when exports grew by 9.9 percent over the 2002 total. Most Latin American countries participated in the strong showing, which was driven by intra- and extra-regional exports, according to the IDB’s Integration and Regional Programs Department.
Latin American exporters are benefiting from a range of positive developments: the stronger than expected growth in the U.S. economy; more competitive exchange rates; the robust recoveries in countries such as Argentina, Uruguay and Venezuela; and the rising demand from China, which has boosted the prices and volumes of Latin American agricultural and mining exports. Latin American exports to China will rise by 34 percent this year to $14 billion.
The outlook for next year’s exports is clouded by several uncertainties. Among these are questions regarding the sustainability of the economic recovery in the United States; the recent appreciation of Latin American currencies vis-à-vis the dollar; the risks involved in managing the overheating of the Chinese economy –– also a fierce competitor in manufactured exports; softening commodity prices; and trade disputes among Latin American subregional partners.
During 2004, Latin American exports within the region climbed 42 percent over the 2003 intra-regional total, while exports to countries outside the region rose 20 percent. Notwithstanding its recent vigorous growth, intra-regional trade did not reach the importance it achieved in the late 1990s, when it represented up to 20 percent of Latin America’s overall trade. This year it would make up about 16 percent of the total.
The Andean Community, which includes Bolivia, Colombia, Ecuador, Peru and Venezuela, posted the highest export growth rates among all Latin American trade groups in 2004. Its overall exports rose 37 percent while its exports within the subregion jumped 44 percent. The Mercosur countries – Argentina, Brazil, Paraguay and Uruguay –- saw their overall exports increase by 28 percent, while exports among the group’s partners rose 39 percent.
Chilean exports have enjoyed a strong rebound this year, growing by as much as 51 percent. This performance was largely driven by Chinese demand for copper, although Chile is also reaping benefits from its free trade agreement with the United States, as its exports to the U.S. market increased 27 percent this year.
Mexico, aided by the U.S. recovery, posted a 12.8 percent increase in its worldwide exports, a notable improvement over last year’s weak 1.8 percent growth. Mexico’s exports to its North American trading partners grew 11.8 percent while its exports to Latin America increased by 33.1 percent.
In contrast with the rest of the region, Central America saw its export growth rate decline this year to 4 percent, against a 9 percent increase in 2003. The U.S. economic recovery appears to have done little for this group of countries, whose in-bond assembly industry (maquila) faces growing competition from China.