It may be too early to call it a trend, but trade in Latin America and the Caribbean is rallying. According to the Inter-American Development Bank’s (IDB) 2017 first quarter “Trade Trend Estimates,” there are reasons for economic, albeit cautious, optimism. Generally, an export decline – in this case a decline of 6% - isn’t a good result but the IDB’s estimated 2016 export decline of 6% reflects a “deceleration of the recessive trend” that saw exports for the regions decline by 15% in 2015. Exports from the region have declined for the past four years and economists have been looking for some signs of a recovery. The reasons vary, but the fall in commodity prices and changes in demand among trade partners, notably the U.S. which accounted for three-fourths of the fall in export sales (see Peter Buxbaum article on page 4) from the regions. Other factors such as currency and national stability (Venezuela and Brazil) have also undermined growth both in imports and exports from the regions. Work in Progress: South American Export Recovery South American nations recorded a 4.6% decline in exports in 2016 but have registered a year-on-year 23% increase over the first quarter of 2017, according to IDB estimates. The IDB says the main reason for the improved year-on-year growth is the value of commodity flows to extra-regional markets but notes there are “early signs of recovery in some sub-regional economies.”
Not surprisingly the South American nations whose exports are largely oil and mineral products recorded the highest year-on-year increases. Shipments from Venezuela, Peru, Ecuador, Colombia, and Brazil grew at high rates. This result was attributed primarily to the favorable pricing more than volumes.
  • According to IDB estimates, in 2016 exports from Venezuela fell by around 24%. A 75% recovery in the first quarter of 2017 resulted from the improvement in oil markets, while, as in the previous year, export volume continued to decline.
  • Except the South American region itself, all destinations contributed to the 7.7% increase in exports from Peru in 2016. The US and China accounted for almost all the growth. In the first quarter of 2017, Peru’s export sales were up 39%. Indicative of the upward trend in Asian sales, exports to China and to the rest of Asia increased 90% and 122%, respectively - accounting for a 91% overall growth. Copper was the product that contributed the most to the expansion of foreign sales, due to both the rebound in prices and the increase in production capacity.
  • The IDB reported that exports from Ecuador contracted 8.4% in 2016 as the collapse in shipments to the US was not compensated by the growth of sales to Asia (excluding China), Latin America, or the European Union. In the first quarter of 2017 exports bounced back, growing by 34%. The US tallied nearly half of the increase, with a growth rate of 49%. The regional market was also relevant, as sales increased 42% and explained nearly a third of the overall growth with strong increases in demand from Chile and Peru. Three fourths of the total increase were due to greater oil exports.
  • Colombia represented a different trade scenario than most South American nations. In 2016 the total value of exports from Colombia fell 13%, but shipments to the US, the country’s main trading partner, tallied a small increase. In the first quarter of 2017 y-o-y surge of 31%, with China being the only destination that continued to decline at 8%. Significant increases were noted in shipments to the rest of the region 32%, the EU at 31%, Asia (excluding China) 122%, and the US 9%. Slightly more than two thirds of the year-on-year growth in this period corresponded to increases in exports of oil, coal, gold, and coffee.
  • The slip in export sales from Brazil reached 3.1% in 2016. A fall in regional exports was the primary cause of the decline, especially Venezuela. However, in the first quarter of 2017 exports grew 24% year-on-year.
Nearly 50% of this improvement came from China, where exports of iron, oil, and soybean purchases translated into a year-on-year increase of 63%. The South American neighbors added 17% to the overall increase, mainly through exports of personal and commercial vehicles to Argentina. The growth of shipments to the US was due mainly to oil.
  • Paraguay posted a 2.1% increase in exports in 2016. The fall in shipments to the EU and to the US was compensated by greater sales to the rest of South America and to Asian markets (excluding China). In the first quarter of 2017 exports grew 12% with exports to South America up 59%, (primarily to Argentina and Uruguay.) However, exports to the EU were down 40%, off 3% to the US, and Asian exports dropped 43%.
  • Bolivia’s recovery has a way to go. In 2016 exports from Bolivia fell 18.7% in 2016. While the reduction in sales to Brazil and Argentina explained most of the poor performance, exports to the US and Asia also fell. Exports recovered moderately in the first quarter of 2017, with a year-on-year growth of 4%. The biggest contributors to the increase were sales to China up 32% and the rest of Asia advancing 79%, mostly because of exports of zinc ore.
  • Chile, with one of the more complex export mixes, recorded a drop of 2.6% in 2016. Exports to the South American region and the EU were down although exports to both China and the US were up in 2016. In the first quarter of 2017 the trend reversed and exports increased 4%. The increase was across the board except for China which was down 13%. The products that contributed the most to the increase were salmon, copper, and iron.
  • Except those destined for the EU, exports from dropped 8.4% in 2016. However, the nation has posted a turnabout in the first quarter of 2017 with an export growth of 4% year-on-year. Most of this growth was to Brazil at 50% and China 14%, while the recovery was slowed by declines to the US at 11%, Asia down 13% and the EU 6%.
  • Argentina’s recovery had already started in 2016 with 1.7% in exports. Exports to the US, EU and Asia were up while exports to China and South America were down.
Through the first three months of 2017, export growth continued with an increase of 2%, based on a boom to China at 75%, as well as those to the region 9% and the US at a 7% increase. Wheat, soy cakes, and auto and trucks were the products that contributed the most to the expansion.