ECLAC forecasts trade in Latin America to drop 23% by 2020

Latin America and the Caribbean are considered to be the hardest hit regions due to the economic impact of the global pandemic, according to the latest data released by the Economic Commission for Latin America and the Caribbean (ECLAC).

cang-container-Santos-Brazil

Santos port in Brazil

The economic body forecasts that the value of trade to and from the region will fall by 23% in 2020 - the worst decline in 80 years. Since World War II has the trade prospects been so bleak. Trade in and out of the region will reach close to USD 2 trillion in 2019.

While global trade fell 16.6% in the first five months of the year, Latin America saw a 27% decline in international trade. In contrast, China's trade fell only 1.2% compared with a decrease of 6.2% in the rest of Asia and 14.3% in Europe. Only the United States came close to the trade collapse with Latin America with a 22.2% drop in international trade.

Intra-regional trade also fell, with manufacturing being the hardest hit as global finished product demand fell, with a huge 55% drop for regionally-shipped cars and a 35% drop in value of textiles and garments.

The overall forecast is based on a forecast decline that includes expected prices (-11%) and volumes (-12%) for the region's major manufactured goods, services and goods.

Imports are expected to be hit hardest when the economic recession starts to hit consumers in the region. Import value is expected to fall by a quarter, and import volumes are expected to fall by as much as 18%, slightly more than the decline seen during the 2009 global financial crisis, and so on. what was witnessed in 1982, at the beginning of the external debt crisis and during World War II.

The first five months' trade volume has shown how fragile the leading economies in the region are. The economic power of Brazil is grappling with one of the worst outbreaks of Covid-19 with more than 100,000 people dead. Other countries like Peru and Chile were also hit hard by the virus and global demand for South American goods fell sharply.

After announcing positive numbers in the first three months of the year, total container throughput to and from the region plummeted in April and May, with container shipping volumes plummeting by 17 and 21 percent, respectively.

However, increased transshipment volumes at ports such as Panama and Colombia have reduced the overall impact on regional throughput. Volums were down 1% year-on-year, but the trade impact was most evident in key commercial gateways such as Buenaventura in Colombia, Valparaiso in Chile and Lazaro Cardenas in Mexico with 33%, 28% and 18.8% declines in terms of volume in the first five months of the year. While these gateway ports were affected, transshipment ports in Panama and Cartagena saw throughput increase of 16% and 12%, respectively.

“In the context of increasing uncertainty, countries in the region should take actions that will allow them to reduce internal logistics costs and produce value-added services to increase their competitiveness. them”, said Alicia Bárcena, ECLAC executive secretary.

Agricultural exports is the only sector that maintained its upward trajectory in the first half of the year, continuing to increase by 0.9%. In contrast, the manufacturing sector decreased by 18.5% in the first five months of the year and increased by 43.1% year-on-year in May.

Phaata (Adapted from Container-News)