LATIN AMERICA AND THE CARIBBEAN - Amcham Chile

amchamchile.cl

LATIN AMERICA AND THE CARIBBEAN - Amcham Chile

Osvaldo Rosales

Director, Trade and Integration Division

ECLAC

AMCHAM-Chile

July 14 th , 2010


Before the crisis (2003-2008)….

Three simultaneous macroeconomic developments:

o Sound fiscal policies and a better public debt profile

o More flexible exchange rates and unprecedentedly high

international reserves (+150% between 2003 and 2008)

o A regional current-account surplus with economic growth

Ready access to external financing

Increase in trade (M + X) (value: 138%/volume: 49%)

Terms of trade improved by 25% in the region

Per capita GDP grew by more than 3% per year for five

consecutive years

Unemployment diminished from 11% to 7.5% with job

quality

Poverty rates fell by 10 percentage points (from 44% to

34%)


Region’s real economy has been severely

affected: trade, remittances, tourism, FDI

Latin America and the Caribbean: Year-on-year change in goods and services exports,

foreign direct investment and remittances, 2008 and 2009

20%

15% 14% 13%

10%

0%

1%

0%

-10%

-20%

-30%

-10%

2008 2009

-15% -15%

-13%

-40%

-37%

Export volume Price of export

goods

Source: ECLAC.

Services

exports

Foreign Direct

Investment

Remittances

4


The region’s goods exports and imports fell 23% and 25%,

respectively, in 2009, after an increase of 16% and 22% in 2008

LATIN AMERICA AND THE CARIBBEAN: MERCHANDISE EXPORT GROWTH 2008 AND 2009

(Growth rates relative to the same period in the previous year)

Exports

Imports

Caribbean countries -30%

17%

Mexico -21%

7%

Central America

-9%

9%

Mexico and Central America -20%

7%

Chile -20% -2%

Andean countries -28%

30%

MERCOSUR -22%

25%

South America -24%

22%

Latin America and the Caribbean -23%

16%

-40% -20% 0% 20% 40%

2008-2007 2009-2008

Caribbean countries -23%

21%

Mexico

Central America

-24%

-25%

9%

14%

Mexico and Central America -24%

10%

Chile -31%

31%

Andean countries -21%

23%

MERCOSUR -27%

41%

South America -26%

34%

Latin America and the Caribbean -25%

22%

-40% -20% 0% 20% 40% 60%

2008-2007 2009-2008

Source: ECLAC, based on official sources.


Among its major trade partners, exports to Asia fell the

least

LATIN AMERICA AND THE CARIBBEAN: MERCHANDISE EXPORT GROWTH 2008 AND 2009,

BY DESTINATION AND ORIGIN

(Growth rates relative to the same period in the previous year)

Exports

Imports

LAC

-28%

24%

LAC

-25%

21%

Other Asia countries

-14%

18%

Other Asia countries

-26%

19%

China

6%

25%

China

-16%

32%

Asia

-6%

21%

Asia

-21%

24%

European Union

-28%

15%

European Union

-23%

24%

United States

-26%

9%

United States

-25%

17%

World

-23%

16%

World

-25%

22%

-40% -20% 0% 20% 40%

2008 - 2007 2009 - 2008

-40% -20% 0% 20% 40%

2008 - 2007 2009 - 2008

Source: ECLAC, based on official sources.


Intra-regional trade remains below the peak levels reached prior to

the Asian Crisis… and in 2009 it fell even more than total trade

LATIN AMERICA AND THE CARIBBEAN: INTRAREGIONAL TRADE, 1986-2009

(As a share of each group or subregion’s total exports)

35%

Andean Community

Centr. American Common Mkt

MERCOSUR

CARICOM

30%

25%

20%

15%

10%

5%

0%

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009p

Source: ECLAC based on COMTRADE.

7


The drop in LAC exports has no recent precedent.

The nearest parallel happened 70 years ago

80

Latin America and the Caribbean: price and quantity of exports

1931-2009 (Annual growth rates)

60

40

20

0

-20

-40

quantity

price

1931

1934

1937

1940

1943

1946

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

Source: ECLAC, based on official sources. 2009 projections from ECLAC International Trade and Integration Division

8


In the case of imports, the nearest parallel

happened 27 years ago

70

Latin America and the Caribbean: price and quantity of imports

1931-2009 (Annual growth rates)

50

30

10

-10

-30

-50

External-Debt Crisis

quantity

price

1931

1934

1937

1940

1943

1946

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

Source: ECLAC, based on official sources. 2009 projections from ECLAC International Trade and Integration Division

9


But recovery has already started…

For 2010 ECLAC predicts an average GDP growth of 4.3%

Regional exports for the second half of 2009 fell by 15% in

value respect to the same period of 2008, but it grew 4.7%

in December over November of 2009.

For 2010 ECLAC predicts trade growth between 5 and 6% in

terms of volume

Terms of Trade for the region would improve 3,8% in 2010,

stimulated principally by hydrocarbons and metals in

South America and Mexico.

Though current account balance might worsen in 2010 –

thanks to faster increases in imports –, recovery in

financial inflows, especially FDI, would compensate for the

deficit.

10


LAC exports and imports, which fell drastically as a result of the

crisis, begin to recover to a pre-crisis level

LATIN AMERICA AND THE CARIBBEAN: EVOLUTION OF TRADE IN GOODS

(in million of dollars)

January 2006-December 2009

90,000

80,000

Balance Exports Imports

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

-10,000

Jan/06

Feb/06

Mar/06

Apr/06

May/06

Jun/06

Jul/06

Aug/06

Sep/06

Oct/06

Nov/06

Dec/06

Jan/07

Feb/07

Mar/07

Apr/07

May/07

Jun/07

Jul/07

Aug/07

Sep/07

Oct/07

Nov/07

Dec/07

Jan/08

Feb/08

Mar/08

Apr/08

May/08

Jun/08

Jul/08

Aug/08

Sep/08

Oct/08

Nov/08

Dec/08

Jan/09

Feb/09

Mar/09

Apr/09

May/09

Jun/09

Jul/09

Aug/09

Sep/09

Oct/09

Nov/09

Dec/09

Source: ECLAC, based on official sources.


60,000

50,000

40,000

Recovery has been quicker for South America, benefitting

from a strong demand of commodities by China

60,000

50,000

40,000

Balance Exports Imports

SOUTH AMERICA : EVOLUTION OF TRADE IN GOODS

(in million of dollars)

January 2006-December 2009

MEXICO AND CENTRAL AMERICA: EVOLUTION OF

TRADE IN GOODS

(in million of dollars)

January 2006-December 2009

Balance

30,000

Exports Imports

20,000

10,000

0

-10,000

Jan/06

Feb/06

Mar/06

Apr/06

May/06

Jun/06

Jul/06

Aug/06

Sep/06

Oct/06

Nov/06

Dec/06

Jan/07

Feb/07

Mar/07

Apr/07

May/07

Jun/07

Jul/07

Aug/07

Sep/07

Oct/07

Nov/07

Dec/07

Jan/08

Feb/08

Mar/08

Apr/08

May/08

Jun/08

Jul/08

Aug/08

Sep/08

Oct/08

Nov/08

Dec/08

Jan/09

Feb/09

Mar/09

Apr/09

May/09

Jun/09

Jul/09

Aug/09

Sep/09

Oct/09

Nov/09

Dec/09

30,000

20,000

10,000

0

Ja n F e b M a r / A p r / 0 M a y Ju n / Ju l/ 0 A u g S e p / O c t/ N o v D e c 6

Ja n F e b M a r / 0 A p r / M a y Ju n / Ju l/ A u g S e p / O c t/ N o v D e c 7

Ja n F e b M a r / A p r / 0 M a y Ju n / Ju l/ 0 A u g S e p / O c t/ N o v D e c 8

Ja n F e b M a r / 0 A p r / M a y Ju n / Ju l/ A u g S e p / O c t/ N o v D e c / 0 9

-10,000

Source: ECLAC, based on official sources.


LAC is lagging behind in international competitiveness…

Selected countries: Ranking in the WEF Global Competitiveness Index, 2008-09

Paraguay

Nicaragua

Bolivia, P.S.

Guyana

Venezuela, B.R.

Ecuador

Suriname

Dom. Rep.

Trinidad & Tobago

Argentina

Jamaica

Guatemala

Peru

Honduras

El Salvador

Uruguay

Colombia

Brazil

Mexico

Costa Rica

Panama

Barbados

Chile

N. Zealand

Ireland

Australia

Norway

Finland

Sweden

4 6 15 18 222428 47

79828384

75

74

58 596064

Better

105

104

103

98

868892

84

115 118120124

0 20 40 60 80 100 120 140

Source: WEF Global Competitiveness Report 2008-2009.

13


…and also in technological readiness

Selected countries: Ranking in the WEF Network Readiness Index, 2008-09

Bolivia, E.P.

Nicaragua

Paraguay

Surinam

Ecuador

Guyana

Venezuela, R.B.

Honduras

Perú

Argentina

Guatemala

Trinidad y Tobago

El Salvador

Rep. Dominicana

México

Panamá

Uruguay

Colombia

Brazil

C. Rica

Jamaica

Chile

Barbados

Ireland

N. Zealand

Australia

Norway

Finland

Sweden

2

8

6

14

23

22

39

36

59

56

53

67

66

65

64

Better

82

81

78

75

89

87

100

96

95

106

117

128

125

122

0 20 40 60 80 100 120 140

Source: WEF Global Competitiveness Report 2008-2009.

14


And there is a long way to go in trade facilitation

Time to export and import

(days)

Cost to export and import

(US Dollars per container)

Singapore

Korea

OECD

Mexico

Chile &

Panama

Caribbean

Central

America

MERCOSUR

Andean

countries

Singapore

Korea

OECD

Mexico

Chile & Panama

Caribbean

Central America

MERCOSUR

Andean countries

0 10 20 30 40

0 500 1000 1500 2000 2500

Time to import

Time to export

Cost to import

Cost to export

Source: ECLAC based on World Bank, Doing Business 2010.

15


In the current decade, China has become a key trade partner

for the region, especially for South America

Selected countries: China’s rank as a trade partner

EXPORTS (destination)

IMPORTS (origin)

2000 2008 2000 2008

Argentina 6 2 4 3

Brazil 12 1 11 2

Chile 5 1 4 2

Colombia 35 4 15 2

Peru 4 2 13 2

Venezuela, B. R. 37 3 18 3

Costa Rica 26 2 16 3

Mexico 25 5 6 3

Cuba 5 2 5 2

China is an important buyer…

• In the top-5 for 10 countries

• In the top-2 for 6 countries

Source: ECLAC, based on official sources.

… and an important supplier:

• In the top-5 for 23 countries

• In the top-2 for 5 countries

16


LAC, as an increasing trade partnership of China

Trade growth rates, key regional partners, 1995-2009 (Average

annual rates)

Trade Partners

Exports

Regions 1990-1995 1995-2000 2000-2005 2005-2009 (1)

Latin America and the Caribbean 32.2 17.8 26.8 26.1

Asia Pacific (2) 26.5 9.3 20.3 11.6

United States 36.7 16.1 25.6 10.2

European Union 26.3 15.0 28.8 14.9

Rest of the World 8.6 7.1 26.6 14.3

World 19.1 10.9 25.0 13.4

Imports

Latin America and the Caribbean 14.5 12.7 37.6 22.8

Asia Pacific (2) 32.4 12.2 23.9 7.1

United States 19.7 6.8 16.8 10.2

European Union 18.2 7.6 18.8 14.4

Rest of the World 11.2 13.4 26.8 14.5

World 19.9 11.3 24.0 11.7

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of the United Nations

statistical database on merchandise trade (COMTRADE) and DOTs (IMF)

Notes: (1) corresponds to DOTs data for January to November and moving average estimates for December. (2)

Includes ASEAN, Australia, Republic of Korea, Japan and New Zealand.

17


Share of Asia-Pacific (17) a and China in the total exports of Latin American countries,

2001-2006 (% of the total exports of each country)

2000 2009

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from the

United Nations Commodity Trade Database (COMTRADE).

a

Asia Pacific (17) includes Australia, Brunei Darussalam, Cambodia, Hong Kong (Special Administrative Region of

China), India, Indonesia, Japan, Lao PDR, Malaysia, Myanmar, New Zealand, Philippines, Republic of Korea,

Singapore, Taiwan Province of China, Thailand, and Viet Nam.

18


Latin America and the Caribbean (16 countries):

share of the main destinations in total exports,

2000-2020

(In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on data from the

COMTRADE database and national sources.

Notes: the 16 countries are: Argentina, Bolivia (Plurinational State), Brazil, Chile, Colombia, Costa Rica,

Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, Uruguay, Venezuela

(Bolivarian Republic of). Estimates and projections based on GDP growth rates for the years 2000-2009

in the United States, European Union, China, Latin America and the Caribbean, Asia Pacific, and Rest of

World. It is expected a growth rate of trade which converges to the economies' long-term growth rate.

19


Latin America and the Caribbean (16 countries):

share of the main sources of total imports,

2000-2020

(In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on data from the

COMTRADE database and national sources.

Notes: the 16 countries are: Argentina, Bolivia (Plurinational State), Brazil, Chile, Colombia, Costa Rica,

Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, Uruguay, Venezuela

(Bolivarian Republic of). Estimates and projections based on GDP growth rates for the years 2000-2009

in the United States, European Union, China, Latin America and the Caribbean, Asia Pacific, and Rest of

World. It is expected a growth rate of trade which converges to the economies' long-term growth rate.

20


Latin America and the Caribbean: Three leading

export products for Selected Countries, by Country

or Region of Destination, 2004-20062006

(Percentages)

Asia-Pacific European Union China United States World

Argentina 57.8% 44.9% 83.4% 24.6% 21.9%

Brazil 34.4% 22.1% 55.7% 13.9% 12.2%

Chile 71.7% 65.4% 85.8% 47.5% 55.3%

Costa Rica 89.8% 56.8% 94.2% 36.2% 30.0%

Guatemala 86.7% 74.7% 97.5% 45.2% 23.8%

Mexico 20.3% 46.3% 47.6% 23.8% 24.8%

Peru 61.9% 41.5% 70.6% 51.3% 40.0%

Source: ECLAC, on the basis of information from the United Nations Commodity Trade Database (COMTRADE).

21


Higher quality in the exports oriented to US markets

…more tech intensity in LAC EXPORTS

Primary

products

US EU AP

26% 46% 59%

NRBM 12% 29% 24%

LTM 11% 5% 3%

MTM 30% 15% 9%

HTM 19% 4% 5%

22


Exports, imports and trade balance with China

(In millions of dollars)

Trade pattern of LAC

with China is different

among South America

and Mexico-C.

America

Source: ECLAC, on the basis of COMTRADE

data, official data and DOTs (IMF).

23


Official visits of Head of States are growing

24


Summary of the trade relationship with China

Asymetry between levels of trade and investment

Asymetry between South America and Mexico-C America

Few products explain the majority of exports

Mainly natural resources¨; low technology content

Trade flows almost exclusively inter-industry

Asymetry between the organized Chinese agenda for LAC and the LAC

reaction, without regional coordination

China displacing EU as second trade partner of LAC by 2015.

Backward trend in export diversification

Risks of “Dutch disease”

Risk to reinforce the inter-industry specialization with China

Complacency with the cycle of commodities, delaying choices of

industrial and innovation policies

Loosing opportunities to advance on internationalization of

enterprises, fostering linkages between services, manufactures and

natural resources

25


Regional scenarios on trade

In 2012, 9 LA countries will have FTA with US

Colombia &Panama pending

11 or 16 with EU (depending on Mercosur)

15 trade agreements will link 5 LA countries with 11

Asian economies

Plus a lot of regional agreements within LAC

Demand of convergence

26


FTAs with US in the Americas

Canadá

México

Honduras

Guatemala

Nicaragua

El Salvador

Panamá

Costa Rica

Colombia

Ecuador

República

Dominicana

Perú

Chile

OSVALDO ROSALES

27

27


Some salient trends

CAFTA-NAFTA convergence: a huge potential to exploit

Amplified markets with similar rules and disciplines on

goods, Services and Investment

Tech and business alliances to deal with Asian challenges

Mexico-C. America

US-Mexico-C America

Accumulation origin

Within all FTAs in LA with US

CAFTA-NAFTA will over Panama-Colombia

Real state boom in Panama and other CA countries

Business linked to the expansion of Panama Canal

Plan Puebla-Panama-Colombia


Investment on infrastructure, logistics, ICT’s

28


Trade agreements between LA and Asia countries

Japón

India

Tailandia

Malasia

Corea

China

P.C. de

Taiwán

Singapur

Brunei

México

Guatemala

Costa Rica

Panamá

Australia

Perú

Nueva

Zelanda

Chile

29


Other Initiatives on Asia Pacific

Latin-American Pacific Arch is a good initiative

11 countries: Colombia, C. Rica, Chile, Ecuador, El Salvador,

Guatemala, Honduras, Mexico, Nicaragua, Panama and Peru

Except Ecuador, 10 countries with FTA with US

The idea: to strengthen the linkage with Asia Pacific, reinforcing the

owns linkages within the region

4 working groups





Convergence on trade agreements

Trade Facilitation, Infrastructure and Logistics

Promotion and Protection of Investments

Cooperation on Competitiveness

30


Latin American Pacific Arch

31


The US Dilemma: How to deal with

the Chinese connection?

Moving forward on Doha Round

Moving pending FTAs in the Congress

Deepening its economic and trade commitment to

Latin America

Put in practice the cooperative relationship with LAC

“seeking an equal partnership”

Advancing on the TPP

32


The TPP: an opportunity to reassert

the leadership of US on world

trading system

US requires flexibility and political will to move Doha

agenda

World trading system needs leadership to deal with

the new issues: trade & climate change; labor,

environment; security; private rules and standards

APEC 2011 (Hawai) and the TPP are excellent

opportunities to take up again the initiative

33


Relevance of TPP

Economic engagement with the engine of the world

economy

To offset discrimination against US exports generated by

an increasing number of intra-trade Asian pacts

To avoid isolation of Asian economies …temptation to

act as stumbling block

To avoid the breakdown of APEC in two blocks: the Asian

and the Western area.

34


Challenges for US policy (on TPP

initiative)

To approve the TPA

To approve pending FTAs (mainly Korea,)

Significant concessions on agriculture and textile and clothing

Flexibility on AD

Less pressure on the new “platinum standard”

To avoid the bad combination: platinum standard in the new

issues and the tin standard in the traditional issues (agriculture,

AD, public procurements, services Mode 4)

35


The challenges for the partners

If US does its homework, then the partners may be available to engage

on the initiative

The issues

To start new negotiations on politically sensitive issues, already

settled with the US after difficult negotiations (including several

non-voluntary changes after the negotiations were formally closed)

To combine trade arrangements of different scope and depth

To articulate the TPP with an immense web of preference

agreements

If US does not its homework, it will be very difficult to advance in the

TPP

36


The Pending Trade Agenda

with LAC

To approve pending FTAs (Colombia, Panama)

Lower the trade barriers it still maintains to key LAC exports: agriculture,

textiles and clothing, ethanol

Be more forthcoming on the reduction of its agricultural subsidies on

Doha Round

Become more involved in Trade Facilitation and Aid for Trade projects,

committing resources, collaborating with its FTA partners: a new way of

understanding the administration of the FTAS

Setting up trade finance squemes to support exporting SME from its FTA

partners in the region

Promoting cumulation of origin across all its FTAs in the region

37


US choices: a) indifference

Lost opportunities

Reduced share on LAC and Asian trade

Loosing leadership

Protectionism against China

No hemispheric initiatives on trade

China gaining presence on trade and investment

New international alliances on trade and investment

38


US choices: b) active engagement

Pushing free trade initiatives on Doha and APEC

Leading the TPP initiative with pragmatism, flexibility and platinum

standard for all the issues

Promoting origin accumulation among the FTA’s with Canada and LA

countries

Promoting value chains of these countries on business oriented to Asia

Pacific

Business and tech alliances with LA partners

Aid for strategic trade



Administration of FTA’s

SME’s exports

Quality certification

Trazability

Training work force……

Trade Facilitation

39


Cooperation and integration are necessary to better

address the post-crisis structural problems

Moving toward an integrated regional market

would:

o foster productive integration and economies of scale

o enhance the region’s attractiveness internationally

However, the current political environment in the

region does not favor large trade liberalization

initiatives

o Due to large differences in orientation towards “free trade”

o South American FTA project has been put in the backburner

But differences over trade issues should not

impede cooperation in a series of more urgent

areas:

o Need to look beyond trade

40


In this context, ECLAC proposes to focus on

8 priority areas

Addressing intraregional challenges by:

1. Enhancing the region’s physical infrastructure

2. Supporting intraregional trade through trade financing

and trade facilitation

3. Reducing the region’s asymmetries

4. Fostering social cohesion

Addressing global challenges by:

1. Strengthening cooperation on innovation &

competitiveness

2. Developing closer ties with Asia Pacific

3. Facing together the reform of the int’l financial system

4. Addressing the challenge of climate change

41


The new trade policy should address….

New issues

o Labor; environment; security; sanitary and phytosanitary traceability; food

safety; carbon traceability; climate change; certifications; best practices;

corporate social responsibility

Multiple objectives

o Competitiveness-innovation-sustainability

o Internationalization of firms

o Global value chains

o Climate change

Key institutional challenge is to achieve an integrated approach

comprising the following policy areas:

o Trade

o Productive development; Innovation and technological diffusion

o FDI

o Human resources (education and capacity building)

o Environment

Strengthen the role of the State in two main areas:

o Address institutional coordination failures

o Foster public-private partnerships for a leap in innovation and

competitiveness

42


Thank You

osvaldo.rosales@cepal.org

43

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