The Economic Commission for Latin America and the Caribbean (ECLAC) has urged the regional countries to integrate their economies quickly, saying their foreign trade is set to record a staggering 23% drop this year as a result of the COVID-19 pandemic.
The effects of the pandemic on the regional economy will be far worse than the 2009 financial crisis, said the UN agency in a special report.
Unveiling the report, Alicia Bárcena, the agency’s executive secretary, said both export and import will shrink by as much as 25%.
The sharp decline in the tourism sector (-50%) is dragging down service exports, especially from the Caribbean, while manufacturers are seeing no buyers with lockdown measures hindering intraregional trade.
“Deepening regional integration” is the only solution to emerge from this crisis, says the agency, urging the countries to reduce unnecessary cost “through efficient, smooth, and secure logistics.”
According to the document, the value of the region’s goods exports and imports declined by 17% between January and May 2020 compared with the same period in 2019. Both flows plunged towards the end of that five-month period, with a 37% year-on-year drop in May alone.
During this period, shipments to the United States and the European Union fell by 22.2% and 14.3%, respectively, with trade within the region contracting 23.9%.
Interestingly, exports to China shrank by just 2%. The agency forecasts a further decline in exports to the U.S. in the second half of the year.
The worst-hit sectors are tourism (-50%), followed by mining & oil (-25.8%), and manufactured goods (-18.5%). In contrast, agriculture and livestock products notched a slight increase of 0.9%.
This is precisely the reason why some Central American countries, including Honduras and Nicaragua, saw their exports increase during the pandemic.
What is worrisome for the region is the contraction in the importation of capital goods and intermediate inputs, which the agency warns will slow down investment as well as recovery.