The value of goods exports from Latin America is dropping fast, as the Chinese economy slows down along with the countries in the European Union, according to a study by the Inter-American Development Bank (IDB).
While the LatAm trade with the United States is growing, the European Union and China are no longer purchasing as many goods from the region as they did last year, the report noted.
The slowdown in goods exports was primarily driven by lower export prices and stagnating trade volumes. Although the US economy is expanding, the global trade shrunk 3.1% year-on-year in the first three quarters of 2019.
“While advanced economies are beginning to display a cautious return of optimism, emerging economies continue to pose risks to exports from Latin America and the Caribbean,” said Paolo Giordano, Principal Economist at the IDB’s Integration and Trade Sector. Giordano coordinated the study.
China accounted for close to 25% of LatAm exports in 2018. The slowing growth in the world’s second-largest economy has now started to pinch commodity exporters in the region.
Copper, oil, sugar, soybeans and iron ore are some of the prominent commodities the region exports. Copper prices fell 8.3% in January–October compared to the same period last year.
“South American exports declined at an estimated rate of 7.2 percent after growing 8.2 percent in 2018. The Caribbean experienced an estimated contraction of 10.8 percent. Exports from Mesoamerica grew 3.1 percent as a result of a 3.3 percent increase in shipments from Mexico and a 1.5 percent rise in those from Central America,” the report noted.
If the exports fall, so do imports. The decline in imports is the side effects’ of the decline in export demand and the contraction in economic activity, according to the bank.