Trade recovery in Caribbean still uncertain due to COVID-19 – study

A new study by the Inter-American Development Bank (IDB) has found that trade recovery in the Caribbean and Latin America and is still uncertain due to new outbreaks of the Coronavirus (COVID-19) and the economic impact caused by the pandemic.

In its “Trade and Integration Monitor” bulletin, the IDB said there has been a 16 percent drop in the value of exports from the region in the first half of 2020.

The “Trade and Integration Monitor”, which analyzes trade flows in the region, notes the downturn was mainly caused by a drop in export volumes, which, in turn, were driven by the economic impact of the pandemic.

The study found that the value of exports from the Caribbean and Latin America contracted more than global trade, which dropped by 13.3 percent year-on-year in the first half of 2020.

“The pandemic affected international trade in services more severely than trade in goods. Service exports from the Caribbean and Latin America entered negative ground for the first time since 2015, contracting at an estimated rate of 29.5 percent year-on-year in the first half of 2020.”

The IDB study noted that the Caribbean and Latin America’s trade performance was particularly affected in the first half of 2020 by the downturn in exports to large markets, such as the United States (-19.5 percent), the European Union (-18.6 percent) and China (-1.0 percent). However, the drop in intraregional trade was sharper, with the study indicating that these flows fell by 30.3 percent in the Andean Community, 24.6 percent in the South American trade bloc (MERCOSUR), 24 percent in the Pacific Alliance, and by 8.8 percent in Central America and the Dominican Republic.

As a result, the study also found the share of intraregional flows in total trade from the Caribbean and Latin America continued to shrink, accounting for just 12.8 percent of the total.

Imports from the Caribbean and Latin America fell 17.1 percent year-on-year in the first half of 2020, according to the report, urging regional countries to adopt “an ambitious international integration agenda and consolidate the regional value chains to attract new investments and take advantage of near-shoring opportunities in both goods and services”.

The study says priorities should include strengthening export promotion and investment attraction agencies, improving trade facilitation and modernizing customs facilities, diversifying the services sectors and promoting trade digitalisation, among others. The report also notes that “pragmatic initiatives” to reduce transportation costs will be critical if Latin American and Caribbean economies hope to compete in the global production networks of the future.

Additionally, it recommends strengthening regional integration and cooperation initiatives “to ensure the region’s economies are operating in an efficient, reliable, regulatory space that is attractive for investors”. – (CMC)