Sharp Slowdown Recorded in Exports from Latin America and Caribbean, IDB Study Finds

The value of exported goods from Latin America and the Caribbean grew at an estimated rate of 2.9% year-on-year in the first quarter of 2023, after increasing by 16.4% in 2022, according to the latest edition of the Inter-American Development Bank’s Trade Trends Estimates report.

Although the region’s trade performance was better than the world average, exports slowed significantly due to lower commodity prices and weaker export volumes.

Looking ahead, the balance of risks is moderately weighted to the downside due to the impact of tight monetary policies on global growth, uncertainty surrounding the war in Ukraine, the depletion of the expansionary effect of the reopening of the Chinese economy, and the reversal of the upward trend in commodity prices.

“The post-Covid expansionary phase in the trade cycle has run its course, and Latin American and Caribbean exports have moved into a slowdown that is set to continue into the next quarter before stabilizing in the second half of the year,” said Paolo Giordano, Principal Economist at the IDB’s Integration and Trade Sector, who coordinated the publication. “Policies and investments that seek to boost competitive insertion into foreign markets will be key to shoring up the region’s economic recovery.”

The slowdown affected the entire region but was especially pronounced in the economies of South America, where the impact of falling prices was also greater due to the weight of commodities in their export baskets. External sales continued to expand in the first quarter of the year in the countries of Mesoamerica, particularly Mexico, which helped to sustain the region’s performance.

Export prices
According to the report, the prices of Latin America and the Caribbean’s main export commodities were extremely volatile between January and April 2023. Year-on-year growth rates were negative for the prices of oil (-18.2%), coffee (-12.6%), iron ore (-11.9%), copper (-11.1%), and soybeans (-5.2%). Sugar prices increased by 15.1% year-on-year. 

The report expects that “the main adjustment to prices took place in the first quarter of 2023” and that “prices will remain largely stable for the rest of the year, at historically high levels.” However, “the forecast includes risks of different natures that may unfold against a backdrop of uncertainty regarding the evolution of interest rates and the value of the dollar, which tend to have a direct impact on commodity prices.”

Performance by subregion
In South America, exports are estimated to have stagnated (-0.3%) in the first quarter of 2023 compared to the same period in the previous year, after having grown by 16.2% on average in 2022. Commodity prices drove exports throughout 2022 but entered a downward phase halfway through the year. Moreover, real trade flows contracted compared to the first quarter of 2022, albeit with some exceptions.

Meanwhile, exports from Mesoamerica climbed by an estimated 6.3% year-on-year in the first quarter of 2023 after growing 16.1% in 2022. External sales of Mexico increased by 6.8% year-on-year in the first quarter of 2023. Shipments from Central America grew by 1.6% year-on-year in the same period. 

The region’s total imports are estimated to have grown by 0.6% in the first quarter of 2023 after expanding by 21.1% in 2022. 

The report contains detailed data on the export performance of 20 countries in Latin America and the Caribbean.

Variation in export values
(Year-on-year variation rate, percentages, Q1 2023 and 2022) 

Source: IDB Integration and Trade Sector based on official national sources.
Notes: For additional information on the procedures, periods, and data sources used in these estimates, please refer to the Methodological Note. The arrows show the change in trend in comparison with the previous year.