Countries in Latin America and the Caribbean are beginning to show signs of economic recovery and a higher volume of exports, including new products in higher quality niches, according to the World Bank’s new semiannual report on Latin America and the Caribbean, “The Big Switch: Restoring Growth through Trade.”
The region is expected to contract by 1.1% in 2016 but recover to 1.8% in 2017, according to the Consensus Forecasts. This recovery is primarily attributed to a rebound in South America, where growth is expected to reach 1.5% in 2017.
“The regional slowdown seems to finally be coming to an end, with average growth expected to turn positive in 2017,” said Augusto de la Torre (photo), chief economist of the World Bank for Latin America and the Caribbean.
The report explains that, in the new reality of lower commodity prices, the region can no longer rely on domestic demand to drive growth as it did during the boom years. A shift towards external buyers will be crucial to boost economic activity.
However, just when the region seems ready to make the necessary efforts to strengthen its presence in international markets, the world appears to be heading in the opposite direction, as the volume of global trade is stabilizing, if not declining, dragged down by a contraction in import volumes from China and East Asia more broadly.
The good news is that some preliminary evidence now shows that countries in the region are already increasing export production, including new higher-quality products that are finding niche markets in the U.S. and Europe. Additionally, more competitive exchange rates, achieved during the adjustments of the past two years, open the door for greater regional trade by replacing imports from outside the region with efficiently produced goods and services within the region. The report also concludes that countries with flexible exchange rates are diversifying their exports and export destinations.