Latin American, Caribbean Exports Continue to Rise
But the region still faces major economic risks, says new UN report
NEW YORK - 10/18/05 - A 17% increase in the export of goods from Latin America and the Caribbean in the first half of 2005 marks the second straight year for such regional growth in trade, according to a new report released recently by the United Nations' Economic Commission for Latin America and the Caribbean (ECLAC).
The report - Latin America and the Caribbean in the World Economy 2004: 2005 Trends - forecasts a good year for regional trade in 2005, "due to better international prices for the region's exports, improved terms of trade, lower interest and inflation rates, and solid fiscal results."
But, it warns, "medium-term economic risks for the region remain formidable."
The risks it identifies include a large deficit in the US current account, soaring oil prices, an undiminished threat of terrorism, and signs of protectionism among the world's leading industrialized economies.
The report said oil prices remain crucial to the region as three Latin American countries - Venezuela, Ecuador and Colombia - are major global oil exporters.
But, it said, several of Latin America's small and medium-sized countries are oil importers, and global oil prices of about $60 per barrel are imposing "significant cost burdens for the region."
China has become the largest market for South American goods, with Chinese imports from the region rising from $1.5 billion in 1990 to $21.6 billion in 2004.
If this high demand from China for South American goods continues, the region "can look forward to a lengthy period of strong exports and their terms of trade will be strengthened," the report said.
At the same time, some countries in Latin America and the Caribbean face increasing competition from China, especially in the textiles market, the report said.
This trend could become particularly important in the event of excessive textile production in China.
The ECLAC said national authorities in Latin America and the Caribbean "should make an effort to detect and make the most of the potential for complementary activities with regard to China and the Asian countries."
The report is divided into six chapters - recent developments in the world economy, particularly the major changes occurring in the structure of international trade and financial flows and their implications for the Latin American and Caribbean countries; the international negotiations taking place within the framework of the World Trade Organization; and the status of Latin American and Caribbean integration efforts as a number of the region's countries become more actively engaged in negotiations with the United States and the European Union.
In addition, the report covers protectionist trends in the world economy and especially in developed countries; and the strategic aspects of economic and trade relations between China and Latin America and the Caribbean; and a Latin American and Caribbean perspective on the complex links that have developed among trade, security, and transport, as security measures are tightened in the wake of terrorist attacks in the US and Europe.
The US "is helping countries in Latin America and the Caribbean enact legal, policy and regulatory reforms that promote trade liberalization, hemispheric market integration, competitiveness and investment," according to Adolfo Franco, assistant administrator for Latin America and the Caribbean at the US Agency for International Development (USAID).
Speaking in recent Congressional testimony, Franco said that his agency "continues to help countries meet new standards for rules of trade, such as customs and rules of origin, sanitary and phyto-sanitary measures (animal and plant health and food safety), and intellectual property rights."
In addition, USAID assistance "helps smaller economies in the region benefit from a global trading system by addressing longer-term challenges, such as rural economic diversification and small and medium-sized enterprise development and competitiveness," he said.
In another development, Mexican President Vicente Fox has called for countries to abide by their international trade agreements, voicing support for Canada in its softwood lumber dispute with the US.
Fox told a business gathering that the North American Free Trade Agreement (NAFTA) subjects trade in the region to "rules that provide guarantees of legal certainty." He later told reporters his stance included the softwood dispute.
"Mexico regrets any unilateral decision that fails to abide by the decisions of the arbitration panels where trade differences are discussed and aired," Fox said in a speech late last week to members of the Vancouver (British Columbia) Board of Trade.
Canada has been angered by Washington's refusal to scrap duties on Canadian softwood after a NAFTA panel ruled the US had failed to justify the need for the tariffs imposed three years ago.
Some Canadian officials have charged the US reaction amounted to a rejection of NAFTA, but Washington continues to deny the assertion arguing that Canada has misinterpreted the panel's decision.
"Mexico believes that when international commitments are promptly honored, we diminish uncertainty in the region," Fox said. "These institutions and procedures must be strengthened, not weakened."
Canadian Prime Minister Paul Martin, who met with Fox in Vancouver, called the Mexican leader's statements helpful.
"I'm sure this will weigh heavily in these battles," Martin said at the leaders' joint press conference after Fox's speech.
The Mexican president made his comments during a two-day visit to Western Canada to promote investment opportunities in Mexico.
In his speech, Fox urged for greater co-operation between the three NAFTA countries -- Mexico, Canada, and the US - amid increased competition with Asian countries.
"We've been losing jobs to Asia, to China, the three of us," he said. But, he said he was optimistic North America has greater potential for growth and trade opportunities.
Fox, whose presidential term ends next year, also touted "unprecedented legal security" for investors in Mexico, and added that over the past five years the country had made "significant progress" to reduce corruption and poverty.
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