Growth in Goods Exports from Latin America and the Caribbean Faces Risks, Services Continue to Expand

• Growth in volumes and the stabilization of prices explained the recovery in goods exports.
• Service exports sustained robust growth.
• The increase in extraregional trade flows was offset by a contraction in intraregional trade.

The value of goods exports from Latin America and the Caribbean rose by 3.2% year-on-year in the first half of 2024, rebounding after a 1.6% decline in 2023, according to a new report from the Inter-American Development Bank (IDB). This improvement was the result of an increase in export volumes and the stabilization of prices relative to 2023.

However, the most recent indicators do not yet confirm a sustained recovery in the region's exports, according to "Bucking the Trend: The Potential of Knowledge-Based Services", the latest edition of the annual Trade and Integration Monitor.

The study reveals that service exports slowed slightly in the first quarter of 2024, growing at 9.5% compared to the average of 12.2% in 2023. Nevertheless, this growth remains well above the global average of 7.1%.

"After the rebound that followed the pandemic, goods exports from Latin America and the Caribbean have returned to a low-growth trajectory amid more pronounced global fragmentation and highly volatile prices. By contrast, exports of services-especially knowledge-based services-have proven resilient and dynamic," said Paolo Giordano, Principal Economist at the IDB's Integration and Trade Sector, who coordinated the report.

Export prices in Latin America and the Caribbean fell by 0.5% in the first half of 2024,building on the 2.3% drop of 2023. Export volumes increased, growing at 3.3%, up from 1% the previous year. Import prices fell even more sharply (-3.1%) than export prices, improving the region's terms of trade.

The decline in intraregional sales (-4.5%) partially offset the growth in exports to the rest of the world (4.1%), and the share of intraregional trade in total trade fell to 13.7%.

The report concludes that the external environment entails significant uncertainty and downside risks, mainly due to geopolitical tensions, industrial policies and rising protectionism, the impact of climate change. Macroeconomic conditions remain challenging, which may constrain external demand and heighten the volatility of commodity prices.

The potential of knowledge-based services

The report includes an in-depth analysis of the long-term potential of knowledge-based services, with business and computer services standing out for the region.

Exports of knowledge-based services have grown at an annual average rate of 4.7% in Latin America and the Caribbean over the last decade, outpacing exports of goods and overall services. However, growth has lagged behind the rest of the world (7.0%), and these services are concentrated in less sophisticated activities that are vulnerable to disruption by artificial intelligence.

To unlock the potential of this fast-growing segment of global trade, Latin America and the Caribbean must address the internal challenges underlying its productivity gap. These include human capital, digital infrastructure, the business climate, and access to finance. The region also needs to tackle external barriers that restrict access to international markets and undermine competitiveness.

The Trade and Integration Monitorwas prepared by the IDB's Integration and Trade Sector.

GOODS EXPORTS FROM LATIN AMERICA AND THE CARIBBEAN