Latin America: Global Rebalancing To Prompt A Secular Shift In Export Trends

Our most recent Latin American economic themes article looks at export growth. In short, we expect all major economies in the region with the exception of Mexico to see weaker export growth between 2013 and 2022 than in the last decade.

We continue to believe that global rebalancing pressures will cause a secular shift in the export dynamics of the major Latin American economies in the coming years.

The metals producers in the region are, by and large, set for a painful readjustment. Indeed, in the last decade, Peruvian, Chilean, and Brazilian export growth was buoyed substantially by robust Chinese demand. With China’s growth story winding down, this will feed through to weaker export growth for the major metals producers.

Elsewhere, despite Venezuela’s devaluation of the bólivar, and our expectation that Argentina will devalue the peso this year, we do not believe this will be sufficient to head off a moderation in their export growth over the long term. In Venezuela, the devaluation will have little effect, given that dollar-denominated oil exports comprise the vast majority of the country’s total outbound shipments and given the underinvestment resulting in falling production. In Argentina, while the peso’s anticipated devaluation will see exports recover somewhat, grains prices will remain below the past decade’s highs, and the effects of major erosion of productive capacity will linger.

By contrast, Mexican exports look set to surge in the coming decade. Rising wages in China have seen Mexico’s manufactured goods become increasingly cost-competitive in the last year. Combined with a fairly attractive business environment and recently passed reforms, this will bolster export growth over a multi-year timeframe.

Our full article on Latin America’s export prospects over the coming decade, as well as broader political, economic, financial market, and industrial sector coverage of Latin America, are available to subscribers at Business Monitor Online.