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Global value chains

Global Trade Trends 2023: 5 Insights and Predictions

By Estefania Camacho

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Published by ConnectAmericas

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The Latin America and Caribbean region is quickly recovering from the health crisis that started in 2019 in some parts of the world and continued by 2020 in the West, at least. Global trade has recovered faster than in previous crises, resuming growth in November 2020. 

Both the pandemic and trade frictions have accelerated resilience, timeliness and changes in technology and labour costs, a transformation that could enable greater participation of the region in global value chains.

The trends to look out for in global trade in 2023:

  1. E-commerce: E-commerce is expected to continue to grow and transform the way companies conduct business internationally. It also enables significant reductions in trade costs, whether logistical, regulatory or information costs with this new mode of trade. 
  2. Tighter trade regulations: Due to the COVID-19 pandemic, new trade regulations are likely to emerge to ensure the safety and protection of workers and consumers. However, with a growing demand for digital transactions as well, some of these regulations will need to be updated and new ones designed to optimise the global digital arena.
  3. Increased attention to sustainability: Companies are expected to pay more attention to sustainability in their international business practices, including reducing greenhouse gas emissions and adopting ethical supply chain practices. 
  4. Increased foreign direct investment: A rise in foreign direct investment is expected due to increased globalisation and the need for companies to access new markets and resources, after global foreign direct investment flows stagnated, remaining 23% lower in 2021 than the peak in 2015 and similar to 2008. 
  5. Increased importance on trade agreements: Trade agreements will continue to be important in facilitating international trade and reducing trade barriers.

What were the trends in 2022?

In the first half of 2022, the year-on-year rise in intra-regional sales (33.5%) was higher than the rise in extra-regional sales (18.5%), although in both cases at lower rates than in 2021.

It is important to note that these trends are subject to change due to factors such as the war in Ukraine, the zero COVID policy in China, the European energy crisis and monetary tightening in the economies, so market developments should be followed closely to get an up-to-date picture of the situation.

Intra-regional flows grew at higher rates than extra-regional flows in the Pacific Alliance, the Andean Community, Central America and the Dominican Republic, and MERCOSUR. In contrast, a limited sample of Caribbean countries indicates that the bloc's sales expanded mainly because of extraregional momentum.

Intra-zone or intra-bloc trade, i.e. flows within the respective integration schemes, increased 31.0% in 2021 and accounted for 2.5% of the total.  Intra-Pacific Alliance trade was driven by sales of vehicles from Mexico to Colombia and of vehicles and electrical goods to Chile and Peru. Exports of molybdenum, fruits and plastics from Peru to Chile also contributed. 

Considering the different integration schemes, the contribution of US demand was decisive only for the Pacific Alliance (by Mexico). For Central America and the Dominican Republic, the main contribution came from LAC itself. For the Southern Common Market (MERCOSUR), the largest market contributor in the first half of 2022 was China, followed by the region itself, while in 2021 the largest contribution had come from other partners such as India, the Republic of Korea and Singapore. In the Andean Community, export growth was driven by China, India, Japan and the Republic of Korea in 2021, and by LAC in the first part of 2022.

Caribbean Community 

According to a sample of 30 countries (Barbados, Belize, Guyana and Suriname), CARICOM exports recovered in 2021, mainly due to sales outside the region, in particular a boost in Guyana's oil exports to the United States.  

Andean Community (CAN)

Total CAN exports rose to 40.5% in 2021, driven by shipments of fuels from Ecuador and Colombia to the United States, gold from Bolivia to India, and minerals from Peru to China Intra-regional exports showed remarkable dynamism, expanding 50.5% y-o-y in H1 2022. 

CAN intra-zone trade rose 31.6% in 2021, accounted for 5.7% of the total and was driven by all partners. Sales of soy derivatives from Bolivia to Colombia and Peru, of non-traditional exports from Peru to Colombia and Ecuador, and of plastic materials from Colombia to Ecuador increased. Ecuador increased its oil exports to Peru. 

In the first half of 2022, intra-zone trade accelerated to 39.2%, mainly due to the contribution of Ecuador's sales to Colombia and Peru. The main progress in the integration agenda was made in the digital, environmental and trade areas.



The Reorganization of Global Value Chains: What’s in it for Latin America and the Caribbean? Published by the Inter-American Development Bank Integration and Trade Sector December 2022. 

Shockwaves: Latin America and the Caribbean facing global trade turmoil / Cataloging-in-Publication data provided by the Inter-American Development Bank Felipe Herrera Library

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