Latin America and the Caribbean in the World Economy 2010-2011. The region in the decade of the emerging economies

Chapter I looks at the ways in which the difficult international economic environment in 2010-2011 has resulted in emerging and developing regions (the South) increasing their share in world trade and economic variables. The recent economic recovery has developed a starkly two-speed pattern: while the South recovered rapidly from the crisis and its economies have burgeoned, the industrialized countries (the North) remain mired in difficulties. The dynamics of trade for the main groupings of products and countries shows that world trade, driven mainly by China and the rest of emerging Asia, has underpinned recovery from the crisis.

The industrialized countries are facing a complex outlook. The fiscal situation in the European Union, Japan and the United States is heavily compromised, which is sapping the strength from their tentative economic recovery. Fiscal and public debt challenges threaten to plunge these economies into a lost decade of low growth and high unemployment. Conversely, the emerging economies have registered steady growth since the crisis, albeit with some signs of a slowdown by mid-2011. This could, therefore, be the decade of the emerging economies. Nevertheless, the international scenario, with its strong contrasts, holds a number of risks and limits political space for achieving substantive agreements on the governance of globalization. Three factors are impacting in different ways on international trade patterns. First, a new commodity price boom has been under way since early 2009, despite a partial reversal in mid-2011. Second, global trade restrictions have increased slightly since late 2010 and could worsen, given the persistence of major risk factors and the blockage in the Doha Round of trade talks. Third, the number of regional and bilateral trade agreements being concluded in different parts of the world continues to increase rapidly.

Chapter I concludes by briefly describing how the financial crisis hastened two processes which had begun 20 years earlier: the convergence of per capita income between developing and industrialized countries, and the increasing weight of the South in the global economy. In connection with the second of these processes, evidence is presented on the South’s growing participation in world aggregates for production, consumption, trade and investment. South-South trade, in particular, has expanded rapidly over the past decade.

Chapter II looks at the main trends, especially in the past decade, in trade and investment between Latin America and the Caribbean and its three main partners outside the region: the United States, the European Union and the Asia-Pacific region. Trade and investment flows are examined overall and by sector and product. Strategic aspects of the linkages with each partner are reviewed, including trade negotiations and economic cooperation initiatives. Section B then briefly discusses the main variables of the region’s trade ties with the United States, the European Union and Asia-Pacific. Sections C, D and E examine in more depth the links with each of these partners.

Chapter III discusses some of the main challenges that the transformations occurring in the global economy pose to economic integration efforts in Latin America and the Caribbean. Section B summarizes the changes that will have the most impact on the region’s future position in the global economy, and section C briefly reviews the region’s main assets vis-à-vis the challenges it faces. Section D examines the performance of trade integration in the region in terms of different variables, including actual and potential intraregional trade as a proportion of the region’s total trade and the weight of manufacturing exports in total trade, as well as the weight of trade in parts and components (which is broadly used as a proxy for the presence of value chains). This section also summarizes the main arguments in favour of strengthening integration in order to improve the region’s international position. Section E puts forth a number of policy orientations with that in mind. Lastly, section F offers conclusions.