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Intraregional exports fell in the USMCA area

Intraregional exports in the area of the Treaty between Mexico, the United States and Canada (USMCA) showed a drop of 8 percentage points in the total external sales of that region between the early 2000s and the end of the 2010s, according to a report released by CAF.

CAF is a multilateral financial institution that provides multiple banking services to public and private sector clients in its shareholder countries, including 16 Latin American countries, Spain, Portugal and 14 private banks in the Andean region.

After reaching 46% intra-regional exports of USMCA in the total of its international sales on average during the period from 2000 to 2004, that coverage decreased to 38% in the span from 2015 to 2018.

Within the region there is heterogeneity among the different sub-regions. Central America has some of the highest levels of intraregional trade (between 15 and 17% in recent years), followed by Mercosur, where there has been a significant decrease in internal trade flows, from 20% in the mid-1990s to 12% in 2015-2018.

On the other hand, CAN, Caricom and the more recently created Pacific Alliance show much lower and relatively stable levels of regional trade in relation to global trade (7%, the first two and 3% the last one).

Intraregional exports

According to the same report, the lower dynamism of intraregional trade in Latin America could be explained in part by the lower participation of the region’s countries in global value chains, which have a strong regional component.

Participation in these production linkages promotes the exchange of intermediate inputs and intra-industry trade, which accelerates as economies specialize and production processes fragment into larger stages.

The countries of the region, with the exception of Mexico, did not show great dynamism in their integration into regional value chains and their participation was concentrated in extra-regional value chains (EVCs).

Mexico‘s dynamism was driven by its participation in the North American Free Trade Agreement (NAFTA), which promoted its regional integration with Canada and the United States.

In general, Latin American countries have a backward participation, i.e., they are finalizers of processes in the LECs.

However, countries such as Bolivia, Chile, Ecuador and Venezuela have a mostly forward participation, based on their exports of energy and non-energy minerals.

South American countries are inserted in value chains mainly as suppliers of intermediate and final primary goods and generic processed intermediate goods, while Central American countries, through their backward integration, have a high share of processed final goods and primary final goods.

 

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