Latin America’s export sector optimistic, IDB survey shows

RIO DE JANEIRO, BRAZIL – The export sector in Latin America and the Caribbean improved “considerably” its short and medium-term expectations after the covid-19 hit the economy, revealed on Thursday a survey by the Inter-American Development Bank (IDB).

A year and a half after the pandemic’s start, which strongly affected global trade flows, 47% of the region’s exporting companies considered that international demand would grow in the next three months, and 57% said they expect to increase their shipments in the coming year.

This represented a significant increase in optimism compared to 2020 when only 16% and 36% of companies said export demand would grow in the short and medium term, respectively.

The “Survey of exporting firms in Latin America and the Caribbean. Seeking to understand a new exporting DNA” also found recovery in the exporting trend.

Thirty-five percent of companies increased their sales abroad in the first quarter of 2021, compared to 11% at the pandemic’s beginning. And only 43% of companies suffered a reduction in shipments, compared to 77% a year earlier.

In addition, nearly half of the companies said they would increase their export-oriented investment in the medium term.

“It is very auspicious to see how in the second year of the pandemic, companies recovered their export performance and envision significant trade improvements by 2022,” said Fabrizio Opertti, IDB Integration, and Trade Sector Manager.

“The increase in government assistance to cope with the negative impacts of the pandemic, as perceived by companies, also stands out,” he added.

With the scourge of the pandemic, only 4% of the firms surveyed said they had not received any type of assistance from the public sector to alleviate the consequences of the pandemic on their export capacity.

Export subsidies and assistance in finding new markets were the main benefits provided by States in 2021.

MORE TRADE AGREEMENTS

The IDB survey highlighted companies’ “significant support” to seal more trade agreements with other countries.

When asked whether new trade agreements should be signed, 67% said yes, 10.3% said no, and 22.2% said maybe.

Among those who answered yes, 29.4% preferred to seal new agreements with the region (18.3% said South America and 11.1% Central America). Another 29.4% opted for North America, while 23.3% chose Europe.

A further 14.3% said they were interested in advancing trade agreements with Asia, 2.2% with Oceania, and only 1.4% opted for Africa.

In 2020, almost half of the companies in the region had Latin America and the Caribbean as their leading export destination. Thirty-five percent of firms directed their sales to South America, 9% to Central America, and 5% to Mexico.

Outside the region, the main markets were the United States and Canada (29%), Europe (15%) and Asia (5%).

The survey also revealed changes in the digitalization and environmental awareness of companies.

Some 38% of the firms surveyed reported using e-commerce as a sales channel in 2020, up from around 25% the previous year.

The highest growth in this branch was in large companies: while 15% used this channel in 2020, 42% did so in 2021.

On the other hand, 18% said they do not use this channel but expect to do so soon.

The importance of adopting environmentally friendly practices was another of the survey’s findings: 69% of the companies considered that their export destinations would value the adoption of this type of measure.

The second edition of this IDB survey was carried out with the participation of 405 micro, small, medium and large companies from 18 countries in the region.

Source: AFP