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Latin America

International Economic Environment

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aIntroduction

• There is generally a favourable economic environment for the region in 2005-2006

• Strong International prices for the commodities produced by the region

• Latin America and the Caribbean region is a net oil exporter

• However many small and medium countries are net oil importers (especially for the Caribbean)

• Risks which are facing the region– Decrease in the oil price– Improved US economy– Protectionism in demanding countries

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World economic trends and their impact on the Latin American and Caribbean region’s position in the

international economy

• World economy has been growing at 4% for the last four years.

• Risks as of now – Increase in the oil prices– Increase in global demand– Turnmoil in the Middle East

• Oil prices have an impact on global inflation and as well on countries inflation

• This leads to increased interest rates which damages the world economy

• The high interest rates makes it harder to borrow for emerging economies

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World economic trends and their impact on the Latin American and Caribbean region’s position in the

international economy

• However there is a new and major trend in world economy which is the decreased disequilibrium

• Latin American economies can be harmed by the decreased demand in the USA balanced by the increased demand coming form the Asian countries especially Inddia, china and Russia

• Interest rates increase will affect the region to a lesser extend thanks to the increased foreign exchange resources and the high exports

• Argentina, Ecuador and Uruguay can be hampered by the larger public debt (50% GDP)

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World economic trends and their impact on the Latin American and Caribbean region’s position in the

international economy

• Latin American and Caribbean exports are spurred by a large international demand

• FDI inflows expand less than for the Asian and African Market

• Latin American economies posted the 2nd largest export increase after China in 2005

• 2006-2007 increase is expected to be around 7% to 8%

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aChina and India trade relations with Latin America and the

Caribbean : opportunities and challenges

• Asian countries show a high interest in pledging strategic relationship with Latin America and The Caribbean

• Latin America export commodities and imports manufactures which is complementary with the Chinese and Indian production

• Mexico and Central America have built a trade surplus with China

• The same products are exportes to China as to the USA• China headed Mexico as the first US trading partner• India has concluded trade agreements with

MERCOSUR and Chile

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aChina and India trade relations with Latin America and the

Caribbean : opportunities and challenges

• Next step is becoming part of the Chain with Asian countries

• Proximity to the North American Market is an asset for Latin America

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aDOHA ROUND

• 3 main barriers :– EU agricultural tariffs– USA agricultural subsidies– G20 Manufactures and services tariffs

• 2013 has been set as a deadline to cover agricultural export subsidies

• The least developed countries (Haiti for this region) are exempted from all the doha round commitments

• Establishing a worlk program for small countries (special differential treatment)

• Strengthen the aids to trade for the developing countries

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aDOHA ROUND

• The negociations show that there is little progress in the sbsidies and agricultural tariffs as well for the manufactures and services tariffs

• There is a concentration of powerful economies who sustain each other

• Finally samll economies have very small bargaining power

• As for the region brazil is part of the G6 which enables it to negociate much for itself

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aRegional integration and trade agreements convergence

• Intraregional trade facilitates export diversification• Creating integrated policies and institutions• Agreeing upon uniform customs codes and exemption

of the common external tariffs• Signing agreements with Canada, USA, EU, Japan,

China ad other Asian countries • Tariff barriers aare changed by non tariff barriers • Outside agreements domain over the intraregional

agreements • More constraints and more binding contrats

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a4 Problems Emerge Considering The Trade Agreements

1. Operational issues (customs, codes, storage, procedures, formalities)

2. Disciplines which are formalised in some agreements and absent in some others

3. Institutional structures of trade agreements4. Discrimination between trade partners