Region urged to seek export opportunities

The shortage of some items on the global stage could present an opportunity for Latin America and Caribbean countries to fill the void, officials of the Inter-American Development Bank (IDB) have said.

Additionally, with inflation to continue to rise this year due to the Russia-Ukraine war, officials have also warned Latin American and Caribbean leaders of the need for fiscal consolidation measures and monetary and labour policies to help keep their economies afloat.

President of the IDB Mauricio Claver-Carone said though the direct trade link with Russia and the region was relatively small, it was the reduction in growth among the region’s trading partners that should be of concern.

He explained that economies in Latin America and the Caribbean should look for opportunities to increase exports to countries that were having trouble getting them from Russia and Ukraine.

Claver-Carone indicated that the value of exports from Russia and Ukraine was beyond US$250 billion.

“Besides oil and gas, our region exports iron, minerals, steel, wood and many other products to those same markets – the US, Canada, and European countries and others,” he said.

“Since Latin America and Caribbean exporters already have a way into these markets they could cover a significant share of what is missing. They could help mitigate the pressures at a global level. Latin America and the Caribbean could be a solution to the global inflation level and we should aspire to that,” he said.

Claver-Carone was introducing the IDB’s macroeconomic report for Latin America and the Caribbean on Friday when he made the comments.

The 124-page report From Recovery to Renaissance: Turning Crisis into Opportunity, was prepared by IDB’s Research Economist Victoria Nuguer, Principal Advisor Andrew Powell, and Principal Economists Eduardo Cavalla and Arturo Galindo.

Nuguer pointed to rising inflation as one of the challenges that will continue to affect the region in the coming months.

“We were expecting in 2022 for inflation to start slowing down a little bit. However, the war and increase in oil and commodities in fact, made the inflation to reach 7.5 per cent in the region.”

She cautioned that some countries will see larger increases in inflation and net importers and those who depend on tourism could also see a rise in their debt levels as they seek external financing to buttress spending.

Fiscal consolidation and monetary policies will therefore be critical, she said.

“If we have a consolidation process, bringing down expenditures and conserving investment could bring benefits in terms of outputs that are sustainable and long-lasting. This consolidation process will not be successful if it does not come hand-in-hand with [measures] to reduce informality and tax evasion . . . In order to reduce informality we will also need the labour policy to complement all this,” she explained.

Pointing to the dramatic rise in the closure of small businesses during the pandemic, she also stressed the need for countries to create more employment opportunities and make liquidity available to businesses.

Urging regional leaders to keep up their digitisation thrust, she also pointed to the need for more technical assistance for micro, small and medium-size enterprises (MSMEs), the correction of structural problems in the public sector and the need for social security benefits to be accessible to everyone.

Meanwhile, Galindo warned that the estimated reduction in global economic growth this year will have an impact on Latin American and Caribbean countries, predicting that between 2022 and 2024 the region would lose around 0.2 to 1 percentage point.

He said the region should expect increases in interest rates on borrowing which could also impact economic growth rates. In addition, the need for external financing could continue to rise, resulting in higher debt levels. (MM)