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Dear MARIA, We just published a new blog—please find the full text below.  How Latin America Can Use Trade to Boost Growth (Credit: Anderson Coelho/iStock by Getty Images) By Flavien Moreau and Rafael Machado Parente Most countries in Latin America and the Caribbean aren’t fully harnessing the potential of international trade, an important driver of growth for emerging market economies. While the region has made some progress on trade openness, it continues to be held back due largely to poor infrastructure, burdensome customs clearance procedures, as well as relatively high tariff and non-tariff barriers to trade. One important measure for trade openness, the sum of exports and imports of goods and services, stands at just 47 percent of gross domestic product. That’s about 20 percentage points below the level for other emerging markets around the world. Trade between countries in the region also lags and has stayed broadly flat at less than 20 percent of Latin America’s total trade. That amounts to just half the level of intra-regional trade in Eastern Europe and Central Asia and a third of the level in East Asia. Latin America’s participation in global value chains is also limited. That’s because many countries are more focused on exporting raw commodities rather than intermediate or final goods, though Mexico’s much more integrated economy is a prominent exception, mainly due to its close ties with the United States. Latin America would likely enjoy large economic gains by improving important commercial infrastructure, such as transportation and customs, a new study conducted in our latest Regional Economic Outlook shows. Streamlining customs procedures, fostering public-private partnerships in the logistics industry, and lowering bureaucratic obstacles are examples of policies that can help. Narrowing the infrastructure gap between the region and advanced economies by half, for example, would lower trade costs and result in a 30 percent increase in exports, our latest research shows. This larger demand for the region’s products in turn would boost GDP by as much as 7 percent, which underscores why policymakers should pay greater attention to improving trade-related infrastructure. Because some countries may not be able to afford large infrastructure investments, progress requires prioritizing the biggest bottlenecks and attracting more private investment. Against this backdrop, the energy transition is expected to profoundly alter global trade patterns. Latin American countries with large reserves of critical minerals—like Chile, Peru, Brazil, Mexico, and Argentina—could benefit substantially from rising demand for copper, lithium, magnesium, and other essential inputs for green technologies and decarbonization. With the appropriate policy frameworks, these resources could attract significant investments and may help develop opportunities for Latin American countries to increase their participation in global value chains. Finally, nearshoring, where companies relocate parts of their supply chain operations to closer countries for resilience reasons, is also an opportunity for countries across the region to increase trade. Mexico is an example of a country that has been benefitting from more investment in manufacturing due to this trend. Overall, closing infrastructure gaps, further reducing trade barriers, and putting in place policies that make Latin America a more attractive investment destination should be key elements of the region’s trade strategy going forward.

Dear MARIA, We just published a new blog—please find the full text below.  Climate Change is Disrupting Global Trade (Credit: David Parker/Adobe Stock) By Serkan Arslanalp, Robin Koepke, Alessandra Sozzi, Jasper Verschuur Around 1,000 ships pass through the Panama Canal each month carrying a total of over 40 million tons of goods—about 5 percent of global maritime trade volumes. But water levels in this vital link between the Atlantic and Pacific oceans have fallen to critical lows because of the worst drought in the canal’s 143-year history. Drought restrictions imposed amid insufficient rainfall at the Gatún Lake, which feeds the canal, have reduced throughput by some 15 million tons so far this year. Ships have faced an additional six days in transit. The authorities are exploring strategic options to boost the water supply in the canal. As the Chart of the Week shows, ports in Panama, Nicaragua, Ecuador, Peru, El Salvador and Jamaica are suffering most from these delays, with 10 percent to 25 percent of their total maritime trade flows affected. But the drought’s effects are felt as far away as Asia, Europe and North America. The drought will hamper trade for months to come, with canal passages set to halve to 18 ships per day by February, down from 36 in ordinary times. Economies reliant on the canal for trade should prepare for more disruption and delay. Amid climate change, droughts, floods, tropical storms and other disasters are becoming more common and pose a serious threat to maritime infrastructure. With PortWatch, an open platform launched today by researchers from the IMF and the University of Oxford, policymakers can prepare for trade disruptions caused by shocks like climate extremes and decide how to respond to them. The platform uses real-time satellite data to track nearly 120,000 cargo ships and tankers worldwide—over 99 percent of global maritime trade. It provides daily estimates of trade volumes at 1,400 ports and more than a dozen pinch points, such as the Panama Canal. PortWatch simulates international spillovers from a port closure and plots disruptions to onward supply chains on an interactive map. It enables climate scenario analysis, providing modeled risk estimates for a range of climate extremes. PortWatch also sends alerts on potential and actual trade disruptions after major disasters. —This blog was co-authored by the PortWatch team, which includes Parisa Kamali. Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org   Thank you again for your interest in IMF Blog. Read more of our latest content here. Take good care!