Japan External Trade Organization

White Paper on International Trade 1997

2. Latin America: Mexico Overcomes Financial Crises and Contributes to Latin America's Widening Trade Surplus

(1) Trends in Trade

(2) Changes in Trade Environment

(3) Developments in Trade with Japan

Economic indicators

(1) Trends in Trade

Latin America increased the total value of its exports in 1996 11.0 percent to US$248.055 billion and its imports 10.6 percent to US$245.5 billion. Its trade surplus therefore grew for the second straight year from the US$1.44 billion of 1995 to US$2.51 billion. This increased trade surplus was a result of Mexico's recovery from its financial crisis, stronger export price competitiveness, and resultant surge in exports and the rise in the value of exports from Venezuela and Ecuador due to rising international oil prices. In particular, greater exports from Mexico, which account for over 30 percent of Latin America's exports, have been the driving force behind the growth in the Latin American trade surplus. The calming of the financial crises in Mexico and Argentina helped the real GDP growth rate of the Latin American economy rise from 0.3 percent in the previous year to 3.4 percent in 1996. At the same time, the inflation rate rapidly declined from 25.5 percent to 19.3 percent. The unemployment rate, however, climbed from 7.3 percent to 7.7 percent, so a problem still remains.

(2) Changes in Trade Environment

Reflecting the greater exports of Latin America in 1996, the ratio of the balance of foreign debt to exports dropped from 221 percent in 1995 to 208 percent in 1996 or the lowest level since 1980. Further, the debt service ratio (the ratio of payments of principal and interest on debt to exports) declined for the 10th straight year from 16.4 percent in 1995 to 14.5 percent in 1996. On the other hand, the conclusion of numerous bilateral free trade agreements and the growing size and depth of sub-regional economic integrations have led to steady expansion of trade in the Latin American region. In particular, in 1996, in Mercosur, there was rapid progress made in Brazil, Argentina, etc. in intraregional specialization in the fields of automobiles and food processing. At the same time, Venezuela, Colombia, Peru, and other ANCOM countries have been making a swift move toward provisional membership in Mercosur. The draw of Mercosur in Latin America has been growing stronger.

(3) Developments in Trade with Japan

Japan's trade with Latin America declined in 1996 (based on Japanese trade statistics issued by the Ministry of Finance converted into dollar by JETRO, hereinafter referred to as MOF trade statistics). On a dollar basis, exports dropped 8.7 percent to US$17.9894 billion, while imports declined 3.2 percent to US$11.537 billion. Latin America's share of Japan's overall trade in 1996, however, remained almost unchanged, that at 4.4 percent in terms of export destinations and 3.3 percent in terms of countries or regions of origin. The main goods which Japan exported to Latin America were machinery and equipment, accounting for an 85.1 percent share, chemicals, 5.1 percent, and metals and metal products, 3.7 percent. The main goods imported were raw materials, at 32.8 percent, manufactured goods at 30.3 percent, and food at 29.7 percent.

Economic indicators

This paper is online: http://www.jetro.go.jp/WHITEPAPER/Trade97/index.html