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China's demand helps reduce commercial deficit in Latin America

(Xinhua)
Updated: 2009-08-26 14:26

China's demand for the products of Latin America contributed to absorbing the reduction of exports in the region caused by the current global economic recession, the Economic Commission for Latin America and the Caribbean (ECLAC) said on Tuesday.

"Only China has a sustained demand of basic products, which has allowed counteracting the general reduction of the regional foreign trade," the ECLAC said in its report "Scene of Latin America and Caribbean's international insertion 2008-09; crisis and regional cooperation places."

The ECLAC stressed China's growing role in the world economy and its strengthening economic ties with the region, saying that only China has had a sustained growth with a rate estimated to reach 8 percent this year.

"In the region we are very happy for the economic ties with China," ECLAC executive secretary Alicia Barcena said when presenting the report.

The ECLAC deepens the trade ties between China, the Asia-Pacific and the Latin America areas, said the report, which stands out the new role of the Asian economies in the world order.

It also analyzed possible cooperation and regional integration, and proposed joint actions to tackle the crisis in the sectors such as trade, infrastructure, innovations, asymmetry reduction, social cohesion, approaching to Asia-Pacific and climate change.

The ECLAC said that Latin America's exports would drop 11 percent this year compared with that of 2008 due to the crisis, while the imports would decrease 14 percent.

The ECLAC also said that the volume of shipping and imports would have the sharpest drop in 27 years.

The drop was caused by "the strong reduction of the international demand, the reduction of some raw material prices, the difficulties to finance the trade and the pro-cycle behavior of the trade flows," the ECLAC said.

However, after two or three years of less activity, the international trade will be again an opportunity source, so the region must be ready, the ECLAC said.

"The policy to reactivate the commerce is urgent, because the post-crisis will continue awarding the economies with more export orientation," Barcena said.

Almost all Latin American countries witnessed drops in their trade flows with their main partners, the Unites States, the European Union (EU) and Asia.

Despite this negative commercial situation, the report said the region has better dealt with the crisis in comparison with past ones, thanks to positive macroeconomic strength during the period of 2003 to 2007.

The ECLAC also said that exporters of basic products, mainly oil and minerals, such as Venezuela, Ecuador and Colombia, "are the most affected for the perishing of the exchange terms."

However, the most affected country has been Mexico for its enormous commercial dependence on the United States and Canada, the ECLAC said.

During the first half of 2009, Latin America's exports of oil and mining products dropped 50.7 percent compared with the same period in 2008, while that of manufactured products decreased 23.9 percent.

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The sharpest decreases were on the Latin American shipping to the EU with a drop of 36.3 percent and to the United States a reduction of 35.3 percent.

The ECLAC proposed to increase infrastructure investment, to boost inter-regional trade and to promote innovation and competitiveness cooperation.

The ECLAC also proposed to create a cooperation program to boost the inter-regional exchange in order to coordinate the participation of countries and multilateral-regional organizations to take advantage of its benefits and to strengthen the mobilization of financial resources.