U.S. is still Latin America’s biggest trading partner

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    The United States has been Latin America’s biggest trading partner

    The United States has been Latin America’s biggest trading partner throughout much of the region’s history, and this trend continues today.(Photo/ Juan Manuel Herrera – OAS/OEA)

    Many talk about the United States’ declining influence in Latin America, pointing to the rising role of China or European companies, investors, and governments. Yet a closer look at the economic ties between the United States and Latin America questions whether this part of the relationship has in fact weakened.

    The United States has been Latin America’s biggest trading partner throughout much of the region’s history, and this trend continues today. In 2011 trade between the United States and Latin America topped $800 billion, more than three times the region’s exchanges with China. It is also growing faster than U.S. trade with nearly any other region in the world—over 80 percent in the last decade. The lion’s share occurs between the United States and Mexico ($460 billion, or some 58 percent of regional trade). U.S. commercial ties with Brazil and Venezuela follow, together totaling another 16 percent.

    Latin America’s biggest trading partner

    For Latin America’s seventeen countries, thirteen import more goods from the United States than anywhere else. This includes Chile, Colombia, Guatemala, Venezuela, Honduras, and Mexico. Most of these imports are manufactured goods, including computers and computer accessories, telecommunication parts, cars, civilian aircraft, and machinery. For ten of the seventeen countries, the United States is the primary export destination. Most send raw materials—oil, minerals, and agricultural products—to the north.

    Flags of the the Organization of American States countries. (Photo/ OAS/OEA)

    Flags of the the Organization of American States countries. (Photo/ OAS/OEA)

    U.S. foreign direct investment in Latin America remains high, totaling over $25 billion (or just under 20 percent of all FDI in Latin America) in 2011. Though technically surpassed by the Netherlands (which sent closer to $32 billion) the 2011 ECLAC report finds that only 8 percent of FDI from the Netherlands comes from companies based there; it is instead largely a conduit for investments by companies in third countries. The United States was the largest foreign investor in Mexico, as well as in Costa Rica, Guatemala, Honduras, and Paraguay. Most of this money concentrated on manufacturing, especially the chemical and the automobile industries. U.S. investments far surpass those made by China, which, as explained in a previous post, mostly head to the Cayman Islands and the British Virgin Islands (suggesting tax considerations instead of productive activities).

    Where the United States’ economic heft perhaps comes up short is in the area of government-backed development loans. Here the U.S. Export-Import Bank is much less active than China’s Development Bank and Export-Import Bank (which outpace the U.S. Export-Import bank, World Bank, and the Inter-American Development Bank loans combined).

    Overall, the data suggests that the United States is still by far the region’s largest and most important economic partner. Over the last two decades, free trade agreements with Mexico (NAFTA), Central America (CAFTA), Peru, Colombia, Chile, and Panama have strengthened these ties. During the 2012 campaign, both presidential candidates talked about deepening these economic links in the future. With Obama’s win, the next economic step looks to be the Trans-Pacific Partnership, which would bring together Chile, Peru, Mexico, the United States, and Canada in the Western Hemisphere with Australia, Brunei Darussalam, Malaysia, New Zealand, Singapore, and Vietnam in a comprehensive free trade area. If successful, the agreement would likely increase trade and foreign direct investment between the participants, bringing the United States and at least these Latin American countries closer than ever.

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    Source: Council on Foreign Relations

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