Latin America and Caribbean countries will record an 11 per cent increase in their exports this year, to reach a record US$715 billion, the Inter-American Development Bank has said.

But while the hemisphere has been relatively successful at deepening the penetration of other people's markets, its growth rate has slowed because of a weakened U.S. dollar at a time when the United States is facing problems in its financial markets.

According to the IDB, this year's hike in exports from the hemisphere represents five consecutive years of growth, but at a slower pace than in the three previous years whose annual rate of increase averaged more than 20 per cent per annum.

"A major challenge facing the region is a likely slowdown, or possibly even a recession in the United States resulting from the recent credit crisis," said the IDB in a statement.

"Similarly, the appreciation of some of the region's currencies, such as the Brazilian real, vis-à-vis the U.S. dollar appears to have contributed to some stagnation on these countries' exports to the U.S. this year."

Growth expected to fall

Economic growth in Latin America and the Caribbean is expected to end below 5.0 per cent in 2007, and fall to 4.3 per cent in 2008, according to International Monetary Fund estimates based on analyses conducted in October.

During 2007, exports among countries belonging to the same trade pacts also posted strong increases, for example, among Central American Common Market trade rose 18 per cent while exports among members of Mercosur increased 27 per cent.

Overall exports among Latin American countries grew 18 per cent from 2006 to US$124 billion.

But in oil-rich Venezuela, exports were down by 2.5 per cent, the IDB said, even though sales to its former Andean partners grew 13.7 per cent.

The IDB projects, however, that competition from Chinese manufacturers could weigh down Latin America's export performance in the year ahead, particularly for countries such as Mexico and some Central American nations.

"Any intensification of this competition would further hinder their maquila sectors," said the IDB.

That's a reference to assembly plants to which foreign materials and parts are shipped and the finished products returned to the original market.

Its more formal name is 'maquiladora' sector, which operates in much the same way that Jamaica's 807 garment trade programme did.

The IDB says there is also a downside risk to Latin American commodity exports in the medium term, saying they could decline "especially if demand from China slows."

But: "Counterbalancing those negative factors, there are indications that the global economy might be able to quickly overcome a slowdown in demand from the United States."

And, if China's boom continues then so will Latin America's, but with adjustments such as diversification of intra-regional trade, and the implementation of free trade agreements such as the DR-CAFTA deal with the United States, the bank said.

business@gleanerjm.com

Latam export growth in 2007

Paraguay: 63.2% on strength of soybean exports

Chile: 19.5%

Argentina 17.6%

Nicaragua 17.3%

Guatemala 16.7%

Brazil 16.5%

Peru 16.5%

Colombia 15.5%

Costa Rica 14.3%

Mexico 6.6%

El Salvador 5.9%

Ecuador 1.4%

Venezuela -2.5%