Contents

A. Growing dissatisfaction with hyperglobalization

B. The region’s vulnerable participation in global trade

C. A political scenario with new uncertainties

A. Growing dissatisfaction with hyperglobalization

Globalization questioned in the North

Tensions Reactions

Low dynamism of the global economy

High unemployment (Europe)

Wage stagnation

Increasing inequality

Gowing migratory flows

Intense competition from Asian manufactures

Disruptive impacts of the digital revolution

Rise of nationalisms

Opposition to new trade agreements

Resistance to immigration

Anti globalization movements

World GDP and trade do not recover after the crisis

Variation in the volume of global merchandise exports and GDP, 1952-2016 a (Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), with data from the World Trade Organization and International Monetary Fund. a Figures for 2016 are projections.

-15

-10

-5

0

5

10

15

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

20

16

Exports GDP Average export growth

8.6 7.8

5.4 3.9

6.5 5.3

2.9

The ongoing transition in China’s economic model has reduced its demand for imports

China: consumption, investment and trade

A. Consumption and investment, 2000-2015 (Percentages of GDP)

B. Trade volume: year-on-year variation, Q1 2006-Q2 2016

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), with data from World Bank, World Development Indicators, National Bureau of Statistics of China and World Trade Organization.

30

32

34

36

38

40

42

44

46

48

50

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Household final consumption expenditure

Gross fixed capital formation

-30

-20

-10

0

10

20

30

40

50

06

Q1

06

Q4

07

Q3

08

Q2

09

Q1

09

Q4

10

Q3

11

Q2

12

Q1

12

Q4

13

Q3

14

Q2

15

Q1

15

Q4

Exports Imports

The incomes of the middle class in developed countries stagnated

Change in real income by percentile of the world population between 1988 and 2008 (Percentages)

A. The middle class of emerging economies

B. The middle class of developed countries

C. The world’s richest 1%

Source: Economic Commission for Latin America and the Caribbean (ECLAC), with data from Ch. Lakner and B. Milanovic, “World Panel Income Distribution (LM-WPID)”, 2013 [online] http://go.worldbank.org/NWBUKI3JP0.

0%

10%

20%

30%

40%

50%

60%

70%

80%

1 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 99

A

B

C

Percentile

The tensions of globalization have large implications for emerging economies

Risks

•Continued imbalances and adjustments

•More protectionism

•Less offshoring

•Migratory tensions

•Growing digital gaps

Repercussions

• Weak growth

• Greater exposure to financial volatility and indebtedness

• Worsened social indicators

B. The region’s fragile participation in international

trade

The region shows a fragile participation in global trade

Latin America and the Caribbean and developing Asia: Share in world exports of goods and services, 2000 and 2015

(Percentages)

Latin America and the Caribbean Developing Asia

Source: Economic Commission for Latin America and the Caribbean (ECLAC), with data from UN COMTRADE database.

0

1

2

3

4

5

6

7

8

9

Goods (total) High-techgoods

Services (total) Modernservices

2000 2015

0

10

20

30

40

50

60

Goods (total) High-techgoods

Services(total)

Modernservices

2000 2015

In 2016 the region’s exports are projected to fall 5% and its imports 9%, completing 4 years of contraction

Latin America and the Caribbean: annual variation in merchandise trade, 2000-2016 a

(Percentages) A) Exports B) Imports

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on countries’ official information. a Figures for 2016 are projections.

-5.0

-30

-20

-10

0

10

20

30

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Volume Price Value

-9.3

-30

-20

-10

0

10

20

30

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Volume Price Value

The sharp contraction of the region’s imports weakens perspectives for investment and growth

Latin America and the Caribbean: projected variation in the value of merchandise imports by category, 2016

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on data from national central banks, customs offices and statistical offices.

Latin America and the Caribbean: structure of merchandise imports by category, 2015

(Percentages)

-20.5

-10.0

-7.3

-3.7

-25 -20 -15 -10 -5 0

Fuels

Intermediate goods

Capital goods

Consumption goods

Fuels 10%

Intermediate goods

55%

Bienes de capital

16%

Consumption

goods 19%

The largest drops in exports and imports will be in South America and the Caribbean

Latin America and the Caribbean: projected variation in merchandise trade by value, volume and price, 2016

(Percentages) A) Exports B) Imports

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on countries’ official information.

-12.6

-6.3

-1.1 -3.1

-5.0

-15

-10

-5

0

5

Caribbean SouthAmerica

CentralAmerica

Mexico Latin Americaand the

Caribbean

Volume Price Value

-16.7

-7.6

-5.0 -2.0

-9.4

-20

-15

-10

-5

0

5

SouthAmerica

Caribbean CentralAmerica

Mexico LatinAmerica and

theCaribbean

Volume Price Value

In 2016 there is a deep reduction in the region’s trade deficit

Latin America and the Caribbean: trade balance with the world and with selected countries and regions, 2014-2016 a

(Millions of dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on data from national central banks, customs offices and statistical offices. a Figures for 2016 are projections.

-150000

-100000

-50000

0

50000

100000

150000

World United States European Union China Other Asia

2014 2015 2016

Trade falls with all the region’s main partners

Latin America and the Caribbean (LAC): variation in the value of merchandise trade by origin and destination, 2015-2016 a

(Percentages) A) Exports B) Imports

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on countries’ official information. a Data for 2016 are projections.

-18

-17

-20

-15

-9

-20

-1

-2

-4

-5

-4

-10

-25 -20 -15 -10 -5 0

European Union

China

Asia (including China)

World

United States

LAC

2016 2015

-14

-2

-3

-10

-11

-20

-4

-7

-8

-8

-9

-12

-25 -20 -15 -10 -5 0

European Union

China

Asia (including China)

United States

World

LAC

2016 2015

Same as in 2014 and 2015, intraregional trade falls the most, especially in South America

Latin America and the Caribbean: annual variation in the value of goods exports to the region and to the rest of the world, 2007-2016 a

(Percentages)

Variation in the value of intra-grouping goods exports, January-June 2016 with

respect to same period of 2015 (Percentages)

Grouping Variation

Andean Community -19.1%

Pacific Alliance -12.0%

MERCOSUR -11.7%

CARICOM -7.8%

Central American Common Market

-1.3%

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on countries’ official information. a Figures for 2016 are projections.

-20

-10

-14 -4

-30

-20

-10

0

10

20

30

40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Intra-regional exports Exports to the rest of the world

A modest recovery of the region’s trade is projected for the remainder of this decade

Latin America and the Caribbean: value of merchandise trade, 2000-2020 a (Index: 2010=100)

A) Exports B) Imports

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on countries’ official information.

0

20

40

60

80

100

120

140

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

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09

20

10

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16

20

17

20

18

20

19

20

20

Central scenario Pessimistic scenario

Optimistic scenario

0

20

40

60

80

100

120

140

20

00

20

01

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Central scenario Pessimistic scenario

Optimistic scenario

C. A political scenario with new uncertainties:

• Mega regional trade negotiations: TTP, TTIP, RCEP

• Climate change: future of the Paris Agreement

• Migration • Future of the digital era

An uncertain political scenario for the regulation of global trade

TPP 11% of world population 36% of world GDP 23% of world exports 26% of world imports 28% of FDI inflows 43% of FDI outflows

TTIP 11% of world population 46% of world GDP 41% of world exports 44% of world imports 28% of FDI inflows 46% of FDI outflows

RCEP 48% of world population 29% of world GDP 29% of world exports 28% of world imports 30% of FDI inflows 26% of FDI outflows

The political economy of the current globalization

An international system with few regulations and weak multilateral mechanisms favors the stronger players (firms and governents) who have:

• Greater negotiating power (large countries and blocs vis-a-vis small ones)

• Greater market power

• Greater ability to mobilize resources across borders

• Lock-in effect of Business As Usual (BAU) on policies and interests (by definition future generations do not have a voice today)

US trade with Canada and Mexico accounts for 60% of total trade among TPP members

TPP: top 10 bilateral trading relationships and cumulative share in intra-group exports, 2015a

(Billions of dollars and percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), with data from UN COMTRADE database.

0

10

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60

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80

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100

200

300

400

500

600

700

800

USA-CAN USA-MEX USA-JPN MLS-SNG AUS-JPN USA-SNG JPN-MLS JPN-SNG AUS-USA USA-VTN

Value Cumulative share (righthand axis)

The TPP at a crossroads: implications for the region

With TPP Without TPP •Renegotiation of NAFTA (in terms

more favorable to the USA)

•Uncertainty about the other US free trade agreements in the region

•Greater room for convergence between the Pacific Alliance and Mercosur

•The return of bilateralism in the USA?

•Chile, Mexico and Peru enjoy cumulation of origin and improve access to Japan for their agricultural exports

•Some loss of policy space (for example in intellectual property) but less than for Asian TPP members

•Countries from the region who are not TPP members could suffer export diversion, especially in the USA (for example Central America with Viet Nam)

•Reduced flexibility of Pacific Alliance vis-a-vis future convergence with Mercosur

Possible scenarios of the new hemispheric context in the production sphere

• A geopolitical adjustment of trade and FDI flows

• Increased infrastructure spending:

– Impact on prices of metals

– Fiscal expansion, higher interest rates, a stronger dollar

• More carbon-intensive production, less support for renewable energies

– Increases in hydrocarbon production, effect on prices

• Support for reshoring in the United States:

– Lower taxes on repatriation of profits

– Managed trade and investment with China and Mexico

– Pressure to invest locally

Tasks for the region in the new global and hemispheric context

• Given the current uncertainty, moving forward with regional integration is more necessary than ever

• Promote convergence between the different regional integration mechanisms

• Move towards a single digital market

• Implement a regional infrastructure program

• Develop regional value chains

• Speed up implementation of the trade facilitation agenda

• At the national level, productive diversification requires industrial and trade policies consistent with the technological revolution and with a big environmental push