Transcript Document

The U.S. Recession
and Latin America
By Mark Weisbrot
Co-Director of the
Center for Economic and Policy Research (CEPR)
Wednesday, May 14, 2008
Growth of U.S.Trade Deficit
A rapidly growing U.S. economy has provided an
important boost to our trading partners
 From 1994-2007:
– U.S. GDP grew by $6.8 trillion
– U.S. imports increased by more than $1.5 trillion
 The current trade deficit is seen by most economists as
unsustainable
 To return to a more sustainable level, the United States
will need to reduce imports and increase its
exports

The Western Hemisphere
•The most affected countries are those where:
(a) exports constitute a higher share of national
GDP and,
(b) exports to the United States represent a larger
share of total national exports
•The countries that will likely suffer most are those which
entered into “free trade” agreements with the United
States, such as NAFTA and CAFTA-DR, including:
• Mexico, Guatemala, El Salvador, Costa Rica,
Nicaragua, Honduras, Dominican Republic
Nominal GDP Exports to the U.S.
(In US$ millions)
(In % of GDP)
Argentina
Bahamas, The
Barbados
Belize
Bolivia
Brazil
Canada
Chile
Colombia
Costa Rica
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St. Kitts and Nevis
St. Lucia
St. Vincent and the Grenadines
Suriname
Trinidad and Tobago
Uruguay
Venezuela
248,332
6,586
3,739
1,304
12,710
1,295,355
1,406,430
160,784
171,738
22,842
268
35,494
44,528
20,234
553
33,320
978
5,295
10,059
10,737
886,441
5,675
19,280
10,347
101,504
520
958
528
2,234
20,703
21,171
226,922
1.6
6.8
0.9
7.8
2.4
1.9
23.3
5.5
5.1
17.0
0.6
11.1
13.1
9.6
1.7
9.2
12.5
8.6
37.0
6.7
21.4
25.7
1.7
0.6
4.8
10.7
1.7
0.3
5.6
41.3
2.5
15.0
Total Exports
(In % of GDP)
21.4
30.3
8.4
29.0
28.2
12.7
29.4
41.8
16.3
66.5
40.5
16.6
30.7
20.1
9.1
22.8
78.6
11.5
53.8
19.9
27.8
42.7
8.9
25.2
26.0
18.7
13.1
32.6
65.1
68.5
22.5
34.9
Western Hemisphere:
Nominal GDP, total
Exports to the World and
to the U.S. in 2007
[The Economic Impact of a
Slowdown on the Americas,
CEPR, March 2008]
Nominal GDP Total U.S. imports Total U.S. exports
(In US$ millions)
(In % of GDP)
(In % of GDP)
United States
13,843,000
17.0
11.9
Sources: International Monetary Fund (IMF), World Economic Outlook (WEO), October 2007; IMF, Direction of Trade Statistics (DOTS);
Bureau of Economic Analysis, National Economic Accounts.
The Relative Importance of Exports
to the U.S. Market
•
Some countries are much more dependent on the U.S.
market than others. For example:
• 77 percent of Mexico's exports go to the U.S. market, and
these exports to the United States accounted for
approximately 21 percent of the country's GDP in 2007
•
Other countries where exports to the U.S. constitute a
significant percentage of GDP include Honduras (37
percent), Nicaragua (26 percent), Canada (23
percent), and several other countries in Central
America and the Caribbean.
Projected Reduction in Exports,
by 2010
1.
Low-adjustment Scenario
•
•
2.
Trade deficit falls from 5.2 percent of GDP in 2007 to 3.0
percent of GDP in 2010
A trade deficit of this size would imply that the ratio of U.S.
foreign debt to GDP would still rise but at a much slower pace
than the increases in recent years
High-adjustment Scenario
•
•
Trade deficit falls back to 1.0 percent of GDP by 2010
Depending on foreign investment, this trade deficit could still be
associated with a rising ratio of foreign debt to GDP; however,
the rate of increase would be slow
Projected Reduction in Exports
to the United States
(% of GDP)
(% of Exports)
Argentina
0.2
0.8
Bahamas, The
0.7
2.4
Barbados
0.1
1.8
Belize
1.1
3.8
Bolivia
0.3
1.1
Brazil
0.2
2.0
Canada
2.8
9.5
Chile
0.9
2.1
Colombia
0.4
2.3
Costa Rica
2.7
4.1
Dominica
0.1
0.2
Dominican Republic
1.8
10.7
Ecuador
0.6
1.9
El Salvador
1.5
7.6
Grenada
0.3
3.0
Guatemala
1.4
6.0
Guyana
2.0
2.5
Haiti
1.4
11.9
Honduras
5.9
11.0
[The Economic Impact of a
Jamaica
1.1
5.4
Mexico
2.9
10.4
Slowdown on the Americas,
Nicaragua
4.1
9.6
March 2008]
Panama
0.3
3.1
Paraguay
0.1
0.4
Peru
0.6
2.5
St. Kitts and Nevis
1.7
9.1
St. Lucia
0.3
2.1
St. Vincent and the Grenadines
0.0
0.1
Suriname
0.9
1.4
Trinidad and Tobago
2.3
3.3
Uruguay
0.4
1.7
Venezuela
0.1
0.3
Sources: International Monetary Fund (IMF), World Economic Outlook (WEO), October 2007; IMF, Direction of Trade
Statistics (DOTS); U.S. International Trade Commission (USITC), Interactive Tariff and Trade Dataweb; and authors’
calculations.
Scenario A:
Small Decline in U.S.
Imports
• Small-Adjustment
Scenario: a reduction in the
size of the U.S. trade deficit
to 3.0 percent of GDP by
2010.
CEPR,
Scenario B:
Large Decline in U.S.
Imports
Projected Reduction in Exports to
the United States
(% of GDP)
(% of Exports)
Argentina
0.2
1.1
Bahamas, The
1.0
3.4
Barbados
0.2
2.5
Belize
1.5
5.3
Bolivia
0.5
1.6
Brazil
0.4
2.8
Canada
4.0
13.5
Chile
1.2
2.9
Colombia
0.5
3.2
Costa Rica
3.8
5.7
Dominica
0.1
0.4

Dominican Republic
2.5
15.1
Ecuador
0.8
2.7
El Salvador
2.2
10.7
Grenada
0.4
4.3
Guatemala
1.9
8.5
Guyana
2.8
3.6
Haiti
1.9
16.8
Honduras
8.3
15.5
[The Economic Impact of a
Jamaica
1.5
7.7
Mexico
4.1
14.6
Slowdown on the Americas,
Nicaragua
5.8
13.5
March 2008]
Panama
0.4
4.4
Paraguay
0.1
0.6
Peru
0.9
3.5
St. Kitts and Nevis
2.4
12.9
St. Lucia
0.4
2.9
St. Vincent and the Grenadines
0.1
0.2
Suriname
1.3
1.9
Trinidad and Tobago
3.2
4.7
Uruguay
0.5
2.4
Venezuela
0.2
0.5
Sources: International Monetary Fund (IMF), World Economic Outlook (WEO), October 2007; IMF, Direction of Trade Statistics
(DOTS); U.S. International Trade Commission (USITC), Interactive Tariff and Trade Dataweb; and authors’ calculations.
Large-adjustment
scenario: a reduction in the
size of the U.S. trade deficit
to 1.0 percent of GDP by
2010.
CEPR,
Conclusion:
Impact on the Americas

As demand for our trading partners’ exports
decreases, we will see slower growth in the
Americas

Other potential channels of transmission:
– Remittances sent home by foreign nationals
working in the United States decreasing
– Credit crunch, investment flows, continued
problems in international financial system
– Pro-cyclical policy responses
Continued, next slide
Conclusion:
Impact on the Americas
•
Continuation of Long-Term Trend:
Latin America Drifts Further from U.S.
•
Further FTA’s unlikely
•
More regional economic integration
•
More diverse economic and possibly
development strategies