Latin America and Caribbean Goods Exports Rebound in 2024 Amidst Promising Growth in Knowledge-Based Services

The rebound was driven by rising export volumes and stabilizing prices, though the data does not yet confirm a sustained upward trend.

Latin America and the Caribbean (LAC) experienced a 3.2% increase in goods exports in the first half of 2024, signaling recovery after a 1.6% decline in 2023, according to the Inter-American Development Bank’s (IDB) latest Trade and Integration Monitor, titled "Bucking the Trend: The Potential of Knowledge-Based Services." The rebound was driven by rising export volumes and stabilizing prices, though the data does not yet confirm a sustained upward trend.

Goods Trade Overview

Export volumes grew by 3.3%, significantly higher than the 1% increase in 2023, but export prices dropped 0.5%, compounding the 2.3% decline from the previous year. Conversely, import prices fell by a sharper margin (-3.1%), improving the region’s terms of trade.

While exports to the rest of the world rose by 4.1%, intraregional trade declined by -4.5%, reducing the share of regional trade to 13.7% of total exports.

“The external environment continues to present uncertainty and risks,” highlighted Paolo Giordano, Principal Economist at the IDB’s Integration and Trade Sector, pointing to geopolitical tensions, climate change, rising protectionism, and fragile macroeconomic conditions as key challenges.

Resilient Knowledge-Based Services

Amid volatility in goods exports, knowledge-based services have shown robust growth, albeit slightly slower than in 2023. These exports expanded by 9.5% in Q1 of 2024 compared to a 12.2% annual growth rate in 2023 but remained well above the 7.1% global average growth.

Over the past decade, knowledge-based service exports in LAC have grown at an average rate of 4.7% annually, outperforming goods and overall service exports. However, this growth lags behind the global average of 7.0%, and many of the region's services are focused on less sophisticated activities, vulnerable to automation and artificial intelligence (AI).

Addressing Growth Barriers

The report underscores the untapped potential of knowledge-based services, especially in business and computer services. To strengthen this sector and capitalize on its growth:

Human capital development must be prioritized through education and training tailored to high-tech industries.

Digital infrastructure requires significant investment to facilitate innovation and market competitiveness.

Improved business climates and access to finance are necessary to foster entrepreneurship and innovation.

The region must dismantle external trade barriers, such as restrictive market access policies, that hinder service exports.

Key Insights and Recommendations

The IDB report also emphasizes the need for diversification in export portfolios, cautioning against over-reliance on commodity trade amid uncertain global demand and climate change. Promoting regional cooperation and trade agreements could mitigate the decline in intraregional trade while creating new avenues for service exports.

To leverage knowledge-based services as a catalyst for growth, the region must adopt forward-looking policies that address the productivity gap and global competitiveness challenges. By doing so, LAC can position itself as a hub for innovation and a significant player in the global knowledge economy.

While the rebound in goods exports offers hope, the region's long-term growth lies in developing resilient sectors such as knowledge-based services. By addressing structural inefficiencies and fostering international cooperation, Latin America and the Caribbean can achieve sustainable economic progress amidst a rapidly evolving global trade landscape.