The Economic Commission for Latin America (ECLAC) warned that the economic situation in China will affect the countries of Latin America who have a dependence important in terms of commercial relations with this country, among them, Uruguay. The price drop in 2023 will continue as high volatility in the commodity value during 2024.
The international organization published the Preliminary Balance of the Economies of Latin America and the Caribbean 2023, where he carried out an analysis of what the year leaves at an economic level for the region, and the different factors that influenced its development and growth. In that sense, he pointed out as one of the variables that affected South Americaparticularly, as the fall in terms of trade —by 2.6% at the end of the year— of the raw Materials, one of the main export products of these countries.
In turn, the ECLAC pointed out the particular impact that, within this framework, the economic situation has on China, one of the main trading partners of South America and consumer of raw materials worldwide. Uruguay, Of course, it does not escape this analysis, quite the opposite.
Dependence on China, a negative factor
As explained by the ECLAC, in 2022, China represented a 18% of the world’s Gross Domestic Product (GDP) and 14.4% of global goods exports. Therefore, the performance of its economy indirectly affects the region through the commodity prices that many countries export.
This was not only seen during 2023, but will also extend to 2024, as warned Moody’s Investor Service in its outlook for non-financial companies: “The deceleration of the growth in China and advanced economies will maintain price volatilitybut it will limit the price increases of the main commodities in Latin America.”
In this scenario, the countries that export products to the Asian giant and, in addition, these placements have a large participation in their trade balance, are the ones that experience the direct effect. This is because, in addition to the fall in commodity pricesadds the low demand for raw materials by China and, therefore, lower income for the region.
Uruguay is noted as one of the countries that are more exposed to the slowdown of the Chinese economy, as it has the Asian nation as its main trading partner, with a 27% of its exports directed towards their territory. Added to this is that the export of goods represents a part relevant to Uruguayan economic activityso the impact is stronger.
This could be clearly observed for much of the year, with the drop in Chinese demand for products such as meat and dairy after a record 2022.
Yes ok China It has projected a growth of 4% for next year, this forecast cuts by one point what it grew this year, due to the country’s real estate crisis. Therefore, Uruguay should consider this situation in terms of commercial relations and, although not cutting off exchanges – in fact, the government is working to improve and deepen them -, it should consider other destinations for your exports that allow it to reduce dependence on the Asian giant.
Source: Ambito
