ICM 172
The dynamism of intra-MERCOSUR trade in recent years 1
Between 2002 and 2008, intrazone export growth was 143.0%, while extrazone exports grew 43.5% (Graph 1). These years mark the respective minimum and maximum of the expansionary phase that followed the period of serious macroeconomic instability that the MERCOSUR countries became embroiled in and whose most dramatic event was the crisis and abandonment of convertibility in Argentina between 2001 and 2002. In 2002, intrazone trade represented just 10.6% of Argentine and Brazilian exports, rising to 16.8% in 2008. Despite the intensity of the growth in these flows, the ratio is still a long way off the 24-25% seen in 1997-98. This result is not surprising if one remembers the differential evolution of exports according to destination. First, the high value of intraregional trade in 1997-98 is due to the fact that, in 1993-98, these flows grew by 78.2% in the heat of the liberalization generated by the creation of MERCOSUR, whereas extraregional trade in those years (hit by the Asian and Russian crises, and by the weakness of commodity markets) behaved far buoyantly, with 21.2% growth (Graph 1.B). This combination raised the proportion of intraregional trade to a level that now appears exceptional.
1
Preview of the MERCOSUR Report No 15. Argentina and Brazil’s statistics institutes provide price indices for exports disaggregated by generic product classes. To obtain exports at constant prices, different price indices for exports to MERCOSUR and extrazone were built up. In Argentina, the index is disaggregated in primary commodities, manufactures of agricultural origin, manufactures of industrial origin, and energy and fuel, whereas in Brazil the components are commodities, and semimanufactured and manufactured goods. These indices were aggregated to the nominal weighting structure of each of these products for each target market. In the case of Argentina, the original indices have a 1993=100 base, and in Brazil’s case, 2006=100, with the year 2000 being established as a common reference period. 2
1
INTAL Monthly Newsletter 172 - December 2010 - All rights reserved.
Since 2003 and the full recovery of activity levels in the MERCOSUR countries, intraregional trade has been more dynamic than in extrazone trade. The phenomenon is visible in an indicator of exports estimated at constant prices for Argentina and Brazil, countries that provide the relevant information for it. 2
B. Extraregional exports
Note: The years represented with a darker bar are the points of comparison of the rates of variation presented. Source: Author’s own based on data from INDEC and IPEA.
2
INTAL Monthly Newsletter 172 - December 2010 - All rights reserved.
Graph 1 Argentina and Brazil: Evolution of exports at constant prices by target area 1993-2010 (Billions of US$ at constant prices) A. Intraregional exports
In 2009, as a result of the international crisis, trade contracted sharply. However, unlike previous crises, the contraction of extrazone exports was similar to sales within the bloc (-10.6% and -13.5% respectively). It should also be remembered that the beginning of the recovery, in the first half of 2010, involved a far greater increase for intraregional exports than those to the rest of the world. Whereas the former grew 34.7%, the latter rose by 5.1%. The effect of the basis for comparison aside, this is an expression of the best performance of the MERCOSUR economies relative to other countries— especially the developed countries—during the period. It is interesting to note that, should there be another phase of growth like 2003-2008, when intra- and extraregional trade grew 16.0% and 6.2% c.a. respectively, it will still take 6 years for intrazone trade to attain a 25% ratio.
3
INTAL Monthly Newsletter 172 - December 2010 - All rights reserved.
In addition, in the next cyclical phase, between 1998 and 2002, intraregional trade collapsed (-41.9%), while the behavior of sales to the rest of the world was highly favorable (57.5%). The relative loss suffered in those years has not made up, in spite of the inequality in the growth of both flows in 2002-2008. The information of real interest, however, is that the cumulative annual (c.a.) growth intrazone exports in recent years has been higher than in the early days of MERCOSUR: shipments to the region grew at a c.a. rate of 16% and extraregional shipments at 12.3% in these periods. Another expression of this recent dynamism is that, in 2008, the level of intrazone exports was 41.3% up on the 1998 high.
Between 2002 and 2008, intrazone export growth was 143.0%, while extrazone exports grew 43.5% (Graph 1). These years mark the respective minimum and maximum of the expansionary phase that followed the period of serious macroeconomic instability that the MERCOSUR countries became embroiled in and whose most dramatic event was the crisis and abandonment of convertibility in Argentina between 2001 and 2002. In 2002, intrazone trade represented just 10.6% of Argentine and Brazilian exports, rising to 16.8% in 2008. Despite the intensity of the growth in these flows, the ratio is still a long way off the 24-25% seen in 1997-98. This result is not surprising if one remembers the differential evolution of exports according to destination. First, the high value of intraregional trade in 1997-98 is due to the fact that, in 1993-98, these flows grew by 78.2% in the heat of the liberalization generated by the creation of MERCOSUR, whereas extraregional trade in those years (hit by the Asian and Russian crises, and by the weakness of commodity markets) behaved far buoyantly, with 21.2% growth (Graph 1.B). This combination raised the proportion of intraregional trade to a level that now appears exceptional.
1
Preview of the MERCOSUR Report No 15. Argentina and Brazil’s statistics institutes provide price indices for exports disaggregated by generic product classes. To obtain exports at constant prices, different price indices for exports to MERCOSUR and extrazone were built up. In Argentina, the index is disaggregated in primary commodities, manufactures of agricultural origin, manufactures of industrial origin, and energy and fuel, whereas in Brazil the components are commodities, and semimanufactured and manufactured goods. These indices were aggregated to the nominal weighting structure of each of these products for each target market. In the case of Argentina, the original indices have a 1993=100 base, and in Brazil’s case, 2006=100, with the year 2000 being established as a common reference period. 2
1
INTAL Monthly Newsletter 172 - December 2010 - All rights reserved.
Since 2003 and the full recovery of activity levels in the MERCOSUR countries, intraregional trade has been more dynamic than in extrazone trade. The phenomenon is visible in an indicator of exports estimated at constant prices for Argentina and Brazil, countries that provide the relevant information for it. 2
B. Extraregional exports
Note: The years represented with a darker bar are the points of comparison of the rates of variation presented. Source: Author’s own based on data from INDEC and IPEA.
2
INTAL Monthly Newsletter 172 - December 2010 - All rights reserved.
Graph 1 Argentina and Brazil: Evolution of exports at constant prices by target area 1993-2010 (Billions of US$ at constant prices) A. Intraregional exports
In 2009, as a result of the international crisis, trade contracted sharply. However, unlike previous crises, the contraction of extrazone exports was similar to sales within the bloc (-10.6% and -13.5% respectively). It should also be remembered that the beginning of the recovery, in the first half of 2010, involved a far greater increase for intraregional exports than those to the rest of the world. Whereas the former grew 34.7%, the latter rose by 5.1%. The effect of the basis for comparison aside, this is an expression of the best performance of the MERCOSUR economies relative to other countries— especially the developed countries—during the period. It is interesting to note that, should there be another phase of growth like 2003-2008, when intra- and extraregional trade grew 16.0% and 6.2% c.a. respectively, it will still take 6 years for intrazone trade to attain a 25% ratio.
3
INTAL Monthly Newsletter 172 - December 2010 - All rights reserved.
In addition, in the next cyclical phase, between 1998 and 2002, intraregional trade collapsed (-41.9%), while the behavior of sales to the rest of the world was highly favorable (57.5%). The relative loss suffered in those years has not made up, in spite of the inequality in the growth of both flows in 2002-2008. The information of real interest, however, is that the cumulative annual (c.a.) growth intrazone exports in recent years has been higher than in the early days of MERCOSUR: shipments to the region grew at a c.a. rate of 16% and extraregional shipments at 12.3% in these periods. Another expression of this recent dynamism is that, in 2008, the level of intrazone exports was 41.3% up on the 1998 high.
