El Salvador was one of the countries with the sharpest drop in exports on the Isthmus in the first quarter, according to the Inter-American Development Bank’s (IDB) Trade Trends report.
The report, released Thursday, shows that Latin America and the Caribbean have faced a slowdown in foreign trade in the first three months of the year due to falling prices of basic commodities and lower export volumes.
Costa Rica was the only country with exponential export growth of 14.1% in Q1 2023, while other Central American countries contracted or slowed.
Exports from El Salvador fell by 4.6% in the first three months of the year. Guatemala, on the other hand, declined by 4.8%, Honduras by 3.7% and the Dominican Republic by 1.5%.
Nicaragua grew at 5.8%, half of the 10.8% growth rate for the same period in 2022, hence the deficit in the IDB report.
El Salvador faces a contraction of 7.4% in the first four months of 2023 after two years of sharp growth in exports. From January to April, the value of goods shipped by businessmen was $2.2607 billion, down $181.8 million from the same period in 2022.
Exports in 2021 increased further due to the recoil effect from the sharp contraction in 2020 after the economic shutdown, while the movement in 2022 was mainly driven by the inflationary effect (higher prices). The trend reversed this year, with shipments rising 2.3% in the first four months of the year, according to the Central Reserve Bank (BCR).
An unlikely scenario.
Paolo Giordano, an economist and IDB research coordinator, said the expansionary business cycle after the COVID-19 pandemic had ended and the region entered a slowdown phase that would stabilize in the second half of the year.
The value of exports from Latin America and the Caribbean increased by 2.9%, but the share was 5.6 times lower compared to 16.4% in the first quarter of 2022.
The dynamics of the region were characterized by price fluctuations. The report detailed that the value of oil fell 18.2%, coffee 12.6%, iron 11.9%, copper 11.1% and soybeans 5.2%. Conversely, sugar recorded a year-on-year increase of 15.1%.
The study expects raw material prices to remain at “historically high” levels.
“This forecast is characterized by the presence of risks of a different nature,” he added, which typically includes adjustments in interest rates and dollar prices that directly affect the underlying commodities.
The BCR reported that exports from the manufacturing sector fell by 6% between January and April, while exports from the agriculture sector fell by 8.1% and the maquila sector by 15.9%.