Inter-American Development Bank
facebook
twitter
youtube
linkedin
instagram
Abierto al públicoBeyond BordersCaribbean Development TrendsCiudades SosteniblesEnergía para el FuturoEnfoque EducaciónFactor TrabajoGente SaludableGestión fiscalGobernarteIdeas MatterIdeas que CuentanIdeaçãoImpactoIndustrias CreativasLa Maleta AbiertaMoviliblogMás Allá de las FronterasNegocios SosteniblesPrimeros PasosPuntos sobre la iSeguridad CiudadanaSostenibilidadVolvamos a la fuente¿Y si hablamos de igualdad?Home
Citizen Security and Justice Creative Industries Development Effectiveness Early Childhood Development Education Energy Envirnment. Climate Change and Safeguards Fiscal policy and management Gender and Diversity Health Labor and pensions Open Knowledge Public management Science, Technology and Innovation  Trade and Regional Integration Urban Development and Housing Water and Sanitation
  • Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Beyond Borders

  • HOME
  • CATEGORIES
    • Asia – LAC
    • Innovation and Technology
    • Investment Attraction
    • Public-Private Alliances
    • Regional Cooperation
    • Regional Integration
    • Trade & Investment Agreements
    • Trade Facilitation
    • Trade Promotion
  • Authors
  • Spanish

Five Findings About the Impact of the Depreciations on Latin American Exports

January 17, 2017 by Dana Chahin Leave a Comment


The exchange rates in most countries in Latin America underwent marked depreciations during the last two years of downturn in global trade. Real depreciations are generally expected to stimulate growth in exports, as when currencies depreciate, domestic goods become cheaper and more competitive abroad. 

However, recent studies have not reached a consensus on the scale of this impact and how permanent it is: some conclude that the positive impact of depreciations on exports seems to have weakened, while others have found that there continues to be a strong connection between real exchange rates and trade.

Is Latin America unusual in this regard? How has depreciation impacted the region’s exports and what can we expect for the future?

The Trade and Integration Monitor 2016 reveals five key findings about the relationship between these two factors:

  1. Between 2003 and 2015, a real depreciation of 1.0% generated an average increase of 0.9% in Latin America’s total exports.
  2. Manufacturing exports are more sensitive to changes in the real exchange rate: a real depreciation of 1.0% generated an average increase of 1.2% in manufacturing exports, which is greater than the effect on total exports.
  3. These effects were greater within intraregional trade (trade between the countries of Latin America, such as between Colombia and Ecuador) as compared to trade with the rest of the world: a real depreciation of 1.0% caused an average increase of 0.9% in intraregional manufacturing exports, in contrast with an impact of 0.6% on those to trade partners outside the region.
  4. The comparison of results for 2003–2008 and 2009–2015 revealed that although the effect of currency depreciations on exports came down in the latter period, the impact continues to be significant. For example, between 2003 and 2008, depreciations of 1% drove intraregional manufacturing exports to grow by 3.4%, while between 2009 and 2015 this effect went down to 1.2%.
  5. The volatility of the region’s exchange rates has increased markedly. In general, this has not had a significant effect on total exports, but it has had negative repercussions on exports of manufactures.

These findings confirm the significant impact that changes in the exchange rate may have on the region’s exports

How should we interpret these results in the current context? Does Latin America stand to benefit from these devaluations?

Even though depreciation impacted exports of manufactures and intraregional exports relatively more, the greatest real depreciation in Latin America were with trade partners outside the region (see figure). However, there have been notable real appreciations in exchange rates within the region, largely due to the depreciation of the Brazilian real vis-à-vis the currencies of its regional trade partners.

Source: Trade and Integration Monitor 2016
Source: Trade and Integration Monitor 2016

These circumstances suggest that the substantial shifts in exchange rates that took place in recent six-month periods have conspired against the growth in intraregional exports, because just as real depreciations have a positive effect on exports, real appreciations between countries in Latin America tend to restrict these.

Likewise, the outlook for the diversification of the export basket is unfavorable, as there is a higher share of manufactures in intraregional trade, which are precisely the type of export that is most sensitive to fluctuations in the exchange rate—in this case, the negative impact of a real appreciation.

Finally, exchange-rate volatility represents an additional risk in the current context of macroeconomic uncertainty.

How should Latin America face up to this challenging state of affairs? The results of the report underlined the importance of implementing policies to promote and support export diversification and regional integration. Although the report highlights the impact that changes in the exchange rate may have on exports, it does not advocate for intervention in the exchange rate to modify export competitiveness. Instead, it calls for trade promotion policies to be placed at the center of the Latin American development agenda.


Filed Under: Regional Cooperation, Regional Integration, Trade Facilitation, Trade Promotion Tagged With: International trade

Dana Chahin

Dana Chahin es consultora del Sector de Integración y Comercio del Banco Interamericano de Desarrollo (BID). Es economista de la Pontificia Universidad Javeriana de Bogotá y cuenta con un máster en economía internacional y política económica de la Universidad Goethe de Frankfurt, Alemania. Antes de realizar su maestría y de vincularse al BID, Dana trabajó durante tres años como asesora de exportaciones en la oficina comercial de ProColombia en Alemania, donde impulsó la realización de negocios internacionales entre empresas colombianas y europeas.

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Follow Us

Subscribe

Search

Productivity and Trade

This space explores how trade, investment and sustainable development in strategic sectors can boost productivity and strengthen more dynamic, inclusive and resilient economies in Latin America and the Caribbean. From trade facilitation and export and investment promotion to entrepreneurship, the development of public-private synergies, agri-food systems and tourism, we address challenges and opportunities for growth in the region.

Related posts

  • Exports from Latin America: Is There Light at the End of the Tunnel?
  • Latin America Needs to Adapt to the Downshift in Global Trade
  • Exports, the Productivity Engine the Andean Region Needs
  • Outlook for Latin American exports in 2020
  • How Competitive Are Latin American Exports?

Categories

Footer

Banco Interamericano de Desarrollo
facebook
twitter
youtube
youtube
youtube

    Blog posts written by Bank employees:

    Copyright © Inter-American Development Bank ("IDB"). This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives. (CC-IGO 3.0 BY-NC-ND) license and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed. Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC- IGO license. Note that link provided above includes additional terms and conditions of the license.


    For blogs written by external parties:

    For questions concerning copyright for authors that are not IADB employees please complete the contact form for this blog.

    The opinions expressed in this blog are those of the authors and do not necessarily reflect the views of the IDB, its Board of Directors, or the countries they represent.

    Attribution: in addition to giving attribution to the respective author and copyright owner, as appropriate, we would appreciate if you could include a link that remits back the IDB Blogs website.



    Privacy Policy

    Copyright © 2025 · Magazine Pro on Genesis Framework · WordPress · Log in

    Banco Interamericano de Desarrollo

    Aviso Legal

    Las opiniones expresadas en estos blogs son las de los autores y no necesariamente reflejan las opiniones del Banco Interamericano de Desarrollo, sus directivas, la Asamblea de Gobernadores o sus países miembros.

    facebook
    twitter
    youtube
    This site uses cookies to optimize functionality and give you the best possible experience. If you continue to navigate this website beyond this page, cookies will be placed on your browser.
    To learn more about cookies, click here
    X
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
    Non-necessary
    Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
    SAVE & ACCEPT