Latin America and the Caribbean (LAC) has a unique opportunity to meet the expected growth in global demand for agrifood products. The region accounts for 14% of global food production and 45% of net international trade in agrifood products.[1] The importance of these products to LAC’s economies is undeniable: agrifood systems account for between 9% and 35% of the region’s GDP and 25% of its exports.
The Inter-American Development Bank (IDB) was among the first to recognize the region’s potential in the agrifood sector. It is also well aware of the global challenges of climate change, population growth, natural resource degradation, and biodiversity loss. New health, safety, and security risks have also emerged, increasingly jeopardizing the balance between supply and demand for agrifood products. All of this is driving up prices and threatening global food security.[2]
The economic evidence shows that international trade plays a fundamental role in the four critical dimensions of food security—availability, access, utilization, and stability—and positively impacts them.[3]
It is no coincidence that the 2030 Agenda recognizes trade as a key driver for inclusive growth and achieving the goal of zero hunger. It has also been shown to play a decisive role in offsetting the adverse effects of climate change and global geopolitical risks.
Between 1995 and 2020, there were three major global trends in agrifood trade:
- International agrifood trade networks became less concentrated, the number of hubs increased, and new international players emerged;
- Intraregional trade increased, while emerging trade clusterswereevidence of a true regionalization of agrifood trade, determined by geographic proximity and trade agreements;
- Global agrifood trade has become more balanced than in the past: more countries are now connected to a wider variety of markets, which has undoubtedly strengthened global resilience.
Nevertheless, a concentrated group of countries still accounts for a large share of the value of trade. At the same time, trade liberalization remains at a standstill, which is detrimental to constructing a fairer, barrier-free agrifood trade system.
Can LAC take advantage of the trade opportunities that global food demand is creating? We are confident that it can.
To capitalize on these opportunities, the region must tackle three pivotal challenges:
- Reducing trade costs, particularly in a sector that deals with many perishable goods and faces numerous nontariff barriers. These barriers often relate to compliance with sanitary and phytosanitary standards. The costs imposed by these regulations can be extremely high, equivalent to adding a tariff of at least 150% to the value of the goods being traded.[4]
- Expand trade policies to promote deeper integration among countries in the region. This expansion would enable the region to meet new market access requirements, such as the European Union’s Regulation on Deforestation-Free Products (EUDR), while promoting regulatory convergence in the areas of health, safety, and food security.
- Improve agricultural productivity to boost the region’s comparative advantages and the benefits of trade.
As part of its commitment to this issue, the IDB is promoting a strategic agenda to respond to trade challenges in agrifood products, led by the Integration and Trade Sector and the Trade and Investment Department.
Consequently, on December 6 and 7, 2023, the IDB will launch its Regional Policy Dialogue on agrifood trade in Panama City. Leading authorities in the areas of trade, agriculture, and the private sector will attend this event.
The meeting will provide an ideal setting for analyzing opportunities to strengthen intraregional agrifood trade. It will also allow us to anticipate trends in global food demand and explore the region’s strategic prospects in this area.
Similarly, we must recognize the importance of issues such as market access, trade facilitation measures, and regulatory convergence in health, safety, and food security. We are convinced that addressing these issues will be vital to this gathering. Although the Regional Policy Dialogue is a closed meeting, we will make key findings public after it has been held.
As a strategic partner for Latin America and the Caribbean, the IDB is committed to supporting innovative agrifood trade reforms and programs, with a special focus on socioenvironmental sustainability and support for the most vulnerable countries.
Strong empirical evidence shows that trade is an effective and essential tool for providing a robust response to global food demand.
There is widespread evidence that trade plays a fundamental role in balancing supply and demand by optimizing the functioning of markets and encouraging investment. The outlook is promising in all these areas.
To find out more about agrifood trade, have a look at some of the IDB Group’s publications on the issue:
- How can trade policy help avoid a food security crisis during COVID-19? ;
- Food security in Central America, Panama, the Dominican Republic, Mexico and Haiti;
- Supporting the promotion of the trade agenda for the internationalization of sustainable agribusiness: Central America [in Spanish];
- Traceability systems as a way to distinguish Latin American countries and improve their integration into international agrifood value chains [in Spanish]; and
- Waste not, want not: Strengthening LAC agrifood exports through robust cold chain logistics.
Country competitiveness in the global food and agricultural market, 2018.
[1] Latin America and the Caribbean are “pillar for world food security”.
[2] Agriculture in LAC uses significant natural resources (one-third of available land, two-thirds of fresh water) and accounts for almost half of the region’s greenhouse gas emissions.
[3] By moving food from where it is produced at lower cost to where it is needed, trade promotes greater food security and healthier diets by giving consumers access to a greater quantity and variety of products that each country is capable of producing. At the same time, it can help global agriculture use natural resources like land and water more efficiently.
[4] Bilateral agrifood trade between Argentina and Brazil, according to FAO 2022(Figure 2.7).
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