GLOBAL LatAm edition8

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 A tale of commodities:

How LatAm’s trade with countries has changed through the centuries.

Soy? Copper? Bovine Meat?  

At the turn of the nineteenth century, there were a number of reasons that the Spanish and Portuguese colonies in the Americas sought independence from their Iberian overlords.

Trade, or more specifically free trade, was a big one.

See, under the mercantile systems imposed by European empires throughout the 1700s and 1800s colonies could only trade with their colonial masters in the homeland. All raw goods from Spanish America, for example, had to be shipped to the ports of Seville or Cádiz in southern Spain.

Desiring to trade with other great powers (particularly the British), the soon-to-be Latin Americans declared independence. And the rest is history.

Trade has been just as important in the centuries since, if not more, as the newfound states in the region had to grow their economies and finance their development. Trade with Iberia was gradually supplanted by trade with the British and then the United States.

Which brings us to today.

China is without a doubt the most critical economy for a majority of Latin America’s biggest countries, serving as the primary trade partner of, among others, Brazil, Chile, Ecuador, Peru, and Uruguay.

China’s trade with Latin America has soared from $14B in 2000 to almost $500B in 2022, as our Senior Editor Gabriel Cohen recently outlined in a story for our good friends over at Americas Quarterly.

In the process, China has managed to surpass the European Union in terms of commercial relations with Latin America, swallowing up more Brazilian soy, Chilean copper, and Uruguayan beef than the supranational bloc headquartered in Brussels.

China might even have been able to become the region’s overall largest trade partner, if not for Mexico and its tight trade ties with the US. Last year, Mexico surpassed China to become Washington’s main trade partner. Both imports and exports are soaring between the North American countries, and while South America remains dependent upon China, Mexico’s economy is inextricably tied to its northern neighbor.

Without a doubt, trade is just as important for Latin America’s countries today as it was 200 years ago when they were breaking free from European colonialism. Given the vast natural resources of the region, this seems unlikely to change.

What’s important to always remember, however, is what exactly is being traded. Brazil’s top export to China in 2021 was iron ore; its top import was semiconductors. Argentina exports bovine meat to Germany, yet imports motor vehicles.

Latin America’s countries are no longer the territorial or colonial holdings of far-off monarchs in Lisbon, Madrid, or Paris.

If the goal in the long run is to preserve sovereignty and grow economically, then developing domestic industrial and services sectors will be key.

About

Panama Canal

Panama Canal is an artificial 82-kilometer (51-mile) waterway that connects the Pacific Ocean with the Atlantic Ocean, built between 1904 and 1914.

The Canal locks at each end lift ships to Gatun Lake, an artificial freshwater lake 26 meters (85 ft) above sea level. The shortcut dramatically reduces the time for ships to travel between the two oceans, enabling them to avoid the route around the southernmost tip of South America via the Drake Passage or Strait of Magellan.

Panama Canal moves roughly $270 billion worth of cargo annually–it’s the trade route taken by 40% of all U.S. container traffic alone and handles about 5% of all global maritime trade.

The Driest October in 70 Years

Last October, however, Panama received 41% less rainfall than usual, leading to the driest October in 70 years in what was supposed to be Panama’s rainy season, bringing the level of the Gatun Lake almost six feet below where it was a year ago. Additionally, infrastructure constraints led the Panama Canal Authority to restrict the number of ships that could pass each day.

The principal commodity groups carried through the Canal are motor vehicles, petroleum products, grains, coal, and coke.

According to the Panama Canal Authority, most of its traffic came from containers and dry bulk like soybeans.

The world’s largest operator of chemical tankers (Stolt-Nielsen) typically also uses the Canal.

However, due to the drought and the backup at the crossing, the operator has decided to reroute its fleet to the Suez Canal.

Although representing the smaller number of crossings, the Canal is also an important route for passengers, with many ocean cruise lines offering popular Panama Canal itineraries that sail through the Canal in the approximately 8-hour passage to their next destination in the opposite ocean.

How Panama canal works

[🎞️ Joe LeMonnier]pic.twitter.com/DRDRf93U8s

— Massimo (@Rainmaker1973) February 17, 2024

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Source: Edgar Schein via Dr. David Weiss