By ActionForex.comThe last months of 2010 saw a large increase in exports from Latin American countries to the rest of the world. While some of this increase may be reflecting an increase in commodity prices, the sheer strength and size of the move in export numbers from the region cannot be explained solely by this increase in prices.
Although this contention is very difficult to prove, there are some countries in the region that provide the segmentation regarding whether exports increase due to price effects and/or quantity effects. Argentina is such a country and the one we will use for this explanation. In the case of Argentina, exports increased by 23.3 percent in November 2010 compared to the same month a year earlier. Out of this increase in the value of exports, the quantity of goods exported increased by 12 percent while the price of those goods increased by 10 percent.
Meanwhile, imports of goods, which, of course, are exports of other countries to Argentina, increased by 53 percent in November, year-over-year. Of this increase in imports to Argentina the quantity of goods imported increased by a whopping 39 percent while prices of these imports rose by only by 9 percent.
For Brazil, exports during December 2010 surged by 52.5 percent compared to December 2009. Although we don't have the numbers regarding the composition of this increase in imports, we can deduce from Argentina's numbers that the increase in the value of exports was due, fundamentally, to an increase in the quantity of goods exported by Brazil rather than by only an increase in price effect. By looking at the breakout in Brazilian exports during December 2010 it is clear that raw materials were leading the way with metals and petroleum in the vanguard of the charge. In fact, petroleum exports increased by 192 percent in December 2010 compared to December 2009. However, petroleum prices increased by only 20 percent during the same period of time. Meanwhile, iron ore exports surged by 208 percent during this period with the largest buyers of iron ore being China, Japan and Germany.
Mexican exports were also strong at the end of 2010, increasing by 25.9 percent in November compared to the same month a year earlier. Although Mexican exports may have been helped more by the increase in commodity prices than Argentina and Brazil, Mexican exports were already growing strongly a year ago and thus they are also benefiting from an increase in the quantity of goods rather than this being just a price issue.
The bottom line here is that growth numbers for the last quarter of the year for the world economy, but especially for emerging markets, may surprise on the upside as the export sector in Latin America is not showing any signs of slowing down, just the opposite. And since a large share of Latin American exports to the rest of the world comprise raw materials for the production of other goods then it is clear that even growth for developed countries may also surprise on the upside once these numbers are released.
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