Latin America, between international uncertainty and strategic alternative | Business | EUROtoday

The international economic system goes via an inflection level and this isn’t a short lived turbulence. This thought was central to the spherical desk on worldwide commerce on the RIDGE Forum 2025, held in December on the headquarters of the Development Bank of Latin America and the Caribbean (CAF) in Montevideo. There, teachers and financial coverage makers debate the challenges and alternatives that Latin America faces in a world context that’s more and more fragmented and marked by geopolitics.

The Minister of Economy of Uruguay, Gabriel Oddone, opened the talk by emphasizing that the brand new worldwide atmosphere requires diversifying exterior alliances and prioritizing dependable companions dedicated to multilateralism. In a state of affairs through which the potential of international conflicts is now not simply theoretical, the technique of worldwide insertion turns into a vital situation, particularly for small, open economies. The worldwide order is evolving in direction of an more and more bipolar construction, with the United States and China as the principle poles and with Russia performing as a destabilizing actor, notably in its relationship with Europe. In this context, advancing the settlement between Mercosur and the European Union can be particularly opportune to consolidate commerce ties and reinforce a framework of shared guidelines at a time of weakening of the multilateral system.

Since the worldwide monetary disaster of 2008, the primary main shock that lastingly altered the worldwide economic system, lots of the central rules of the open economic system—the free motion of products and components, environment friendly specialization, and the beneficial properties from commerce—have been more and more questioned. This query poses a double problem: defending the advantages of worldwide commerce with out ignoring the distribution issues and social tensions that globalization has generated in quite a few international locations.

In this unsure context, Uruguay affords an instance of a realistic technique. The nation combines commerce openness, diversification of companions and energetic neutrality that permits it to keep away from the principle geopolitical tensions. China is right now its important buying and selling associate in items, the United States is in providers and the European Union in overseas direct funding. Added to that is the latest acceptance to hitch the CPTPP – the trans-Pacific settlement – ​​and its candidacy, along with Singapore, to hitch the OECD. Uruguay is dedicated to predictability, institutional stability and environmental sustainability as strategic belongings to draw funding, even working from a comparatively excessive value construction.

From academia, Fernando Parro and Lorenzo Caliendo, from the colleges of Rochester and Yale, offered a structural perspective on the transformation of the worldwide business system. Until 2017, worldwide commerce was supported by low tariffs, multilateral negotiations beneath the WTO and rules of reciprocity and non-discrimination. That structure mirrored a long time of empirical proof on the beneficial properties from commerce derived from specialization and comparative benefits. However, for the reason that begin of the commerce warfare between the United States and China, that consensus has eroded. Today, the trade-weighted common U.S. tariff is round 17%, and commerce coverage has turn out to be extra bilateral, discretionary, and fewer predictable. The justifications given—defending manufacturing employment, lowering commerce deficits, or restoring reciprocity—lack strong assist in financial idea. The foreseeable result’s an atmosphere of upper costs, extra uncertainty and fewer funding.

For Latin America, responding with commerce retaliation can be counterproductive. The alternate options contain benefiting from comparatively low tariffs to place themselves as business intermediaries, deepening steady agreements with key companions such because the European Union or China, and reinforcing traditionally restricted intraregional integration. Fernando Arce, from the Inter-American Development Bank, joined the talk, highlighting the macroeconomic challenges of the area. Although many international locations have corrected present account imbalances, vital monetary pressures persist: larger debt prices, fiscal deficits within the Southern Cone and a excessive dependence on remittances in Central America, the place in Honduras and El Salvador they exceed 25% of GDP. Furthermore, the export construction continues to be concentrated in uncooked supplies, with excessive circumstances corresponding to Suriname, extremely depending on gold, and Venezuela on oil.

In quick, the problem for Latin America is appreciable, however so are the alternatives. As was made clear on the RIDGE Forum, international locations that handle to mix openness, macroeconomic stability and a method of clever neutrality will likely be higher positioned to navigate a much less cooperative world. The key will likely be to spend money on infrastructure and logistics, strengthen regional integration and obtain strategic insertion in international worth chains.