The proximity of the U.S. and Latin America comes with tremendous trade opportunities among countries in this region. Moreover, the U.S. has free trade agreements (FTAs) with 11 countries in Latin America. While trade between the U.S. and Latin America has been growing, COVID-19 caused trade to decrease from 2019 to 2020 as countries locked down.
By Perc Pineda, Ph.D.
PLASTICS Chief Economist
The proximity of the U.S. and Latin America comes with tremendous trade opportunities among countries in this region. Moreover, the U.S. has free trade agreements (FTAs) with 11 countries in Latin America.[i] While trade between the U.S. and Latin America has been growing, COVID-19 caused trade to decrease from 2019 to 2020 as countries locked down. U.S. plastics exports—the total of plastic materials and resin, machinery, plastic products, and molds for plastics—to Latin America with FTAs decreased 10.5% to US$16.8 billion in 2020 from US$18.7 billion in 2019. As economies reopened, in 2021 plastics exports to these countries rose 33.2% to U$$22.3 billion. So far this year, from January to September, plastics exports were already 11.5% above the same period last year. At US$18.5 billion, it can be expected that U.S. plastics industry exports to Latin American countries with FTAs would surpass pre-pandemic levels.
While the U.S. dollar value of trade increased due to inflation, data also show that the volume of exports increased by quantity. For instance, U.S. exports of plastic materials and resin to these countries totaled 4.6 billion kilograms from January to September this year. From 2020 to 2021, U.S. exports of plastic materials and resin to these countries increased by 3.8% to 5.8 billion kilograms.
U.S. plastics imports from Latin America with FTAs decreased by 7.9% to US$5.6 billion in 2020 based on customs value. The following year it increased to $7.1 billion—a 26.2% increase. Since January this year, U.S. plastics imports from these countries totaled $6.6 billion—28.4% above the same period last year. The strengthening U.S. dollar supported the robust increase in U.S. plastics imports.
All told, the plastics trade volume between the U.S. and Latin American countries with free trade agreements has recovered significantly and is projected to increase. The breakdown of plastics exports by type and country year-to-date is shown below.
Year-to-date ending September 2022, the U.S. has about US$12.0 billion trade surplus in plastics with the 11 Latin American countries with free trade agreements. Moreover, the U.S. imports plastics products from all 11 countries, which so far this year totaled US$4.7 billion. This means that plastic converters in these countries import plastic machinery. Year-to-date ending September, the value of U.S. exports of plastics machinery to the 11 countries totaled US$130.1 million. However, the share of plastics machinery from the U.S. imported into these countries remains low. In 2021, of the total US$79.2 million plastics machinery imported into Chile, only 7.0% originated from the U.S. Except for Costa Rica where the U.S. is the main supplier of plastics machinery—42.3% of total plastics machinery imports, the U.S. share in the other countries were surprisingly low.
One would expect that with the FTA between the U.S. and Mexico, under the U.S. Mexico Canada Free Trade Agreement (USMCA), Mexico’s imports from the U.S. would be higher than 18.5%. With the $223.5 million imports of plastics products into the U.S. from Colombia, the share of U.S. plastics machinery imports into Colombia was only 6.4%. These small numbers suggest that the U.S. and its Latin American partners are not maximizing the benefits that FTAs bring in addition to geographic proximity between the U.S. and Latin America. The U.S. is a major source of plastic materials and resin from the U.S. There is no reason why Latin America cannot source more plastics machinery from the U.S. instead of other countries.
The U.S. plastics industry offers tremendous opportunities in sourcing plastics equipment. The best way to further explore and be a part of the vibrant plastics machinery and equipment sector of the U.S. plastics industry is through NPE – The Plastics Show, which is the largest plastics trade show in the Americas. Held every three years, the next show takes place on May 6-10, 2023, in Orlando, Florida. This five-day event will showcase seven technology zones: Bottle Zone, Advance Manufacturing, Business Solutions, Materials Science, Packaging, Moldmaking, Recycling and Sustainability.
There is plenty of room for plastics trade between the U.S. and Latin American countries with FTAs to grow. The combined economic size of the U.S. and Latin American countries with FTAs is estimated to reach US$27.8 trillion this year, at current prices, and is projected to grow to US$33.8 trillion by 2027.[ii] As a consequence trade between the U.S. and Latin America could only grow. The U.S. is not only the world’s largest market for plastics—but also ranked second global player in plastics according to the Global Plastics Ranking™—it offers tremendous opportunities to source resin, machinery, molds, and products. Preferential access to the U.S. market either as a seller or buyer would support the strategic goals of the 11 countries in Latin America with FTA to remain competitive in their domestic market and the international markets they serve.
A version of this blog in Spanish can be found here.
[i] Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, and Peru.
[ii] Estimates are based on the International Monetary Fund’s World Economic Outlook, October 2022.