Order Code 98-840 E
Updated September 24, 2003
CRS Report for Congress
Received through the CRS Web
U.S.-Latin American Trade: Recent Trends
J. F. Hornbeck
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
Since congressional passage of Trade Promotion Authority (TPA) in August 2002
(P.L. 107-210), the United States and Chile concluded a bilateral free trade agreement
(FTA) and the 108th Congress will likely follow closely progress on two other U.S.-Latin
American trade initiatives. The first is the U.S.-Central America Free Trade Agreement
(CAFTA), currently being negotiated, with an anticipated year-end completion date.
The second is the Free Trade Area of the Americas (FTAA), scheduled to be concluded
in January 2005. Because congressional committees will oversee the last phase of the
FTAA negotiations through the consultation process defined in TPA, the 108th Congress
will play an important role in determining if the FTAA is to be brought to completion
by 2005. This report tracks U.S.-Latin American trade data and will be updated.1
Developments in U.S.-Latin American Trade
Latin America, although not the largest, is the fastest growing U.S. regional trade
partner. Between 1990 and 2002, total U.S. merchandise trade (exports plus imports)
with Latin America grew by 200% compared to 101% for Asia, 82% for the European
Union, 37% for Africa, and 109% for the world. It should be pointed out, however, that
most of the growth in Latin American trade was due to Mexico, which is not only the
largest U.S. regional trade partner in dollar terms, but also the fastest growing. As seen
in figure 1, from 1990 to 2002, the share of U.S. trade with Latin America, excluding
Mexico, has only kept pace relative to the rest of the world, whereas Mexico’s share has
expanded from 6.6% to 12.5%, reflecting enormous growth.
In 2002, U.S. trade worldwide continued a decline begun in 2001, largely reflecting
tepid recovery from the global economic downturn. U.S. exports to the world slid by
4.9% in 2002, following an decrease of 6.8% in 2001. Among the larger trade partners,
1 Additional information on this and other trade related issues is available from the CRS
Electronic Briefing Book on Trade at: [http://www.congress.gov/brbk/html/ebtra1.html]. See
also, CRS Report RS20864, A Free Trade Area of the Americas: Status of Negotiations and
Major Policy Issues, by J. F. Hornbeck.
Congressional Research Service ˜ The Library of Congress

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U.S. exports grew by 1.9% to South Korea and 15.0% to China, but declined by 10.5%
to Japan, 9.5% to the European Union, and 1.6% to Canada. After falling 6.7% in 2001,
U.S. exports to Latin America dropped by another 6.5% in 2002 (see appendix 1). U.S.
exports to Latin America, excluding Mexico, fell by 11.2%, while exports to Mexico, the
second largest export market for the United States, fell by only 3.7%.
Figure 1. U.S. Direction of Total Trade, 1990 and 2002
U.S. exports declined to nearly all the other top Latin American markets after
Mexico. They fell by 21.9% to Brazil, 21.2% to Venezuela, 3.1% to the Dominican
Republic, 0.2% to Colombia, 16.3% to Chile, and 59.4% to Argentina. Bucking the trend,
exports rose by 25.2% to Costa Rica, 6.2% to Honduras, and 9.2% to Guatemala. These
trends point to the effects of economic slow downs in much of South America, including
Argentina’s deep recession in the wake of a financial crisis, as well as, the established
trade ties to Central America, which allowed the subregional trade to fare much better.
On the import side, the slower growing U.S. economy also resulted in reduced
demand for foreign goods, which fell 4.9% worldwide in 2002, after declining by 6.3%
in 2001. Imports diminished by 9.5% from the EU, 2.6% from Canada, and 10.5% from
Japan.
Imports from China and South Korea actually grew by 15.0% and 1.9%,
respectively. Imports from Latin America rose by 3.2% on average and by 2.6% from
Mexico, 9.3% from Brazil, 8.2% from Chile, 5.7% from Argentina, 4.4% from Honduras,
8.9% from Costa Rica, and 8.2% from Guatemala. They fell by 0.9% from Venezuela,
1.8 from Colombia, and 0.4% from the Dominican Republic.
Mexico made up 12.5% of U.S. trade in 2002 and, as seen in appendix 1, it is the
largest Latin American trading partner, accounting for two-thirds of the region’s trade
with the United States. These trends point to the long-term and increasing economic

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integration between the two countries, in part the result of their deliberate trade
liberalization efforts, including the North American Free Trade Agreement (NAFTA).
By contrast, the rest of Latin America together makes up only 6.7% of U.S. trade,
potentially leaving room for significant growth. Brazil, for example, has the largest
economy in Latin America, is the second largest Latin American trading partner of the
United States, but accounts for only 8.0% of U.S. trade with Latin America, or 1.5% of
global U.S. trade.
The region’s increasing importance as a U.S. trading partner reflects developments
in both the United States and Latin America. In the United States, total merchandise trade
has grown from 15.6% of gross domestic product (GDP) in 1991 to 18.5% in 2002 (down
from19.8% in 1999 reflecting slower economic growth worldwide). In Latin America,
many countries have adopted, at least in part, market-based economic reforms since the
1980s debt crisis, including trade liberalization. Average Latin American import tariffs
have declined from 45% in 1985 to under 12% by 2000, although the rates vary among
countries. Trade reform has been widespread and represents an opportunity for U.S. firms
to penetrate new markets, but it has not been embraced with equal vigor by all countries,
particularly for some U.S. goods. Also, trade reform can be delayed or even reversed if
countries face economic or political instability. The financial crisis in Argentina, for
example, has led to decisions to encourage exports, but also to impose higher export
taxes, which has an offsetting effect.
Tariff rates have been falling throughout Latin America and so only partially explain
the difference in economic integration among countries. Two other relatively simple
measures of trade openness are presented in table 1 and draw attention to cases where
trade reform may be more apparent than in others. For example, Mexico, Chile, and
Costa Rica are considered among the early and more successful reformers of trade policy,
and for each, total merchandise trade (exports plus imports) represented more than 50%
of GDP in 2001. By contrast, total merchandise trade accounted for a much smaller 22%
of GDP in Brazil and 17% in Argentina, two countries generally associated with lagged
or incomplete trade reforms.
The trade-to-GDP ratio, however, may reflect other than trade policy factors. For
example, the ratio can be smaller for those countries with large domestic markets that are
less trade dependent. This may be the case, in part, for Brazil, which has a large domestic
manufacturing base. Conversely, the ratio may be larger for small economies that are
relatively more trade dependent, such as Costa Rica, which in addition to pursuing trade
liberalization aggressively, has also developed a manufacturing export base, including
computer chips and medical equipment. Still, the lower trade-to-GDP ratio for Brazil and
some other countries stands out.
The per capita dollar value of goods a country imports from the United States is
another specific measure of trade openness (table 1). Brazil and Argentina increased their
per capita dollar value of U.S. imports from 1990 to 2002, but to only a fraction of that
for Mexico and Costa Rica. Mexico’s high figure again reflects an evolving trade
liberalization policy dating to the mid-1980s and its historical ties with the U.S. economy.
Costa Rica’s high per capita consumption of U.S. goods reflects a similar relationship that
has seen enormous growth in recent years. Brazil and Argentina, by contrast, have higher
restrictions on trade with the United States and other countries, in part reflecting trade
policy and trends defined by the regional customs union, Mercosur (Mercado Comun del

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Sur — Southern Common Market), and historically closer trade ties with Europe.2
Argentina’s deep financial crisis led inevitably to severe “import compression” as
aggregate demand fell over four consecutive years and the peso devaluation took effect.
Differences in income can be an important factor explaining variations in U.S. import
consumption, but per capita gross national income (GNI) data shown in table 1 suggest
that it does not stand out as a factor in this case.
Table 1. Measures of Trade Openness for Seven Top
U.S. Trading Partners in Latin America
Trade in Goods
Trade in Goods
Per Capita
Per Capita
Per Capita
(% GDP)
(% GDP)
Imports from
Imports from
GNI 2001
1989*
2001*
U.S. 1990**
U.S. 2002**
(PPP)#
Mexico
31.1%
54.9%
$328
$956
$8,240
Brazil
9.2%
22.5%
$34
$71
$7,070
Venezuela
50.5%
33.8%
$254
$178
$5,590
Colombia
30.1%
30.1%
$62
$84
$6,790
Argentina
11.4%
17.5%
$36
$44
$10,980
Chile
51.0%
51.5%
$126
$163
$8,840
Costa Rica
55.4%
70.7%
$352
$783
$9,260
Data Sources: *Sum of merchandise exports and imports divided by GDP, per IMF, International
Financial Statistics. **IMF, International Financial Statistics March 2003, and U.S. Department of
Commerce. #GNI PPP - gross national income converted to international dollars using purchasing power
parity rates. An international dollar has the same purchasing power over GNI as the U.S. dollar in the
United States. World Bank, 2003 World Development Indicators, pp. 14-16.
The trade data suggest that there may be room for growth in trade between South
America and the United States. For example, Central America’s total merchandise trade
with the United States amounted to $21.7 billion in 2002, compared to Brazil’s $28.2
billion (appendix 1). These figures, however, represent 38% of Central America’s GDP,
compared to 8% of Brazil’s, suggesting significant room for growth in the latter’s trade
with the United States. Trade policy changes, at the margin, could provide some of the
basis for growth in U.S.-South American trade, but they may not be huge immediately
given South America’s historically small interest in the United States and the limited size
of their markets. Still, many economists believe that lowering barriers to U.S. trade with
South America and guaranteeing market access may generate long-term trade and
investment opportunities. Similarly, access to high quality U.S. exports and the large U.S.
market presents an attractive opportunity for Latin American countries, as well.
U.S.-Latin America Trade Issues
From a purely commercial perspective, market access remains an important key to
understanding U.S. goals for improving trade relations with Latin America. There are
three generally recognized components to this idea. The first involves lowering barriers
to allow improved market access for U.S. goods, an issue that varies in significance with
each country. The second is achieving market access under the same rules as other
2 For details, see: United States International Trade Commission. Market Developments in
Mercosur Countries Affecting Leading U.S. Exporters. Publication 3117, July 1998.

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Western Hemisphere countries, an increasingly complex goal given the ongoing proclivity
of the United States and Latin American countries to pursue bilateral agreements. The
third entails guaranteeing that improvements are permanent, providing confidence to U.S.
businesses that trade and investment can be undertaken in a predictable environment.3
Reducing tariffs remains an important U.S. trade policy goal, despite the declining
average tariff rates in much of Latin America. There are three reasons for this. First,
historically there has been selective backsliding in tariff reductions during times of
economic hardship. Second, unilateral tariff reductions do not necessarily favor U.S.
goods, as might be thought at first glance. Tariff rates can be very high on capital goods,
such as automobiles, which dominate U.S. exports.4 Third, U.S. businesses face higher
tariffs than competing firms in cases where sub-regional pacts have been signed that do
not include the United States. Latin American countries, however, are quick to retort that
although the United States has low average tariffs, it too has relatively high peak
(especially above quota) rates on selected products, such as steel and agricultural goods.
Non-tariff barriers are another fertile area for negotiation. The United States
negotiated trade-related issues over Latin American legal and regulatory environments
(e.g. intellectual property rights, government procurement, services trade, e-commerce)
in the U.S.-Chile FTA, with the potential for improving trading conditions for some of
the more competitive U.S. industries (financial services, software development,
government contracting). These are issues that will continue to generate deep interest as
CAFTA and the FTAA move forward. Latin American countries would like to see a
number of U.S. non-tariff barriers also addressed such as U.S. trade remedy laws and farm
price supports. Although legal under the World Trade Organization (WTO) unless
successfully challenged, Latin Americans consider U.S. antidumping and countervailing
duty actions impediments to trade because they are brought frequently against Latin
America’s primary export products. President Bush’s decision in March 2002 to impose
tariffs of up to 30% on selected steel imports was a major point of contention with Brazil,
among other countries, even though the brunt of the tariffs fell on non-Latin American
nations.
There is also considerable difference between some Latin American countries and
the United States over broader social issues that have implications for trade policy, such
as concerns over labor and environmental rules and standards. Although mutually
acceptable solutions were negotiated in the U.S.-Chile FTA, these particular issues point
to the breadth of topics that now fall under trade discussions, complicating negotiations
and raising the question of whether the FTAA can meet expectations of becoming a
hemispheric unifying force. Despite, the passage of TPA by the 107th Congress, the
FTAA faces serious obstacles (particularly in light of the collapsed WTO talks in Cancún,
Mexico in September 2003) as negotiators prepare to complete the agreement by the
targeted deadline of January 2005.
3 Others goals include such broad themes as supporting regional political and security interests.
4 For country-specific data, see: United States Trade Representative. 2003 National Trade
Estimate Report on Foreign Trade Barriers. Washington, D.C., 2003.

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Appendix 1. U.S. Merchandise Trade with Selected
Latin American Countries, 1990-2002 ($billions)
% Change
% Change
Country
1990
1992
1994
1996
1998
2000
2002
00-02
90-02
U.S. Exports
Brazil
5.1
5.8
8.1
12.7
15.2
15.4
12.4
-19.5%
143.1%
Venezuela
3.1
5.4
4.0
4.8
6.5
5.6
4.5
-19.6%
45.2%
Dom. Rep.
1.7
2.1
2.8
3.2
4.0
4.4
4.3
-2.3%
152.9%
Colombia
2.0
3.3
4.1
4.7
4.8
3.7
3.6
-2.7%
80.0%
Costa Rica
1.0
1.4
1.9
1.8
2.3
2.4
3.1
29.2%
210.0%
Chile
1.7
2.5
2.8
4.1
4.0
3.5
2.6
-25.7%
52.9%
Honduras
0.6
0.8
1.0
1.6
2.3
2.6
2.6
0.0%
333.3%
Guatemala
0.8
1.2
1.4
1.6
1.9
1.9
2.0
5.3%
150.0%
El Salvador
0.6
0.7
0.9
1.1
1.5
1.8
1.7
-5.6%
183.3%
Argentina
1.2
3.2
4.5
4.5
5.9
4.7
1.6
-66.0%
33.3%
Peru
0.8
1.0
1.4
1.8
2.1
1.7
1.6
-5.9%
100.0%
Ecuador
0.7
1.0
1.2
1.3
1.7
1.0
1.6
60.0%
128.6%
Panama
0.9
1.1
1.3
1.4
1.8
1.6
1.4
-12.5%
55.6%
Nicaragua
0.1
0.2
0.2
0.3
0.3
0.4
0.4
0.0%
300.0%
Other
5.4
5.4
6.4
7.6
9.1
8.5
8.3
-2.4%
53.7%
Total LAC*
25.7
35.1
42.0
52.5
63.4
59.3
51.7
-12.8%
101.2%
Mexico
28.3
40.6
50.8
56.8
79.0
111.7
97.5
-12.7%
244.5%
Total LA
54.0
75.7
92.8
109.3
142.4
171.0
149.2
-12.7%
176.3%
World
393.6
448.2
512.6
625.1
680.5
780.4
693.3
-11.2%
76.1%
U.S. Imports
Brazil
7.9
7.6
8.7
8.8
10.1
13.9
15.8
13.7%
100.0%
Venezuela
9.5
8.2
8.4
12.9
9.3
18.7
15.1
-19.3%
58.9%
Dom. Rep.
1.8
2.4
3.1
3.6
4.4
4.4
4.2
-4.5%
133.3%
Colombia
3.2
2.8
3.2
4.3
4.7
7.0
5.6
-20.0%
75.0%
Costa Rica
1.0
1.4
1.7
2.0
2.8
3.6
3.1
-13.9%
210.0%
Chile
1.3
1.4
1.8
2.3
2.5
3.2
3.8
18.8%
192.3%
Honduras
0.5
0.8
1.1
1.8
2.6
3.1
3.3
6.5%
560.0%
Guatemala
0.8
1.1
1.3
1.7
2.1
2.6
2.8
7.7%
250.0%
El Salvador
0.2
0.4
0.6
1.1
1.4
1.9
2.0
5.3%
900.0%
Argentina
1.5
1.3
1.7
2.3
2.3
3.1
3.2
3.2%
113.3%
Peru
0.8
0.7
0.8
1.3
2.0
2.0
1.9
-5.0%
137.5%
Ecuador
1.4
1.4
1.7
1.9
1.8
2.2
2.2
0.0%
57.1%
Panama
0.2
0.3
0.3
0.4
0.3
0.3
0.3
0.0%
50.0%
Nicaragua
0.1
0.1
0.2
0.4
0.5
0.6
0.7
16.7%
600.0%
Other
3.6
3.7
3.9
4.0
3.6
6.7
5.6
-16.4%
55.6%
Total LAC*
33.8
33.6
38.5
48.8
50.4
73.3
69.6
-5.0%
105.9%
Mexico
30.2
35.2
49.5
74.3
94.7
135.9
134.7
-0.9%
346.0%
Total LA
64.0
68.8
88.0
123.1
145.1
209.2
204.3
-2.3%
219.2%
World
495.3
532.7
663.3
795.3
913.9
1,216.9
1,163.6
-4.4%
134.9%
Source: Table created by CRS from U.S. Department of Commerce data.
* LAC = Latin America and the Caribbean, except Mexico.

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