Order Code 98-840 E
Updated May 11, 2004
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 U.S.-Chile free trade agreement (FTA) has been implemented and
negotiations have been concluded on the U.S.-Central America Free Trade Agreement
(CAFTA). Congress will likely follow closely progress on other U.S.-Latin American
trade initiatives, including new bilateral discussions begun with the Andean countries
and Panama, and the Free Trade Area of the Americas (FTAA), scheduled to be
concluded in January 2005. Congress defined trade negotiation objectives in TPA and
trade agreements are enacted only after Congress passes implementing legislation. This
report supports the congressional role in trade policy by providing an analytical
overview of U.S.-Latin American trade data and trends, 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 1992 and 2003, total U.S. merchandise trade (exports plus imports)
with Latin America grew by 154% compared to 88% for Asia, 89% for the European
Union, 78% for Africa, and 102% 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 1992 to 2003, the share of U.S. trade with Latin America, excluding
Mexico, actually declined slightly relative to the rest of the world, whereas Mexico’s
share expanded from 7.7% to 11.9%, reflecting enormous growth.
In 2003, U.S. trade worldwide rebounded from a decline begun in 2001, largely
reflecting recovery from the global economic downturn. U.S. exports to the world grew
by 4.4% in 2003, following a decrease of 4.9% in 2002. Among the larger trade partners,
U.S. exports grew by 28.4% to China, 6.8% to South Korea, 6.8% to the European Union,
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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5.3% to Canada, and 1.2% to Japan. After falling 6.5% in 2002, U.S. exports to Latin
America grew by a tepid 0.2% in 2003 (see Appendix 1). U.S. exports to Latin America,
excluding Mexico, increased by 0.6%, while export growth to Mexico, the second largest
U.S. export market, was stagnant.
Figure 1. U.S. Direction of Total Trade, 1992 and 2003
U.S. export growth to select Latin American markets in 2003 was a mixed story.
Export growth fell by 9.7% to Brazil, 37.8% to Venezuela, and 2.3% to the Dominican
Republic. It rose, however, by 5.6% to Colombia, 3.8% to Chile, 50.0% to Argentina,
9.7% to Costa Rica, 7.7% to Honduras, and 15.0% to Guatemala. These disparate trends
point to equally disparate national economic and political events in Latin America, such
as the effects of slow economic growth in Brazil, a major recession in the Dominican
Republic, a political crisis in Venezuela, and the economic rebound in Argentina. Central
America, as a region, escaped South America’s recent round of economic volatility, in
part because of its close trade relationship with the United States.
On the import side, strong growth of the U.S. economy resulted in increased demand
for foreign goods, which rose by 8.2% worldwide in 2003, after declining by 4.9% in
2002. Imports expanded by 8.4% from the EU, 7.2% from Canada, 21.7% from China,
and 3.9% from South Korea. Imports from Japan declined by 2.8%. Imports from Latin
America rose by 6.2% on average and by 2.5% from Mexico, 13.3% from Brazil, 7.1%
from the Dominican Republic, 14.3% from Colombia, 13.2% from Venezuela, 9.7% from
Costa Rica, and 7.1% from Guatemala. Import growth from Argentina and Honduras was
flat and imports from Chile fell by 2.6%.

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Mexico made up 11.9% of U.S. trade in 2003 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
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 6.6% 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 7.9% 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 15.3% of gross domestic product (GDP) in 1990 to 17.4% in 2003. 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, led to decisions to encourage exports, but also to impose
higher export taxes, which had an offsetting effect.
Tariff rates have fallen throughout Latin America and so only partially explain
differences in economic integration among countries. Two other simple measures of trade
openness appear in table 1 and point 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. For each in 2002, total merchandise
trade (exports plus imports) was more than 50% of GDP. By contrast, total merchandise
trade accounted for a much smaller 29% of GDP in Brazil and 40% in Argentina, two
countries generally associated with lagged or incomplete trade reforms. Argentina’s
percentage actually spiked in 2002 from 17% in 2001 because of its financial crisis.
The trade-to-GDP ratio, however, may reflect other than trade policy factors. The
ratio can be smaller for those countries with large domestic markets that are less trade
dependent. This may be the case 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 the Dominican Republic, which as part of its pursuit of trade
liberalization, has also developed a manufacturing export base tightly linked to the United
States. 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 2003, but to only a fraction of that
for Mexico and Costa Rica, for example. 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

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part reflecting trade policy and trends defined by the regional customs union, Mercosur
(Mercado Común del 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 as the effects of
the peso devaluation took hold. Differences in income can also 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
Trade in
Per Capita
Per Capita
Per Capita
Goods (%
Goods (%
Imports
Imports
GNI 2001
GDP) 1990*
GDP) 2002*
from U.S.
from U.S.
(PPP)#
1990**
2003**
Mexico
40.7%
55.4%
$328
$1,350
$8,240
Brazil
15.2%
28.9%
$34
$100
$7,070
Dom. Rep.
69.2%
85.7%
$254
$495
$5,590
Colombia
35.4%
40.7%
$62
$145
$6,790
Argentina
15.1%
40.2%
$36
$85
$10,980
Chile
66.0%
66.0%
$126
$230
$8,840
Costa Rica
70.6%
90.0%
$352
$800
$9,260
Data Sources: Calculations by CRS from the following data sources. *Sum of merchandise exports and
imports divided by GDP, per national account data as reported in IMF, International Financial Statistics.
**IMF, International Financial Statistics 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 $23.3 billion in 2003, compared to Brazil’s $29.1
billion (appendix 1). These figures, however, represent 36% of Central America’s GDP,
compared to 6% 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
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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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
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 and CAFTA, 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 other bilateral negotiations 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 are also differences between some Latin American countries and the United
States over how to handle social issues in trade agreements, such as labor and
environmental provisions. Although mutually acceptable solutions were negotiated in the
U.S.-Chile FTA, the debate over CAFTA seems to be more of a problem. 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. 2004 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, 1992-2003 ($ billions)
% Change % Change
Country
1992
1994
1996
1998
2000
2002
2003
02-03
92-03
U.S. Exports
Brazil
5.8 8.1
12.7 15.2
15.4
12.4
11.2
-9.7%
93.1%
Dom.
Rep.
2.1 2.8 3.2 4.0
4.4
4.3
4.2
-2.3%
100.0%
Colombia
3.3 4.1 4.7 4.8
3.7
3.6
3.8
5.6%
15.2%
Costa
Rica
1.4 1.9 1.8 2.3
2.4
3.1
3.4
9.7%
142.9%
Honduras
0.8 1.0 1.6 2.3
2.6
2.6
2.8
7.7%
250.0%
Venezuela
5.4 4.0 4.8 6.5
5.6
4.5
2.8
-37.8%
-48.1%
Chile
2.5 2.8 4.1 4.0
3.5
2.6
2.7
3.8%
8.0%
Argentina
3.2 4.5 4.5 5.9
4.7
1.6
2.4
50.0%
-25.0%
Guatemala
1.2 1.4 1.6 1.9
1.9
2.0
2.3
15.0%
91.7%
Panama
1.1 1.3 1.4 1.8
1.6
1.4
1.9
35.7%
72.7%
El
Salvador
0.7 0.9 1.1 1.5
1.8
1.7
1.8
5.9%
157.1%
Peru
1.0 1.4 1.8 2.1
1.7
1.6
1.7
6.3%
70.0%
Ecuador
1.0 1.2 1.3 1.7
1.0
1.6
1.5
-6.3%
50.0%
Nicaragua
0.2 0.2 0.3 0.3
0.4
0.4
0.5
25.0%
150.0%
Other
5.4 6.4 7.6 9.1
8.5
8.3
9.0
8.4%
66.7%
Total
LAC*
35.1 42.0 52.5 63.4
59.3
51.7

52.0
0.6%
48.1%
Mexico
40.6 50.8 56.8 79.0
111.7
97.5
97.5
0.0%
140.1%
Total LA
75.7
92.8
109.3
142.4
171.0
149.2
149.5
0.2%
97.5%
World
448.2 512.6 625.1 680.5
780.4
693.3
723.7
4.4%
61.5%
U.S. Imports
Brazil
7.6 8.7 8.8 10.1
13.9
15.8
17.9
13.3%
135.5%
Dom.
Rep.
2.4 3.1 3.6 4.4
4.4
4.2
4.5
7.1%
87.5%
Colombia
2.8 3.2 4.3 4.7
7.0
5.6
6.4
14.3%
128.6%
Costa
Rica
1.4 1.7 2.0 2.8
3.6
3.1
3.4
9.7%
142.9%
Honduras
0.8 1.1 1.8 2.6
3.1
3.3
3.3
0.0%
312.5%
Venezuela
8.2 8.4
12.9 9.3
18.7
15.1
17.1
13.2%
108.5%
Chile
1.4 1.8 2.3 2.5
3.2
3.8
3.7
-2.6%
164.3%
Argentina
1.3 1.7 2.3 2.3
3.1
3.2
3.2
0.0%
146.2%
Guatemala
1.1 1.3 1.7 2.1
2.6
2.8
3.0
7.1%
172.7%
Panama
0.3 0.3 0.4 0.3
0.3
0.3
0.3
0.0%
0.0%
El
Salvador
0.4 0.6 1.1 1.4
1.9
2.0
2.0
0.0%
400.0%
Peru
0.7 0.8 1.3 2.0
2.0
1.9
2.4
26.3%
242.9%
Ecuador
1.4 1.7 1.9 1.8
2.2
2.2
2.7
22.7%
92.9%
Nicaragua
0.1 0.2 0.4 0.5
0.6
0.7
0.8
14.3%
700.0%
Other
3.7 3.9 4.0 3.6
6.7
5.6
8.1
44.6%
118.9%
Total
LAC*
33.6 38.5 48.8 50.4
73.3
69.6
78.8
13.2%
134.5%
Mexico
35.2 49.5 74.3 94.7
135.9
134.7
138.1
2.5%
292.3%
Total LA
68.8
88.0
123.1
145.1
209.2
204.3
216.9
6.2%
215.3%
World
532.7 663.3 795.3 913.9
1,216.9
1,163.6
1,259.4
8.2%
136.4%
Source: Table created by CRS from U.S. Department of Commerce data.
* LAC = Latin America and the Caribbean, except Mexico.

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