Order Code 98-840
Updated May 18, 2007
U.S.-Latin America 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) legislation in
August 2002 (P.L. 107-210), the U.S.-Chile free trade agreement (FTA) and the
Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-
DR) have been implemented. The United States has also concluded trade negotiations
with Peru, Colombia, and likely very soon, Panama. Talks on the region-wide Free
Trade Area of the Americas (FTAA), by contrast, have stalled. The 110th Congress may
consider implementing legislation for one or all of the bilateral FTAs under the current
Trade Promotion Authority (TPA). This report supports the congressional role in trade
policy making by providing an analytical overview of U.S.-Latin American trade data
and trends.1 It will be updated.
Developments in U.S.-Latin American Trade
Trade is one of the driving issues in contemporary U.S.-Latin America relations.
Although not the largest, Latin America is the fastest growing U.S. regional trade partner,
with the exception of Africa, which has had strong export growth based largely on the
recent rise of petroleum prices. Between 1996 and 2006, total U.S. merchandise trade
(exports plus imports) with Latin America grew by 118% compared to 96% for Asia
(driven largely by China), 95% for the European Union, 239% for Africa, and 104% for
the world. There are two import caveats. First, most of the growth in Latin American
trade was due to Mexico, the largest U.S. regional trade partner in dollar terms. Second,
U.S. imports grew more than twice as fast as exports. As seen in Figure 1, from 1996 to
2006, Latin America trade, excluding Mexico, grew from 7.2% to 7.7% of U.S. world
trade, whereas Mexico’s share expanded from 9.2% to 11.5%, reflecting these growth
trends (individual country data appears in the Appendix.)
In 2006, U.S. trade worldwide continued the expansion begun after the 2001 global
economic downturn. U.S. exports to the world grew by 14.5% in 2006, following a
10.5% increase in 2005. Among the larger trade partners, U.S. exports grew by 31.7%
1 CRS also has individual reports on all these agreements and TPA.

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to China, 16.9% to South Korea, 14.5% to the European Union, 8.7% to Canada, and
7.5% to Japan.
Figure 1. U.S. Direction of Total Trade, 1996 and 2006
U.S. exports to Latin America grew by 15.8% in 2006, with export growth to
Mexico, the second largest U.S. export market, expanding by 11.5%. U.S. export growth
to some of the other larger Latin American markets in 2006 was all positive. Exports
expanded briskly to Venezuela (40.6%), Chile (30.8%), Brazil (24.7%), Colombia
(21.8%), Argentina (17.1%), and Costa Rica (13.9%). These trends reflect strong national
economic growth experienced in much of Latin America. Exports to major Latin
American trading blocs varied, expanding by 31.7% to the Andean Community (AC),
22.1% to the Southern Common Market (Mercosur), 17.8% to the Caribbean Community
(Caricom) countries, but only 16.0% to the CAFTA-DR countries.
On the import side, continued strong growth of the U.S. economy resulted in
increased demand for foreign goods, despite a falling U.S. dollar. U.S. imports from the
world rose by 10.9% in 2006. Among the larger U.S. trading partners, imports expanded
by 18.2% from China, 7.3% from Japan, 7.0% from the EU, 4.7% from South Korea, and
4.5% from Canada. Imports from Latin America rose by 13.3% on average and by 41.8%
from Chile, 16.6% from Mexico, 15.7% from Peru, 9.4% from Venezuela, 8.2% from
Brazil, and 4.5% from Colombia. Imports from Argentina actually declined by 13.0%.
For most of the high growth countries, the dollar value of U.S. imports rose because of
precipitous price increases in commodities, particularly petroleum and metals, earnings
growth that likely also contributed to the region’s increased demand for U.S. exports.
Mexico made up 11.5% of U.S. trade in 2006 and, as seen in the Appendix, it is the
largest Latin American trading partner, accounting for 60% 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 7.7% of U.S. trade, leaving room for significant
growth. Brazil, for example, has the second largest economy in Latin America, is the
second largest Latin American trading partner of the United States, but accounts for only
8.2% of U.S. trade with Latin America, or one-seventh that of Mexico.

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The region’s increasing importance as a U.S. trade partner is an important trend in
globalization. In the United States, total merchandise trade (exports plus imports) has
become an increasingly important component of the economy, growing from 7.9% of
gross domestic product (GDP) in 1970 to 21.4% in 2006. Since the 1980s, many Latin
American countries have adopted trade liberalization as part of broader economic reform
programs. Average Latin American import tariffs have declined from 45% in 1985 to
9.3% by 2002, although the rates varied among countries from a high of 16.4% in Mexico
to a low of 6.0% in Costa Rica.2 Trade reform 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 has been delayed or even reversed
in some countries when faced with economic instability or changing political philosophy.
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 2005, total merchandise
trade was more than 50% of GDP. By contrast, total merchandise trade accounted for a
much smaller 23% of GDP in Brazil and 38% in Argentina, two countries generally
associated with lagged or incomplete trade reforms.
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 (% of
Goods (% of
Imports from
Imports from
GDP 2005#
GDP) 1990*
GDP) 2005*
U.S. 1990**
U.S. 2005**
Mexico
40.7%
56.1%
$328
$1,588
$5,993
Chile
66.0%
61.6%
$126
$411
$5,729
Costa Rica
70.6%
81.6%
$352
$791
$4,505
Dom. Rep.
69.2%
45.5%
$254
$541
$3,089
Colombia
35.4%
37.7%
$62
$195
$2,157
Brazil
15.2%
23.3%
$34
$131
$3,574
Argentina
15.1%
38.0%
$36
$119
$8,131
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. #GDP - gross domestic
product in constant 2000 year prices per U.N. Economic Commission on Latin America and the Caribbean.
Statistical Yearbook for Latin America and the Caribbean 2006.
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
2 Data provided by Inter-American Development Bank.

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liberalization, has also developed a manufacturing export base tightly linked to the United
States. Still, the lower trade-to-GDP ratio for Brazil and Argentina is telling.
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 2005, but to only a fraction of
that for Mexico, Costa Rica, Chile, and the Dominican Republic. 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,
including strong intra-industry, production-sharing trade. 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,
and a tradition of industrial policy and broader diversification of trading partners.3
Differences in income can also be an important factor explaining variations in
consumption of U.S. imports, but per capita gross domestic product (GDP) data shown
in Table 1 suggest that they do not stand out in this case.
The trade data suggest that there may be room for growth in trade between South
America and 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 immediately
huge 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 attractive opportunities for Latin American countries, as well.
U.S.-Latin America Trade Relations
The United States and Latin America have pursued trade liberalization through
multilateral, regional, and bilateral negotiations, with mixed results. In part this reflects
their divergent priorities. For many Latin American countries, reducing barriers to
agricultural trade is top of the list for a successful agreement. This goal includes reducing
market access barriers such as tariffs and tariff rate quotas (TRQs), domestic subsidies,
and the use of antidumping provisions. Although there are many other issues, agriculture
has played a big part in slowing progress in the World Trade Organization (WTO) Doha
Development Round and the Free Trade Area of the Americas (FTAA).4 In contrast, the
United States has made clear its unwillingness to address most agricultural and
antidumping issues in a regional agreement like the FTAA to preserve its bargaining
leverage in the WTO against other subsidizing countries like the European Union and
3 For more, see CRS Report RL33258, Brazilian Trade Strategy and the United States and CRS
Report RL33620, Mercosur: Evolution and Implications for U.S. Trade Policy, by J. F.
Hornbeck.
4 In fact, some see the stalemate over the FTAA as due in part to the United States and Brazil
being unable to address protectionist policies that most affect the other country’s main exports.
See Abreu, Marcelo de Paiva. The FTAA and the Political Economy of Protection in Brazil and
the US. Inter-American Development Bank. Washington, DC, March 2006. pp. 1-4, 61-62.

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Japan. Latin American counties have their own sensitive issues and a particular concern
for easing its subsistence agricultural sectors slowly toward trade liberalization.
In addition to market access, the United States focuses its trade negotiating goals on
areas where it is most competitive, such as services (financial, tourism, technology,
professional, among others); intellectual property rights (IPR); government procurement;
and investment. Not surprisingly, these are areas where many Latin American countries
are more reluctant to negotiate. Hence, there is a near reversal of priorities that has
slowed the progress of comprehensive agreements at the multilateral and regional levels,
reflecting inherent differences between developed and developing countries.
The result in the Western Hemisphere has been the proliferation of bilateral and
plurilateral agreements. The United States has advanced its agenda with NAFTA,
CAFTA-DR, the U.S.-Chile FTA, and pending FTAs with Panama, Peru, and Colombia,
in effect substituting them for unilateral trade preferences previously extended under the
Andean Trade Preference Act (ATPA), the Caribbean Basin Initiative (CBI), and the
Generalized System of Preferences (GSP). Brazil, as the major regional economy not in
an agreement with the United States, has moved ahead separately by adding associate
members to Mercosur, having Venezuela accede as a full member, and by leading in the
formation of the South American Community of Nations. Although these are neither deep
nor comprehensive agreements, they do signal a political will to consolidate regional
bargaining interests in juxtaposition to the FTAA option backed by the United States.
Two clear challenges emerge from this picture. First, Brazil and the United States
appear to be having problems moving off their respective positions, which has stalled
progress on the FTAA and raises the question of whether a two-pole, hub-and-spoke
trading system may dominate if a larger regional agreement is postponed indefinitely. The
addition of Venezuela and possibly other countries with less than sympathetic attitudes
toward the United States as full Mercosur members could solidify this standoff. Recent
nationalizations of key industries and other efforts to increase the role of the state in
managing the economies of Venezuela, Bolivia, and Ecuador also do not bode well for
broadening support for market-based trade solutions. Second, multiple FTAs, by
definition, promote a cumbersome trading system with each FTA having its own rules of
origin (to deter transshipment of goods) and related customs administration and
enforcement requirements that can complicate investment and trading decisions.
Resolving this situation will not be easy and may require progress on multiple fronts.
For example, it seems that without advancement in agricultural issues at the WTO,
moving ahead with a comprehensive FTAA is unlikely. A less comprehensive FTAA
may not be considered worth expending the political capital needed to approve it and
offers a far less compelling alternative to a multilateral agreement on economic grounds,
suggesting that the FTAA may not emerge in the near future, despite the logical solution
that a hemispheric-wide agreement presents to integrating a disparate web of cumbersome
subregional FTAs. Together, these circumstances suggest that a new chapter of trade
negotiations between developed and developing countries awaits, which may take
patience and new creative solutions to navigate. Despite these difficulties, the debate has
not been abandoned because trade issues are unavoidably part of larger concerns with
economic reform, development, and globalization, all themes at the forefront of U.S. and
Latin America foreign economic policy agendas.

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Appendix: U.S. Merchandise Trade with Selected
Latin American Countries and Groups, 1996-2006
% Change % Change
Country
1996
1998
2000
2002
2004
2005
2006
2005-2006 1996-2006
U.S. Exports ($ billions)
Brazil
12.7 15.2
15.4 12.4 13.9 15.4 19.2 24.7%
51.2%
Venezuela
4.8 6.5
5.6 4.5 4.8 6.4 9.0 40.6%
87.5%
Chile
4.1 4.0
3.5 2.6 3.6 5.2 6.8 30.8%
65.9%
Colombia
4.7 4.8
3.7 3.6 4.5 5.5 6.7 21.8%
42.6%
Dom.
Rep.
3.2 4.0
4.4 4.3 4.4 4.7 5.4 14.9%
68.8%
Argentina
4.5 5.9
4.7 1.6 3.4 4.1 4.8 17.1%
6.7%
Costa
Rica
1.8 2.3
2.4 3.1
3.3 3.6 4.1 13.9%
127.8%
Honduras
1.6 2.3
2.6 2.6 3.1 3.3 3.7 12.1%
131.3%
Guatemala
1.6 1.9
1.9 2.0 2.6 2.8 3.5 25.0%
118.8%
Peru
1.8 2.1
1.7 1.6 2.1 2.3 2.9 26.1%
61.1%
Other
11.7 14.4
13.4 13.4 21.4 19.1 22.9 19.9%
95.7%
Total LAC*
52.5
63.4
59.3
51.7
61.5
72.4
89.0
22.9%
69.5%
Mexico
56.8 79.0
111.7 97.5
110.8 120.4 134.2 11.5%
136.3%
Total Lat. Amer.
109.3
142.4
171.0 149.2 172.3 192.8 223.2
15.8%
104.2%
CAFTA-DR
9.6 12.4
13.6 14.1 15.8 16.9 19.6 16.0%
104.2%
Caricom
4.4 5.0
5.4 5.0 5.8 7.3 8.6 17.8%
95.5%
Mercosur
18.6 22.4 21.0 14.6 18.2 20.8 25.4 22.1%
36.6%
Andean
Comm.
12.8 15.5 12.2 11.4 13.2 16.4 21.6 31.7%
68.8%
World
625.1 680.5
780.4 693.1 818.8 906.0
1,037.1 14.5%
65.9%
U.S. Imports ($ billions)
Brazil
8.8 10.1 13.9 15.8 21.2 24.4 26.4
8.2%
200.0%
Venezuela
12.9 9.3 18.7 15.1 24.9 34.0 37.2
9.4%
188.4%
Chile
2.3 2.5 3.2 3.8 4.7 6.7 9.5 41.8%
313.0%
Colombia
4.3 4.7 7.0 5.6 7.3 8.9 9.3 4.5%
116.3%
Dom.
Rep.
3.6 4.4 4.4 4.2 4.5 4.6 4.5 -2.2%
25.0%
Argentina
2.3 2.3 3.1 3.2 3.8 4.6 4.0 -13.0%
73.9%
Costa
Rica
2.0 2.8 3.6 3.1 3.3 3.4 3.8 11.8%
90.0%
Honduras
1.8 2.6 3.1 3.3 3.7 3.8 3.7 -2.6%
105.6%
Guatemala
1.7 2.1 2.6 2.8 3.2 3.1 3.1 0.0%
82.4%
Peru
1.3 2.0 2.0 1.9 3.7 5.1 5.9 15.7%
353.8%
Other
7.8 7.6 11.7 10.8 18.4 24.3 26.3
8.2%
237.2%
Total
LAC*
48.8 50.4 73.3 69.6 98.7 122.9 133.7
8.8%
174.0%
Mexico
74.3 94.7 135.9 134.7 155.9 170.1 198.3 16.6%
166.9%
Total Lat. Amer.
123.1
145.1
209.2 204.3 254.6 293.0 332.0
13.3%
169.7%
CAFTA-DR
10.4 13.7 16.1 16.0 17.7 18.1 18.6
2.8%
78.8%
Caricom
2.9 2.6 4.0 4.0 7.7 9.9 10.4 5.1%
258.6%
Mercosur
11.4 12.6 17.3 19.2 25.5 29.8 30.9
3.7%
171.1%
Andean
Comm.
21.1 17.8 30.0 24.9 40.4 54.0 59.8 10.7%
183.4%
World
795.3 913.9 1,216.9 1,161.4 1,469.7 1,673.5 1,855.1
10.9%
133.3%
Source: Table created by CRS from U.S. Department of Commerce data.
* LAC = Latin America and the Caribbean, except Mexico.

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