Latin America and the Caribbean: trade relations in the face of global geopolitical fragmentation risks

Abstract

Rationale A geopolitical fragmentation of world trade, i.e. the emergence of two blocs that restrict trade with countries in the other bloc, has recently become a more likely prospect. How does this geopolitical risk affect the trade and economic outlook for Latin America and the Caribbean? Takeaways •Countries in Latin America and the Caribbean differ in terms of both their trade openness and the geographical structure of their trade. •They are therefore heterogeneously exposed to the risk of geopolitically fragmented trade. •We quantify each country’s exposure and analyse how Latin America can harness greater trade integration with the European Union to reduce the costs of a potential fragmentation of world trade.