Mercosur’s Push for Trade Agreements Beyond South America

Latin America and the Caribbean Rethink Trade Diversification Amid Global Supply-Chain Shifts

Global supply-chain disruptions, rising geopolitical tensions, and shifting consumer demand are pushing Latin America and the Caribbean to rethink their trade strategies. From expanding export markets to tapping into global value chains, countries across the region are pursuing new approaches to reduce dependency on single markets and strengthen economic resilience. While opportunities abound in nearshoring, agriculture, and tourism, challenges such as overreliance on China, uneven integration, and structural constraints remain at the forefront of policy debates.

• Diversification of Export Markets in Response to Supply-Chain Disruptions-The COVID-19 pandemic and subsequent geopolitical crises exposed the risks of overdependence on a limited number of export markets. Countries like Brazil and Chile are actively pursuing agreements with Asia-Pacific nations, while Caribbean states are seeking new links with Europe and Africa. The goal is to reduce vulnerability to shocks while expanding consumer bases.
• Nearshoring to Mexico and Central America: Opportunities & Risks-The trend of relocating production closer to U.S. markets has boosted interest in Mexico and Central America as nearshoring hubs. This shift offers prospects for job creation, investment, and industrial growth, but risks include infrastructure gaps, security concerns, and policy instability. Analysts warn that without reforms, the region could miss the long-term benefits of nearshoring.
• Caribbean Integration into Global Value Chains: Tourism vs. Manufacturing-Caribbean economies remain heavily reliant on tourism, but policymakers are exploring ways to integrate manufacturing and services into global value chains. Opportunities lie in digital services, agro-processing, and niche manufacturing, yet tourism’s dominance and small domestic markets continue to limit diversification.

China has emerged as a leading trade partner for Latin America, particularly for commodities like soy, copper, and oil. While this relationship provides market stability, it also raises concerns over dependency and vulnerability to Chinese demand shifts. Diversification efforts include pursuing trade with India, the EU, and regional partners to avoid overconcentration.