- Factors explaining the changes in income inequality from
1990 to 2007
2.A. External shocks
(i) Terms of trade gains. During the 1990s, the international terms
of trade of the region (2000=100) followed the business cycle, with
declines during 1990-93, and the 1998-99 and 2000-02 crises. Since
the beginning of the new century, the rapid growth of Asian
countries exerted a favorable impact on the exports and economic
performance of Latin America. In 2006, China a l o n e accounted
for a third of world coal, iron ore and aluminum consumption, a
quarter of world copper consumption, and a large share of the
world imports of agricultural commodities. The pull effect of Asian
economies resulted in a rapid growth of Latin America’s exports.
As a result, the region’s export/GDP ratio rose from 13% to 24%
on average between the 1990s and 2007. The rapid increase in the
value of exports was due to significant improvements in both
export prices and volumes, with the highest increases recorded in
energy and agricultural products such as vegetable oils, flour and
seeds (CEPAL 2007). As a result, in 2007, the regional terms of
trade index exceeded by 33% its average level of the 1990s,
generating a positive yearly shock of 3.7% of the regional GDP
between 2003 and 2007 (Ocampo 2008). In the five main oil-metal
exporting Andean countries (Bolivia, Chile, Ecuador, Peru and
Venezuela) the terms of trade gains from 2003 to 2007 were
massive and generated a positive shock of between seven percent
and 15% of GDP (Ocampo 2009).
However, these improvements in the terms of trade hide varying
situations within the region. For instance, between the 1990s and
2007, the terms of trade index rose by 52% f o r South America
(thanks to the huge gains recorded by the Andean countries), 21%
for Mexico, and 13% for Mercosur, but fell by 13% in Central
America, a region which depends on imported energy (CEPAL
2007). Of the countries adversely affected by the recent terms of
trade changes, a subset (Paraguay, Uruguay, Panama and
Nicaragua) remained specialized in the export of traditional
agricultural commodities. A second group (Costa Rica, El Salvador,
Guatemala, and Honduras) switched to the export of textiles and