Trade and export with Latin America: Exploring the potentials for Bangladesh

Bangladesh's trade with Latin America, although still relatively limited, has been displaying indications of growth. Photo: TBS

Bangladesh has been broadening its trade relationships beyond its traditional markets. One region of growing interest is Latin America, a continent abundant in resources and economic opportunities. This article examines the potential for trade and exports between Bangladesh and Latin America, focussing on the chances available, the obstacles, and the strategic factors to consider.
To gain a comprehensive understanding of the export landscape, it is essential to first analyse the current situation. Historically, Bangladesh has concentrated its trade connections on Western markets, particularly the United States and the European Union, while also strengthening ties with neighbouring countries like India and China. 
However, trade with Latin America, although still relatively limited, has been displaying indications of growth. This region encompasses a wide array of economies, from the thriving markets of Brazil and Mexico to smaller yet robust economies like Chile and Peru, presenting a vast and largely unexplored market for Bangladesh.
In recent years, bilateral trade between Bangladesh and Latin American nations has been steadily increasing. Notably, Bangladesh's primary exports to Latin America consist of ready-made garments (RMG), pharmaceuticals, jute products, and leather goods. Conversely, Bangladesh imports agricultural products, minerals, and chemicals from this region.
There is significant potential for Bangladesh to expand its trade activities in Latin America, particularly in key sectors. The RMG industry holds a crucial position in Bangladesh's economy, and Latin America represents a new and expanding market for these products. The continent's diverse climate and demographics create a continuous demand for various types of clothing, presenting numerous opportunities for Bangladeshi exporters.
Furthermore, Bangladesh's pharmaceutical sector has been experiencing rapid growth, with the country attaining self-sufficiency and commencing exports of medications on a global scale. Latin America's healthcare market is substantial, with a growing need for affordable generic medicines. Establishing strategic partnerships and complying with local regulations could significantly enhance Bangladesh's exports in this sector.
Moreover, as Latin American countries progress technologically, there is an increasing requirement for technology and IT services. With its thriving IT industry, Bangladesh could explore outsourcing opportunities by providing software development, data services, and digital solutions to businesses in Latin America. 
Additionally, considering Bangladesh's historical expertise in jute and its emerging sectors in fisheries and agribusiness, there is potential to export these products to Latin American markets. The region's interest in sustainable and environmentally friendly products aligns well with Bangladesh's jute industry, renowned for producing biodegradable goods.
Trade and export prospects with Latin America are promising, but there are several challenges that require attention. The distance between Bangladesh and Latin America poses a major barrier, leading to higher shipping costs and longer delivery times. Limited direct shipping routes and the need for transhipment through intermediate ports add to the complexity and cost of logistics.
 Besides, tariff barriers, such as import duties, and non-tariff barriers, including customs procedures, product standards, and sanitary and phytosanitary measures, present significant difficulties. Additionally, Latin American countries often impose tariffs on imported goods to protect their local industries, which can particularly burden Bangladeshi exporters who typically operate on thin margins. 
Countries like Brazil and Argentina have strict import regulations and tariffs, which can complicate market entry. In addition, complex regulatory requirements and certification processes can delay market entry and increase costs. Furthermore, while Bangladesh has preferential trade agreements with several countries and regions, it lacks comprehensive trade agreements with most Latin American nations. 
This absence of agreements means that Bangladeshi exports are subject to higher tariffs and stricter regulatory requirements compared to goods from countries with established free trade agreements with Latin American countries, placing Bangladeshi exporters at a competitive disadvantage. 
Another important barrier is the limited knowledge among Bangladeshi businesses about Latin American markets. Understanding local consumer preferences, market trends, and business practices is crucial for successful market entry and expansion. The lack of established business networks and relationships in Latin America further complicates efforts to penetrate these markets. Cultural and language differences can also pose challenges in communication and negotiation. 
Moreover, the financial infrastructure to support international trade between Bangladesh and Latin America is underdeveloped. Issues such as limited access to trade finance, currency exchange risks, and differing banking regulations can deter businesses from engaging in cross-border trade. Additionally, concerns about payment security and contract enforcement can make exporters hesitant to enter new markets. 
Importantly, certain Latin American countries experience political and economic instability, leading to trade risks. Fluctuating economic policies, changes in trade regulations, and political unrest can disrupt trade flows and create uncertainties for businesses. This instability can affect both the demand for Bangladeshi goods and the overall business environment in these countries.
Studying global examples is beneficial when considering strategies. There are valuable lessons for Bangladesh from the global stage. South Korea has expanded its presence in Latin America, particularly in the technology and consumer goods sectors. Brands such as Samsung, LG, Hyundai, and Kia have gained prominence in the region. South Korea's exports of electronics and vehicles to Latin America have steadily increased, and it has signed FTAs with countries such as Chile, Colombia, and Peru to reduce tariffs and facilitate trade and investment. Apart from South Korea, India's trade relations with Latin America are on the rise, with a focus on pharmaceutical and IT services. 
India's export of generic drugs and the establishment of IT service centres demonstrate its growing role in the region. India is also exploring energy cooperation, particularly in oil and natural gas, with countries like Venezuela and Brazil to meet its domestic demand for energy resources.
To exploit the potential of Latin American markets, Bangladesh needs a multifaceted strategy. This includes strengthening diplomatic ties through trade agreements, participating in regional trade blocs, and addressing regulatory challenges. Improving port infrastructure, customs procedures, and logistics capabilities can reduce trade costs and delivery times, making Bangladeshi products more competitive. 
Diversifying product ranges, building a strong brand presence, participating in trade fairs, and leveraging digital platforms are essential for raising awareness and demand for Bangladeshi goods. Exploring efficient shipping routes, establishing logistics partnerships, developing trade finance options, and mitigating payment risks can encourage more businesses to engage in trade with Latin America. Finally, using digital platforms for market entry, marketing, and sales can overcome geographical and logistical barriers.
Enhancing trade and export relations between Bangladesh and Latin America holds promise but requires strategic planning and concerted efforts. Despite being modest, Bangladesh's trade with Latin America is a promising frontier for economic expansion. 
Addressing logistical challenges, fostering market awareness, and leveraging trade agreements can significantly enhance Bangladesh's export footprint in this diverse and dynamic region. As both economies continue to grow, there is ample room for mutually beneficial trade and economic collaboration.

Dr Mohammad Kamrul Hasan. Sketch: TBS

Dr Mohammad Kamrul Hasan is a Public Administration Researcher and Practitioner. [email protected] 
 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.