Mexico and Bolivia have the greatest trade uncertainty in Latin America

Trade tensions between the United States and China are taking their toll on the rest of the world. This was confirmed yesterday by the International Monetary Fund (IMF), in the middle of a press conference at the IMF headquarters in Washington.

The IMF created the trade uncertainty index based on EIU data, which assesses how many times the word uncertainty appears in economic reports.
The IMF created the trade uncertainty index based on EIU data, which assesses how many times the word uncertainty appears in economic reports.

Gerry Rice, the organization's spokesman, said that while "in the past, we said trade tensions were a threat, what we're saying now is that they're not just a threat, they're beginning to slow the dynamism of the global economy". So markets are not moving at an optimal pace, and so the IMF said the trade war could reduce global GDP by 0.8 percent in 2020 and cause losses in the coming years.

In line with this, the IMF created a Global Trade Uncertainty Index based on reports from the Economist Intelligence Unit (EIU), a unit of The Economist. In the case of Latin America, the countries that recorded the highest levels of uncertainty in the second quarter of 2019 were Mexico and Bolivia, with 0.669 and 0.536, respectively, where the indicator closest to 0 is less uncertainty.

The index was developed by Hites Ahir (IMF), Nicholas Bloom (Stanford University) and Davide Furceri (IMF), who evaluated 143 countries with a population greater than two million and thus studied more than 12,000 EIU reports.

The indices are normalized by the total number of words and rescaled by multiplying by 1,000. In other words, the researchers summed the total number of times the word "uncertainty" appeared in each country's report, divided it into the total number of words in that report and multiplied it by 1,000.

The uncertainty of the countries evaluated starts from zero, which means that there is no uncertainty and begins to rise without reaching a maximum.

Among the countries of the region, Brazil showed the highest level of uncertainty for the third quarter of 2018 with 1,922, where citizens were in full presidential elections and Jair Bolsonaro positioned himself as the new president. The uncertainty was decreasing for the fourth quarter of 2018 to reach 1.010 and for the second quarter of this year, stood at 0.396.

There are particular periods of crisis from uncertainty. The registration of this word is usually a constant when there are abrupt changes in the dynamics of countries, as measured by the EIU.

Currently, Mexico and Bolivia are the two economies with the highest trade uncertainty in the region. In the case of Mexico, which had registered an uncertainty of 1.058 for the fourth quarter of 2018, fell to 0.639 in the first quarter of 2019 and rose again in the second quarter to 0.669, is the consequence of the policies of the government of Andres Manuel Lopez Obrador in recent months.

Colombia is in the middle of the list, with 0.134, although it rose after 0.089 recorded in the first quarter of the year. For Colombia, the index moves similarly to other countries in the region. In the last year, uncertainty has increased in the countries of the region.

By Mexicanist

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