Up until recently, Korea has maintained a trade surplus vis-a-vis its trade with Latin America. The area accounted for a mere 7% of Korea's total exports but the surplus with Latin America stood at USD 18 billion, or about 41% of Korea's total trade surplus. However, exports to Latin America has been declining since 2011 by 4.9% annually, which is 5 times higher than Korea's average rate of export drop during the same period. Meanwhile, export to the region from other major exporters, such as the Unites States, China and Japan, have increased and Latin America's import from the world also grew by 4%. This study analyzes the factors causing drops in Korea's exports and suggests some measures to regain Korea's export competitiveness in Latin America.
Chapter 2 depicts Latin America's import structure and Korea's export to the region. For the last 10 years, the annual import growth in Latin America was 10.7%, which far outstripped the world average of 7.9%, with developing countries emerging as major trading partners. On the other hand, Korea's export to Latin America has slowed since 2011. Especially, exports to Venezuela, Brazil and Colombia have shown a clear decreasing trend. And sales of major exporting goods such as large ships, vehicles, petroleum and related products, steel and display devices declined rapidly. Korea's export to Latin America also showed overconcentration in certain products and countries. Mexico and Brazil accounted for about 54% of total exports and the top 10 exporting goods capture about 72% of exports, which makes Korea's exports vulnerable to the business cycle of trading partners. The proportion of capital and intermediate goods is higher than consumer goods. There are several obstacles that Korean firms face in export markets. According to the survey with Korean exporters, they are struggling with fierce competition, particularly with Chinese firms. They pointed out other export barriers such as complicated customs procedures, additional taxes and arbitrary tariff rates.
Chapter 3 examines the export competitiveness of Korea. The share of Korean products in Latin America's import has been declining since 2010 and the drop is noticeable regarding Chile. In general, Korean products have been losing their relative comparative advantage, with the largest drop coming in vehicle exports. The major competing countries in vehicle exports include Japan, China and the United States, and competition with China has intensified since
2011. For the last 10 years, Korea's export growth in Latin America was attributed to improved purchasing power in the region, and not to full exploitation of the growing import demand in certain products nor improved competitiveness in exporting goods.
Chapter 4 analyzes the causes of Korea's sluggish exports to Latin America. According to the vector autoregressive model, VAR, the recent drop in exports to the region resulted from diminishing import demand of the region. The real effective exchange rate did not have a meaningful impact on decreasing exports, which is consistent with the survey results. Korean exporters indicated that non-price factors, such as quality and design, are more important in maintaining their competitiveness in this market. They pointed out that  competition with other countries hindered their export growth and the VAR result also showed that the fall in Korea's export can be attributed to competition with the United States.
Chapter 5 suggests measures to restore Korea's export competitiveness in Latin America. First, Korea needs to diversify its export markets and exporting goods. There is potential to expand exports to other countries including Argentina, Bolivia, the Dominican Republic, El Salvador, Costa Rica, Paraguay and Venezuela. As the middle class grows and many governments expand investment for the development of industry and infrastructure, Korea can find export opportunities in education, health care, transportation equipment, machinery, industrial equipment and construction equipment. Cooperation in distribution with Latin American multinationals can also facilitate export activity. Second, measures to alleviate trade imbalance between Korea and Latin America should be adopted to avoid future trade conflicts. Third, free trade agreements with more countries and upgrading the current agreements and can contribute to additional export growth. Fourth, Korea can facilitate trade with the region by lowering non-tariff barriers. The successful measures that are implemented in several Latin America nations can be extended to other countries, such as the Korean e-clearance system and authorized economic operator.