The Trade Zone

In this week’s edition: The opportunities for Canada in Latin America and how Canadian exports of pulses provide valuable lessons when it comes to trade diversification

How to unlock Latin America

By John Stackhouse

Canada’s trade diversification menu seems to consist of East Asia and Western Europe, with a side dish of Middle Eastern and South Asian economies.

What happened to Latin America?

Sure, the prime minister and his senior team are all over Mexico — largely though as part of their North American trade strategy. The much bigger economic hemisphere south of the Rio Grande still beckons.

This week, the Canadian Council for the Americas published a significant policy paper on how Canada can position itself for the decade ahead in South America, Central America and the Caribbean. 

The region’s GDP is roughly $6 trillion, more than double Canada’s and more than double what it was 20 years ago. And yet Canadian exports in 2024 were a modest $18.6 billion, down nearly 11% that year as agri-food shipments got hammered by trade disruptions. 

Looking ahead, there are dozens of markets to consider, but just focussing on the Big Five—Brazil, Mexico, Chile, Colombia, Peru—would access a combined population of nearly 500 million people, half of them middle class.

We’ve spent the past 25 years negotiating and announcing Free Trade Agreements in Latin America. Most did much less than was promised. One illustration: we have $24 billion of investment in Chile, and less than $1 billion in exports. Now we need to be more strategic.

The CCA report suggests:

• develop consortium approaches to infrastructure, to help fill the region’s $150 billion infrastructure gap

• focus on energy (LNG), machinery, pipelines, digital systems, and mining technology

• target machinery and equipment (buses, tunnelling equipment) for megaprojects

• develop critical minerals partnerships, including processing

• get more sophisticated with labour mobility, as we’ll need a lot more students, skilled workers, professionals and entrepreneurs from the region

• step up as a security partner, helping with defence and security tech, including in space

An age of America First doesn’t need to mean Americas Last.

Check out the full report here.

The week that was

• Mark Carney wrapped up his visit to Abu Dhabi by announcing a $70-billion investment from the United Arab Emirates–the money is expected to go towards the development of critical minerals, energy, ports and AI.

• U.S. Ambassador to Canada linked purchase of F-35s to trade talks. Pete Hoekstra said that Canada needs to “harmonize” with the U.S. on some key economic and military issues to get back to the negotiating table. He specifically referenced the federal government’s F-35 fighter jet review.

• The U.S. exported more to Mexico than Canada for the first time in 30 years. New trade data showed that US$226.4 billion of American goods went to Mexico between January and August this year, compared to the US$225.6 billion worth that crossed into Canada. While the ongoing trade tensions between Canada and the U.S. is one factor, the gap has been narrowing for years.

• The Canadian Mutual Recognition Agreement, which eliminates all barriers to trading goods (except food) between provinces and territories, was signed this week and takes effect in December. The government estimates that it could drive $200 billion worth of value.

• The European Union is looking to Australia and considering a similar strategy to the one the U.S. has taken when it comes to critical minerals and rare earths: invest directly in the mining companies.

Look what’s trending…

Services now make up nearly a quarter of Canada’s exports and have delivered 62% of total real exports growth since 2014. Services trade hold a key to diversification—they are less exposed to tariffs, more resilient to economic downturns, and are already more diversified with exports almost 50/50 split between U.S. and non-U.S. markets, compared to goods exports, 75% of which flow south of the border. (Read RBC Economics full report here).

Pulse(s) Check

By Lisa Ashton, Director of Agricultural Policy

Pulses, of which Canada is the number one exporter globally, is a powerful example of how Canada can deliver on its ambitions to diversify its trading partners beyond the U.S. It’s all about building the right trading relationships and investing in logistics and food-standard alignment where markets are growing.

Why it matters:

• The 2025 federal budget outlines a plan to grow Canada’s trade with the world, including a goal to double Canada’s non-U.S. goods exports to $600 billion by 2035.

• Specific to agri-food, the Canadian Food Inspection Agency (CFIA) is receiving funding to modernize it trade tools and work with trading partners to expand market access for Canadian agri-food products.

• Diversification is easier said than done. The U.S. accounted for over 60% of Canada agri-food export value in 2024, making Canada the least diverse when it comes to trading partners among top agri-food exporters.

• But Canada’s agri-food sector is staking its claim as a global leader in pulses. These pulses are destined for markets far beyond the U.S.

By the numbers:

• Canadian pulses account for roughly 24% of global trade. For dried lentil and peas, Canada’s top markets include countries in South Asia and West Asia including India, Turkey, and the UAE as well as South America, including Columbia and Peru. Canada’s dried peas and lentils, examples of Canada’s pulses boom, export value in 2024 was nearly $4 billion.

• The EU and Indo-Pacific are expected to increase annual consumption by 11% and 14%, respectively, over the next decade, providing growing market opportunities in Canada’s target markets identified in Budget 2025. 

• To meet global demand, Canada’s pea and lentil production volumes have increased by roughly 73% and 393%, respectively, over the past 25 years. Pulses are an important crop in a farmers’ rotation, fixing nitrogen in soils, reducing the need for fertilizer application.

The bigger picture:

• Global pulse consumption is expected to rise by 15% over the next decade.

• Global production is led by Asia and Africa with annual growth in product at roughly 3%. India is the single largest producer accounting for 29% of global production with most of their production being used for domestic consumption. 

• China is the largest importer of pulses, accounting for about 13% of global trade.

• The U.S., Turkey and Ukraine follow Canada in exports of dried peas. But Canada, maintains a strong lead, exporting volumes that are 5 times that of the U.S.

Bottomline:

Canada’s approach to diversifying goods exports to non-U.S. markets can learn from the Canadian pulse experience of expanded domestic production, efficiently navigating international trade logistics, and diversification in growth markets where demand is expected to continue to rise. 

References: OECD-FAO: OECD-FAO Agricultural Outlook, 2025; OECD. OECD Agriculture statistics (database), 2025; UN COMTRADE. Trade Data, 2025.