Latin America and China Highlights Ins Bustillo Director

Latin America and China: Highlights Inés Bustillo Director, ECLAC Washington Office Woodrow Wilson Center for International Scholars 19 September 2011

§ South-South ties are growing • By 2017 South-South trade could exceed North trade • South-South investments are also developing quickly • The number of global trans-Latin and trans-Asian firms is increasing § Over the past decade China has strengthened its economic ties with Asia-Pacific, Africa and Latin America and the Caribbean • The growth of the developing countries is depending increasingly on China, which is already a key trading partner for most of them 2

South-South trade has become more significant within world trade in the wake of the crisis and could exceed North-North trade by 2017 EXPORTS BY REGION, 1985 -2020 (Percentages of the total) Source: ECLAC, on the basis of official figures Nota Figures for 2011 -2020 are projections on the basis of the long-term linear trend. 3

China has gained a much larger share of the region’s trade in the past decade, unlike the United States, whose share has decreased, and the European Union, whose share is stagnated LATIN AMERICA AND THE CARIBBEAN: SHARE OF SELECTED PARTNERS IN EXTERNAL TRADE, 1990 -2010 (Percentages) Exports Imports Source: ECLAC, on the basis of COMTRADE, CEPALSTAT and DOTS. 4

The region runs a large deficit with developing Asian countries (especially China) and a surplus with the United States (especially in the case of Mexico) United States (Millions of dollars) European Union 400 000 300 000 200 000 -100 000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 100 000 China 300 000 200 000 100 000 -100 000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 400 000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Developing Asia 400 000 Source: ECLAC, on the basis of United Nations Commodity Trade Database (COMTRADE) and national sources. 5

Trade between AP and LAC is almost entirely inter-industrial, though with some differences among AP countries LATIN AMERICA AND THE CARIBBEAN : EXPORT STRUCTURE BY TECHNOLOGICAL INTENSITY (Percentage) A. MAJOR EXPORT MARKETS, 2008 -2010 100% 90% 80% 25% 70% 24% 60% 50% 40% 30% 23% 20% 10% 24% 62% 12% 52% 28% 0% Latin America Asia Pacific United States European and the Union Caribbean High tech manufactures Low tech manufactures Primary Products B. SELECTED ASIAN MARKETS, 2007 -2009 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% ASEAN China India Japón Corea Medium tech manufactures Natural Resource-based Manufactures Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of United Nations - COMTRADE and official national statistics. Mundo

The region is facing these new conditions with major strengths, but also significant weaknesses Strengths • • • Economic growth, macroeconomic stability and improvement in employment and poverty indicators Growing middle class Abundant natural-resources endowment: – A third of the world’s potential farming areas and freshwater reserves – 31% of world production of biofuels and 13% of world petroleum – 47% of world production of copper, 28% of molybdenum and 23% of zinc – 48% of world production of soybean, 31% of beef, 23% of milk and 16% of maize – 20% of the surface area of natural forests and abundant biodiversity Weaknesses • • • Production and export structure based on static comparative advantages more than dynamic competitive advantages Lags in innovation, science and technology, education and infrastructure Productivity lags and large gaps between sectors 7

Challenges for the region: improve its position in the international economy (within each country) • Strengthen countercyclical macroeconomic policies – Need to prepare for the possibility of a period of currency appreciation in commodity-exporting countries – This would make export diversification more difficult, increasing the need for greater productivity across all sectors of the economy – Monetary and fiscal policy must be coordinated with reserves accumulation, regulation of capital flows and macroprudential measures • Productive development policies (diversification and inclusive growth) – Incorporate more value added and knowledge into exports – Diversify across products and markets – Promote clusters underpinned by comparative advantages and public-private partnerships – Improve governance of natural resources – Promote innovation (participation in global networks) – Encourage internationalization (trans-Latin firms) – Support SMEs (certification, traceability, carbon footprint) 8

Challenges for the region: gain a better position in the international economy (regional tasks) • Strengthen open regionalism (regional public goods) – – – Infrastructure: energy, transport and logistics Trade facilitation; financial support for intraregional trade Innovation and regional value chains (critical mass and greater scale) Payment settlement mechanisms and regional reserve funds Progress towards a more integrated regional market • Rethink strategies for global and regional alliances – Exploit opportunities for South-South trade and investment – Joint approach to building closer ties with Asia-Pacific (especially China) 9

Latin America and China: Highlights Inés Bustillo Director, ECLAC Washington Office Woodrow Wilson Center for International Scholars 19 September 2011