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China’s large and ever-growing middle class is demanding high-quality goods and services. This demand fits well with Latin America’s openness to FDI over the last two decades.
A FOUNDATION IN INTERNATIONAL TRADE Investment is only part of the picture, though. For years, China has been a significant trading partner for Latin America, especially Brazil and Argentina, which together account for about 75 per- cent of China’s soybean imports. China’s current financial crisis is depressing that demand, which is producing a ripple effect throughout Latin America. After reaching a peak of US $274 billion in 2013, trade between Latin America and China fell off slightly the following year, to US $269 billion, and was projected to fall again in 2015. In fact, based on these trends, the U.N. Economic Commission for Latin America and the Caribbean, or ECLAC, projects a growth rate of only 1.0 percent for the region in 2015, with growth for the South American part of the region limited to nearly 0.0 percent.
Some individual countries are in for
an even deeper economic shock. Bra-
zil’s economy, the seventh-largest in
the world, is expected to contract by 2.0 percent, although this cannot all be laid at China’s doorstep. Brazil’s problems may be just the tip of the Chinese iceberg, however. Other Latin American countries that count China among their major
trading partners, like Peru and Colombia, are also preparing for rocky times ahead. Venezuela and Ecuador, whose oil exports to China, among other trading partners, have funded much-needed social pro- grams, stand to face significant declines in oil revenue as the price of oil plunges. Venezuela’s loss of oil revenue is com- bined with shortages of basic goods and rising inflation. In Ecuador, President Rafael Correa is confronted with street protests against his reaction to the prob- lem, which has included tax increases.
COMPREHENSIVE COOPERATION
Despite problems that arise over the short term, China and the Communi-
ty of Latin American and Caribbean States (CELAC) are also committing to establishing a longer-term relationship. The China-CELAC Cooperation Plan 2015-2019 is a comprehensive agreement for cooperation in 13 thematic areas, of which eight are in the economic sphere. The plan is currently in the broadest stages of development and is expected to become more detailed as the relationship grows over time. The transition from broad area of general agreement to more detailed, specific projects and programs may incur significant challenges of a technical and political nature. CELAC’s
ability to overcome some of the challeng- es posed will likely involve the support of regional and subregional organizations whose specialty is economic development, as well as the research community and academia.
The economic themes envisioned by the plan for cooperation include trade and investment, infrastructure and transpor- tation, and energy and natural resourc- es. In addition, the plan proposes that already existing processes, such as the China-LAC Think Tanks Forum and the Agriculture Ministers’ Forum, be used to advance the Cooperation Plan’s agenda. The plan also establishes several new bodies with focused agendas, such at the Local Governments Cooperation Forum, the Industrial Development and Coop- eration Forum, and the Capital Cities Mayors’ Forum.
Trade & Investment
With respect to trade and investment, the plan’s goal is to increase the level of bi- lateral trade to US $500 billion within 10 years, while raising the stock of recipro- cal investment to at least US $250 billion over the same period. This investment would focus on high-tech manufacturing and the production of goods with added value. Disputes and “frictions” between
LATIN AMERICA & THE CARIBBEAN: goods trade with CHINA. 2000-2014 (millions of dollars)
Source: Economic Commission for Latin America and the Caribbean (ECLAC)
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