Prospects for China-Latin America Economic Relations

GRT Guest Blogger, Margaret Myers, Director of the China and Latin America Program at the Inter-American Dialogue

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Latin America can expect both continuity and divergence from Chinese actors in the coming years. The region has been a critical source of raw materials, such as copper, iron ore, oil, and soy, and an important destination for Chinese exports for almost two decades. It will continue to be so by all accounts. Chinese policy bank finance, much of it supportive of natural resource acquisition or machinery export, topped $30 billion in 2015. Over the past year, China has also indicated interest in developing major trans-regional infrastructure projects, such as the Peru-Brazil railway, which will carry key commodities to ports along the region’s Pacific Coast.

Screen Shot 2016-01-21 at 11.21.32 AMThough still largely focused on the Latin America’s raw materials and markets, Chinese companies are in many cases changing their approach to economic engagement in the region. They are pursuing strategic, in-country partnerships and greater integration across regional value chains. Chinese firms are also increasingly cognizant of local standards and regulations, viewing adherence as good for business. If they come to pass, China’s newest investment policies – as defined in the “1+3+6 cooperation framework” and “3×3 model” – and infrastructure plans could be a major boon for Latin America, rather than confining it to the lower rungs of Pacific value chains.

Much depends, of course, on China’s progress toward economic reform, among other factors. Enhanced overseas investment is supportive of China’s reform efforts, but will require at least moderate rates of economic growth. China’s “economic transformation” will also have varied effects on Latin American’s raw materials and consumer goods exporters. Demand is still high for many of the region’s commodities but could drop along with China’s rate of domestic investment. The challenge for Latin America is to improve trade conditions and attract much-needed Chinese investment, while ensuring that engagement is promoting sustainable economic growth.

To view the full Global Roundtable interview session recorded with Margaret Myers in December, please visit: https://youtu.be/ngCcmL9_eDw

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