CHINA AND LATIN AMERICA. Economic relations in the 21st century

Enrique Dussel Peters

Graduate School of Economics

National Autonomous University of Mexico

http://dusselpeters.com

Invited researcher by ILAS/CASS

Institute for Latin American Studies

Chinese Academy for Social Studies

Beijing, December 3, 2009

TOPICS

On the bookStructureMain topics and discussions– On the region– On the respective countries

Conclusions, proposals and future agenda

ON THE BOOK (1)ON THE BOOK (1) Goal: socioeconomic effects of China´s emergence in LAC, also

including LAC debates, “China from a LAC-perspective”?– Challenges for the region for 21st century– Socioeconomic effects: economy, trade, FDI, firm-level strategies,

regional, employment, sectoral specialization, … acknowledging national differences

– Policy implications Rhys Jenkins (University of East Anglia) and Enrique Dussel

Peters (UNAM/Cechimex (edits.) Project funded by ESRC, coordinated by Rhys Jenkins (2007-

2008) and published by GDI (Bonn) and UNAM/Cechimex (Mexico City) (2009)

ON THE BOOK (2)ON THE BOOK (2) In addition to 8 additional forthcoming papers (GDI and

CECHIMEX) (2010) Heterogeneous group of high-level researchers:

– Rhys Jenkins– Andrés López and Daniela Ramos– Daniel Saslavsky and Ricardo Rozemberg– Jonathan R. Barton– Enrique Dussel Peters

Until 2009/beginnng of 2010: unique contribution in English and Spanish speaking literature for its review (English and Spanish), depth, richness in methodologies, proposals and national and regional perspectives and conclusions

STRUCTURE (1)STRUCTURE (1) Introduction (Rhys Jenkins/Enrique Dussel Peters) The Latin American Case (Rhys Jenkins) The Argentine Case (Andrés López/Daniela Ramos) The Brazilian Case (Daniel Saslavsky/Ricardo Rozemberg) The Chilean Case (Jonathan Barton) The Mexican Case (Enrique Dussel Peters

– On the Authors

– Detailed regional and national statistics– Totalling 400 pages

TOPICS-REGION (1)TOPICS-REGION (1) China:

– rapid growth for a long period: unprecedented– similarities with Japan, South Korea and Taiwan,

diference: size and length– relevance in demand for raw materials + exports of

manufactured goods– effects felt around the world, without an exception

TOPICS-REGION (2)TOPICS-REGION (2)China-Latin America relations:

– Trade: among major trading partners, both sides– FDI: low basis, but growing fast– Closer diplomatic ties– Intensified political exchanges: bilaterally, UN-

system, G20, APEC, multilaterally, and China in LAC (MERCOSUR, Andean Community, IADB, CEPAL, …)

TOPICS-REGION (3)TOPICS-REGION (3)China-Latin America debates:

– Few studies on implications for the region and even bilateral analysis– Mostly: competition in third markets, Mexico and Central America “losers” vs.

Mercosur as “winner”– China as an export market for LAC: complementarities between economies?

“Primarization” of region´s exports and its effects on industrialization and development?

– Less attention: effects on domestic producers and call for protection– FDI: massive inflows of Chinese FDI? Why so far so limited? Lack of initiative of

the region´s firms or obstacles to Chinese firms?– FDI and trade: diversion from LAC to China? – Lessons from Chinese development for LAC? “Rerun” of earlier debates in LAC

in 1950s-1960s and 1980s? Challenge for Washington Concensus and massive political and economic challenges for the region?

TOPICS-REGION (4)TOPICS-REGION (4)Jenkins (LAC):– Direct (trade, FDI) and indirect effects (third export

markets, FDI and terms of trade) + …– China: LAC among the 5 mayor trading partners – LAC: China the mayor 5 trading partner for each LAC

country (before/after 1999 and after 2002). Explanation: changes in China

And: relavant differences. LAC Xs in 2007: 5.4%, 1% of Mx, Ecuador and Paraguay and above 10% for Chile, CR, Cuba.

And: Composition of trade (X= raw materials, M=manufacturing)

TOPIC-REGION (5)

TOPIC-REGION (6)

TOPIC-REGION (7)

TOPICS-REGION (8)TOPICS-REGION (8)Jenkins (LAC):– FDI:

Before 2007, FDI from LAC > FDI from China Minimal absolute and relative flows Chinese FDI: resource seeking form, with exceptions

in Mexico (textiles)

TOPICS-REGION (9)TOPICS-REGION (9)Jenkins (LAC):– Indirect effects:

Competition in export markets: very strong loss of LAC´s market share since 2002 in US, all lost with exception of Perú and Nicaragua

FDI diversion? (little analysis): unlikely (both have done well in terms of FDI) + different structure of FDI origin (US and EU vs East Asia)

Commodity prices: until 2007, LAC benefitted from China´s demand and global effects ($45-23 billion 2002-2006; copper and oil)

TOPICS-REGION (10)TOPICS-REGION (10)Jenkins (LAC), conclusions:– All of LAC have economic relations with China– China-LAC: increasing relevance FOR BOTH– Different patterns of trade in respective countries– LAC: new resource-based model? Socioeconomic

and specialization effects in the short, medium and long term?

TOPICS-COUNTRIES (11)TOPICS-COUNTRIES (11)López/Ramos (Argentina):– Trade Argentina-China: 2nd in X and 3rd in M– Periods in trade with China (1990-95, 1996-2002 and

2003-present)– High concentration of trade with China (10 companies

= 71.4% of total)– Exports to China concentrated in primary low value-

added products = soybeans (soybean, crude soybean oil and cake) (almost 85% of X to China in 2007 and explains almost entirely increase in X to China); changes as a result in China´s policies

TOPICS-COUNTRIES (12)TOPICS-COUNTRIES (12)López/Ramos (Argentina):

– M: increasing capital and intermediate goods (machinery, equipment, electronics, …)

– Antidumping measures against Chinese imports– Contrasting trade effects: positive on taxes and terms of trade but

threat to manufacturing production (see statistics and model)– FDI flows? Interest in mining, oil and fishing, but so far few

projects (less than $800 million until 2007)– Conclusions: China has changed Argentina´s trade (direct and

indirect), destroyer of employment, and Argentina has not taken sufficient advantage of China´s demand. What is Argentina´s place if China continues upgrading?

TOPICS-COUNTRIES (13)TOPICS-COUNTRIES (13)Saslavsky/Rozemberg (Brazil):

– Trade, terms of trade and job creation, competition in third markets, trade costs of restrictive measures and trade agreements

– Trade links: main LAC partner for China; Xs since 2001 to over $10 billion since 2007 (X=3rd , M=2nd), almost 10% contribution to Brazil´s X during 1999-2007, natural resources and North-South type (soyabeans and iron ores = 80.1% of total Xs). Imports from China= industrial supplies and capital goods.

– Terms of trade: improvement in terms of trade (price effects until 2007), but fall in 208 (?).

– Employment effects: 4% job loss through net imports– Government revenue: small.

TOPICS-COUNTRIES (14)TOPICS-COUNTRIES (14)Saslavsky/Rozemberg (Brazil):– Competition in third markets: US and EU vis a vis China. Loss of

competitiveness in UE and US (2001-2007), with some exceptions (fuels– Trade barriers and other costs (antidumping measures and import

licensing, also against China) and bilateral trade-restricting measures (textiles)

– Importance of trade costs in sino-brazilian trade (15% of cost of manufactured goods)

– FDI: for Brazil, 0-0.1% of total (1990-2008), in China, 0.1% of total (Embraer, WEG, Marcopolo, ..)

– Conclusion: major supplier and destination of exports, high concentration, little effects on employment and FDI … long-term impact?

TOPICS-COUNTRIES (15)TOPICS-COUNTRIES (15)Barton (Chile):– Important opening to Asia/APEC since 1990 and

FTA with China (2006); first country in LAC to recognize China as market economy (2004)

– FDI flows: in China (.01% from Chile) and $84 million in Chile in forestry (46%) and financial services (51%) (less than $10 million)

– Third trade partner of Chile (displacing Argentina)– X from Chile = copper (81.9%), wood pulp (6.5%)

and fish meal.

TOPICS-COUNTRIES (16)TOPICS-COUNTRIES (16)Barton (Chile):

– M from China: clothing, textiles, telecom and footwear; second importer to Chile and displacing Argentina and Brazil, among other importers

– Conclusions: improvement in exports (copper) and terms of trade, losers are traditional sectors (textiles, garments and other producers of manufacturing goods and importers (EU and US). Losses not off-set by exports. Export dependency is highly risky.

TOPICS-COUNTRIES (17)TOPICS-COUNTRIES (17)Dussel Peters (Mexico):– Growth, employment and trade patterns in Mexico– Bilateral institutions– Trade relationship in US: high competition, Export-

Similarity Index (1990-2006), …– Results: a) overall displacement in the US

(electronics, YTG, …), b) new specialization pattern on heavy goods and “high value-low volume”?, c) High similarities in manufacturing with China (also Brazil-China).

CONCLUSIONS (1)CONCLUSIONS (1)– Beyond the “winners and losers” debate based on the

concrete experience of LAC and China– LAC-China: mutual (!) relevance– FDI: Why is FDI not more relevant?– China: high interest in raw materials (with no exceptions)– LAC: massive imports from China in manufacturing with

increasing technological level– For LAC: China as a “regional” issue?– Options and alternatives to superficial discussion on the

“Chinese threat”? South-South cooperation and alternatives in concrete projects

AGENDA (1) Effects of China´s economic growth on development

theory and multilateral agencies? Sustainability of commodities and low-value added

exports to China (Brazil, Argentina, Chile and increasingly Mexico)??

Can LA/Mx compete with China? In which sectors? China: upgrading, TNCs, specialization in

manufacturing, ... China: profound questioning of EOI for rest of

periphery (and core countries)

AGENDA (2) Regional agenda? This is not happening! Existing

regional and multilateral institutions are not supporting this process (ideological constraints?), yet (?)

Analysis of national and regional benefits and challenges in detail (trade, investments, employment, wages, ...)

Sectorial challenges/opportunities? YTG, autoparts, automobiles, light manufacturing, agriculture, agroindustrial, ... at 6-digit level of HTS and specific commodity chains!

Strengthening of binational and regional institutions

CHINA AND LATIN AMERICA. Economic relations in the 21st century

Enrique Dussel Peters

Graduate School of Economics

National Autonomous University of Mexico

http://dusselpeters.com

Invited researcher by ILAS/CASS

Institute for Latin American Studies

Chinese Academy for Social Studies

Beijing, December 3, 2009