What is imported and exported between China and Latin America?
What are the characteristics of trade relations between China and Latin America-Caribbean? Are the “open doors” and “hands out” on both sides of the trade balance?
“Economic globalization is an irreversible trend in history,” said President Xi Jinping, in his inauguration speech at the first International Import Expo of China (CIIE), in the port city of Shanghai. “The multilateral system must be defended,” he said before the heads of state of Panama, the Dominican Republic and El Salvador, and the top leaders of international financial institutions (IMF, WTO, World Bank).
“We are serious about opening up the Chinese market,” Xi also promised to business ministers and delegations from Chile, Peru, Argentina, Uruguay, Ecuador and Costa Rica. The current “structural reforms” in China seek to move from “a model based on exports to one based on domestic consumption,” he insisted to representatives of more than 3,000 companies in 130 countries. What does this mean for Latin America?
“Trade is and should always be seen as an opportunity for mutual benefit,” Xi said in Shanghai, on behalf of Latin America and the Caribbean, with the “open door” and the “outstretched hand,” Dominican President Danilo Medina . His country broke ties with Taiwan in May, an indispensable political condition until today to strengthen them with China.
The proportion of the trade deficit in Latin America and the Caribbean with China depends on whether it is analyzed with Chinese or Latin American statistics, warns DW Ignacio Bartesaghi of the China & Latin America Network: Multidisciplinary Approaches (REDCAEM). In 2017, China reported that it imported 127 billion dollars from the region, and exported 130 billion. Latin America, however, reported exports of 102 billion and imports of 180 billion. Why? “China computes free zone exports,” Bartesaghi explains.
In addition, there are subregional differences: “The trade deficit of the region with China is focused on Mexico,” explains the dean of the Faculty of Business Studies of the Catholic University of Uruguay. According to figures from the Mexican Ministry of Economy, Mexico’s trade deficit with China reached almost 70 billion dollars in 2017. For every dollar that Mexico exports to China, it imports about 11, calculates the Mexican business magazine Expansión . South America, on the other hand, “has a more balanced business relationship,” Bartesaghi compares.
The commercial pattern between the region and China is mostly complementary: Latin America imports industrial products with medium or high technological content (electrical appliances, machines, parts of products, integrated circuits, automobiles, transformers) and mainly exports agricultural and agroindustrial products (soybeans, fuels , copper or iron ores, cellulose pulp, meats).
However, “Mexico’s relationship with China is totally different. There is much less complementary trade and much more competitive. Mexico’s commercial relationship with the United States through NAFTA makes Mexico’s business pattern more sophisticated, exporting machines, cars, just as China is exporting. Although it is true that many parts of products that Mexico produces are Chinese. And this is part of what the US president, Donald Trump, has attacked with the renegotiation of NAFTA, ”says the Uruguayan analyst.
Now that Mexico renegotiated NAFTA, China is relegated as its “big plan B”. In addition, with the victory of Jair Bolsonaro in Brazil – and according to the profile that this politician has shown -, it is possible that the South American giant also adopts protectionist measures that do not have China in the spotlight, Bartesaghi predicts.
Latin America does not represent a great market for China, as are the United States, Europe or Asia itself; but a strategic provider of natural resources and food, such as Africa. Meanwhile, China has sophisticated its export structure: from the export of lighter products such as clothing and footwear, it has been increasingly exporting electronic products, machinery, medical instruments, cars.
“China is already the leading producer (not exporter) of vehicles in the world. And the penetration of this sector in the region, in Chile, Uruguay, Argentina and Brazil, is strong, with large automobile companies installed, assembling cars, importing. China is competing with the European Union (EU), the United States and classic technology exporters such as Japan and Korea, ”says the expert from REDCAEM.
This is “an excellent opportunity for Latin America, because China is no longer competing with us in light industries that we have in the region, but it opens up the range of commercial opportunities, it gives us more options in products for which we previously depended on central powers, it gives us the possibility to cooperate and invest, ”he adds. In addition, it has become the main financier of Latin America in recent years.
In the case of processed foods, “with the historical difficulties that Latin America has for export to classical economies,” while MERCOSUR still does not reach an agreement with Europe, the United States, Japan or Korea, the Chinese market is an opportunity “We should take advantage of much more,” recommends this economist.