New phase in Sino-Latin American ties

Updated: 2014-07-21 07:24

By Osvaldo Rosales (China Daily)

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President Xi Jinping is on his second visit to Latin America seeking to start a new phase in China's relationship with Latin America and the Caribbean (LAC). In recent years, this relationship has been characterized by dynamic trade, an upturn in investment, a healthy exchange of high-level visits and the beginning of institutional dialogue.

After offering to deepen the cooperation agenda during a visit to the Economic Commission for Latin America and the Caribbean headquarters in June 2012, Chinese leaders organized the China-LAC Ministers of Agriculture Forum in June 2013. And the ECLAC-China Cooperation Forum is likely to be held soon in Beijing.

Between 2000 and 2013, the trade volume between China and LAC multiplied 21-fold, from $12 billion to $250 billion. China has become one of the most important trading partners of the region. In fact, it is already the second provider of imports and, in 2015, could surpass the European Union as the second-largest export market for LAC. It is already the top export market for Brazil, Chile and Peru and the second-largest for Colombia, Cuba, Uruguay and Venezuela.

However, this dynamic relationship faces some problems. The LAC region, except for Venezuela, Brazil and Chile, has a trade deficit with China. This is particularly acute in manufacturing where the deficit affects all the region's economies and, in some cases, exceeds 4 to 5 percent of their GDP. This is the result of the LAC's exports pattern, which is highly concentrated in low-processed commodities.

Of the total LAC exports to China, 70 percent are raw materials and 24 percent products manufactured from natural resources. Exports are also highly concentrated given that only five products account for 90 percent or more of the exports for 14 LAC countries. Moreover, the number of LAC companies that export their products to China is relatively small, reflecting a pattern different from the LAC exports to other markets.

Chinese investment in LAC has grown, but it is still too low in relation to the trade level. It is also highly concentrated in natural resources and a significant part of the investment involves "tax havens".

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