LatinFinance - September/October 2016 - 56

Outlook
Changing partnership

LATAM-CHINA
OUTLOOK

PAGE 56

FDI
Brazilian bets
PAGE 61

Interview
Minas Buenaventura
PAGE 64

Lending
Official pursuits
PAGE 65

A dynamic relationship
As China's economy shifts focus, its role in Latin America's growth is evolving. Now the
region must change its exports and interactions to take advantage. By Jason Mitchell
Since 2001, when China became a member
of the World Trade Organization, the Asian
giant has become a much more significant
trade and investment partner to Latin
America. Trade between the two has multiplied by 21 times since 2002. In contrast,
trade between Latin America and Europe
only grew twofold, and between the continent and the US threefold. Last year, China's total exports to the region amounted to
$130 billion while imports added up to $104
billion, according to UN data.
China has already emerged as Latin
America's principal banker. Between
2005 and 2015, China Development Bank
and the Export-Import Bank of China lent
the region $125 billion, almost double the
amount lent by the IMF and the World Bank
combined. Around 78% of Chinese loans
were destined for Argentina and the member states of the trading and political bloc

56 L ATINFINA NCE.COM - September/October 2016

Alba, which includes Venezuela, Ecuador,
Bolivia and Cuba.
China's total stock of foreign direct
investment in the region is estimated to add
up to around $100 billion and has doubled
in the last decade.
However, the relationship between
China and the region is lop-sided. China
is much more important to Latin America
for growth than the other way around,
creating economic imbalances and political
asymmetries.
China's imports from Latin America only
account for 6% of the country's total, according to HSBC. But those exports to China
have been one of the main motors of Latin
America's economic growth. The slowdown
in the Chinese economy (HSBC forecasts it
will expand by 6.7% this year against 6.9%
last year and 9.3% in 2011) is having a profound effect on Latin American exporters.

Chinese imports from the region have
centered around a narrow range of commodities, especially copper, soybeans, iron
ore and oil. These factors make the region
vulnerable to any dramatic shifts in China's
economy and its growth model - like the
ones we are currently witnessing.
"Latin America's relationship with China
is a work in progress," says Larry Birns,
director of the Council on Hemispheric Affairs (COHA), a Washington DC-based think
tank. "The rise of China means that Latin
America has become a lot less economically
dependent on the US. Yet, the relationship
is highly unequal. Latin America does not
enjoy high visibility in China."
During the past two years, China's
leadership has decided to switch from a
growth model based on massive investment
- mostly led by the state - in infrastructure to one centered around middle-class

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Table of Contents for the Digital Edition of LatinFinance - September/October 2016