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Research Report

Industrial Development in Latin America: What Is China’s Role?

Jorge Guajardo
Manuel Molano
Dante Sica
Copyright Date: Aug. 1, 2016
Published by: Atlantic Council
Pages: 27
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Table of Contents

  1. (pp. [iii]-[iii])
    Peter Schechter and Thomas Corrigan

    China’s expanded role in global trade in the first part of the twenty-first century profoundly shifted the way that the world does business. The Asian giant’s reach has had broad implications for both industrialized and developing countries, accelerating globalization and changing the terms of trade for economies large and small.

    In the last twenty years, Latin American countries have become key players in this new era of Chinese commercial engagement. The commodity boom, while contributing much to the region’s economic and social progress, sent a plethora of raw and basic materials to Asia, largely to feed China’s economic demand. At...

  2. (pp. 1-3)

    The year 2016 may go down in history as one of the most turbulent periods for trade policy. The Brexit vote challenged the premise of the European Union, a model of free trade. In the United States, both presidential candidates have expressed reservations about liberalizing trade and signing free trade agreements.

    At the epicenter of the backlash against globalization is China. China has earned a reputation as a villain in trade imbalances for much of the world. Countries that have a trade surplus with this Asian country are few and far between, and those that do, primarily commodity exporters, have...

  3. (pp. 4-6)

    Over the last two decades, there was significant growth in emerging economies. China has proven to be the most powerful of this group of countries, demonstrating extraordinary growth that has resulted in increasingly active relationships with the world, and Latin America in particular. During these years, the world shifted toward a new production model through global value chains. This scenario relocated manufacturing production to countries with lower production costs. Asian countries gained prominence as the center of the manufacturing transformation, while design and commerce remained in developed markets such the United States and Europe. In this dynamic, China began a...

  4. (pp. 7-7)

    More protectionist economies in the region have suffered an erosion in their industrial base. Argentina and Brazil experienced greater commodity-led growth since the commodity super-cycle of 2007-10, the effects of which ended recently.

    The advanced economies of the world can benefit from Chinese industrial expansion, because their large capital stocks, access to investment, and educated populations allow them to diversify into more sophisticated products. At the same time, low-value-added industrial commodity production happens somewhere else, mainly in China.

    On the other hand, Latin American countries cannot easily venture into sectors that are more knowledge-intensive; hence China has become both their...

  5. (pp. 8-11)

    The commercial relationship between China and Argentina evolved with an uneven mix of concentrated primary exports and diversified industrial imports, the result of which is a decrease in the country’s industrial capacity.

    While exports heading to China in 2015 were concentrated in the soy industry—soybeans (68 percent) and soy oil (7 percent)—imports coming from the Asian giant to Argentina were completely diversified, and the main three products did not exceed 7 percent of total imports; 99 percent of the imports were industrial manufactures.

    Chinese industrial exports increased by 441 percent from 2003 to 2014, which represented greater momentum...

  6. (pp. 12-13)

    T his report shows that granting China market economy status is likely to worsen an already difficult economic situation for many Latin American industries. A number of policy recommendations emerge from the conclusions of this paper:

    1. Governments from the region might consider negotiating side agreements with the Chinese to balance the exports of sectors that have clearly been negatively affected by Chinese competition. The Brazilian National Confederation Industry (CNI) has made an interesting proposal, according to which Brazil should compare Chinese-based market prices for products to an average of third-market prices. In the event that the Chinese price varies considerably...