Tuesday, June 07, 2011

China Emerges as Latin America’s Biggest Trade Partner

FT: New Trade Routes: Latin America
FT: China demand drives road and rail traffic
China Daily: China to Increase Trade with Latin America

Over the past decade, Latin America has been hard at work focusing on infrastructure and promoting trade with some of the world’s fastest growing economies in an effort to shed the image of financial instability that marked the region in the 1990s. Fortunately, the effort has paid off as poverty is diminishing in many Latin America countries and the middle class is increasing, all largely in part due to the vast expansion of commodity-based trade.

One of Latin America’s biggest trade partners is China. The fast growth of the Chinese economy has increased demand for many Latin America commodities such as Argentine soya, Brazilian iron ore, Chilean copper, and Peruvian gold. Trade between Latin America and China has increased tremendously in the past ten years. For instance, in 1999, trade between the two regions totaled $8 billion. However, by 2009, this total had increased by sixteen times to $130 billion.

The Chinese government is especially supportive of the trade partnership as it encourages more Chinese businesses to invest in Brazil, Peru, and other Latin American countries in an effort to induce these countries to export more goods to China. Likewise, China has also signed free trade agreements with Chile, Peru, and Costa Rica, and is the largest importer of goods and services from Brazil and Chile. Out of all the Latin American countries, Brazil is by far the largest trading partner China has in the region. In 2010, the value of trade between the two countries increased by 47.5% from the year before, totaling $62.5 billion.

The main commodities China imports from Latin American countries include agricultural products, minerals, copper, and other raw materials. In turn, China exports electronic goods, machinery, garments, and shoes to Latin America. Equally important is that Latin America has become the second-largest destination for much of Chinese direct investment. Although, the majority of this investment goes only to certain countries such as Brazil, Peru, Venezuela, Mexico, and Argentina, the investment of Chinese companies is increasingly creating many business opportunities all throughout the Latin America region.

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