Trade Relationship Between China & the Latin American Region

TRADE RELATIONSHIP BETWEEN CHINA & THE LATIN AMERICAN REGION

[pic 1]

[pic 2][pic 3]

1. What are main benefits for Latin American countries trading with China? (Olivia Pitt, 43666116)

Relations between China and the Latin American region have intensified over recent years, with current repercussions showing that their relationship has brought about a number of benefits, and future benefits, for Latin American countries (See figure 1.0). The rate of growth between the two nations has also been substantial: In 2010, Chinese deals with Latin America topped approximately $100 billion (Kelly, 2011).

        China is one of the top manufacturing capitals of the world. Accordingly, it is in constant need of sources of energy, raw materials and food as inputs to manufacture goods that are distributed internationally. Latin America is a primary source of these materials and goods, and although some may say China is a sole beneficiary from this mass exportation, this particular foreign policy doesn’t come without reciprocal advantages for the Latin American region. For one, it allows greater diversification of the Latin American market with the access to more goods and services. With 560 million people and an economic size of US$4 trillion, the Latin American market presents as a significant opportunity for Chinese export industries (Kotabe et al., 2014). Currently, China is Brazil's & Chile’s largest export market as well as Argentina’s second largest trading partner (Kelly, 2011). Not only does this relationship help facilitate trade and investment, agriculture, resources and energy, tourism, and debt reduction and cancellation for Latin America, China is also contributing toward infrastructure construction. China's President Hu Jintao visited Argentina, Brazil and Chile in November 2004 and promised to lay out tens of billions of dollars on improving the region's infrastructure (The Economist, 2004). Procuring goods from remote lands is difficult when basic facilities such as ports, roads, and docks are inadequate. Specifically, China has initiated talks in regards to constructing a rail link through Colombia, making it easier to import goods through America and export raw materials. The rail link in Colombia could be of great strategic importance, acting as a “port to the rest of Latin America” for the expansion of Chinese interests in the region (Kelly, 2011).This way, Latin America may benefit from not only better facilities but increased access to trade all over the world, providing endless opportunities and further fuelling their economy.

Thus, the technical and economic assistance provided by China is of great benefit to the Latin American region. In addition to the above, the growing influx of Chinese wealth has been credited with helping Latin American nations weather the recent financial crisis and expand access to global markets. Beijing has earmarked billions of dollars for much-needed infrastructure, transport, energy and defence projects across the continent in line with its remodelled and rebranded foreign trade strategy, which it has been selling to the developing world as an alternative model for ending poverty (Kelly, 2011). Working toward the diminishment of poverty stricken societies within Latin America is a huge step for the region, and if the trade between Latin America and China benefits this cause it may be a relationship protectionistic countries can learn from. Thus, Latin America can be seen to have benefited – and shall continue to benefit – from their foreign trade arrangements with China.

1. What are the arguments for or against a trading relationship between China and Latin American countries?

FOR: (Myeerah Zhang 44268564)

While there are many benefits for Latin American countries to maintain a trading relationship with China, China has its own agenda as well. Its interests include obtaining markets for its exports, acquiring primary products, gaining international isolation from Taiwan, and securing strategic alliances (Ellis, 2009). In order to diversify China’s market, exporting manufactured goods to Latin America has been the key. This trading relationship has benefited both countries financially and politically, while reducing the hegemonic power of America. While Latin America helps in supplying resources for China’s economic expansion, Chinese companies seize new opportunities to improve the underdeveloped infrastructure in Latin American countries. These mutual benefits allow both countries to grow stronger in the global economy. In the last few decades, China’s imports increased by sevenfold and the exports tripled while continuing to grow at a rapid rate today (Jenkins, Peters and Moreira, 2008). The large exports of primary products like fishing and agricultural products, minerals, petroleum and so on to China has affected the economic growth of Costa Rica, Cuba, Argentina, and mainly Brazil. China's imports totaled to $51 billion in 2007, which is six times the amount in 2002 and is still continuing to increase at a rapid rate (Fernandez Jilberto and Hogenboom, 2012).

Latin American countries have a competitive advantage with natural resources, which allows them to bargain for advanced technological machinery that they cannot produce. China is the largest manufacturer in the world and allowing this trade allows China to produce more goods to export in the global market. Latin American countries presents new opportunities for China to sell its bootlegged products. Many Latin American countries with low income levels are more than willing to purchase pirated music CDs, DVDs, and counterfeit products (Ellis, 2009). The abundant amount of natural resources supports China's high demand for raw minerals. Maintaining this trading relationship between the two countries has opened huge market opportunities on both sides. This relationship not only expands economic ties, but also allows China and Latin America to establish social, political, and cultural links. Just in the past decade, heads of states and leaders have visited the respecting countries to develop better relations. Although limitations occur in officer exchanges and military visits, China does sell or donate nonlethal military goods to some Latin American countries (Ellis, 2009). This trade relationship has allowed the perspective countries to improve their economies' added value and expanding global markets while investing in technology transfers.