Strengthening Economic Ties Between China and Latin America for Future Growth

The collaboration between China and Latin America and the Caribbean (LAC) has evolved significantly over the last two decades, presenting both regions with a strategic opportunity for economic transformation. In just 22 years, trade between China and LAC escalated from a mere $14 billion in 2000 to an impressive $500 billion in 2022, establishing China as the second-largest trading partner for LAC and a primary export market for South America.

A Commitment to Cooperation

During the recent 60th anniversary of the United Nations Conference on Trade and Development, Chinese President Xi Jinping reaffirmed the nation’s commitment to deepening ties with the Global South. His assurances included plans to enhance imports from developing nations, bolster trade and investment cooperation, and align with the UN's 2030 Agenda for Sustainable Development.

This partnership emerges at a pivotal point for LAC countries, which have struggled with diminishing economic growth rates for decades. While the region averaged a GDP growth of 2% in the 1980s, this plummeted to just 0.9% from 2014 to 2023. Historical data reveals an even sharper decline, with growth averaging 5.5% from 1950 to 1979, declining to 2.7% from 1980 to 2009, and continuing to drop in the last 15 years.

Breaking the Low-Growth Cycle

To escape this disheartening low-growth trap, LAC nations will need to undergo fundamental structural transformations in their production models and growth strategies. Collaborating with China offers a captivating opportunity to cultivate a growth trajectory that is more sustained and inclusive. China's reliance on modern industrial policies, innovation in technology, and collaboration between public and private sectors could serve as a framework for LAC countries.

With often limited fiscal resources, these nations cannot always depend on subsidies to stimulate growth. Instead, they must concentrate on establishing efficient governance and nurturing partnerships among key stakeholders to facilitate dynamic and promising sectors.

Strategic sectors such as energy transition, circular economy, electromobility, digital services, health sciences, and the care economy represent significant growth areas waiting to be harnessed.

Rethinking Trade Patterns

A pivotal element of maximizing benefits from this partnership is re-evaluating current trade practices. LAC countries primarily export natural resources and food products, while mostly importing manufactured goods from China. By investing in productive development policies, LAC can diversify its economy and lift the technological sophistication of both its production and export capabilities.

The Economic Commission for Latin America and the Caribbean (ECLAC) identifies potential growth-driving sectors, including renewable energy, digital economy, biotechnology, and internet-enabled services. Engaging deeply with China in these domains could have profound implications for regional progress. The Belt and Road Initiative has already laid the groundwork for better infrastructure in several LAC countries.

A Green Transition Ahead

China's dedication to a global green transition aligns well with LAC's considerable potential in renewable energy. Collaboration in solar and wind energy, along with initiatives in electromobility, could be truly transformative. Not only would such partnerships address stagnant growth, but they could also help alleviate high-levels of inequality and poverty—issues that plague the region. According to ECLAC's Social Panorama 2022, around 201 million people, or 32.1% of the population in the region, are living in poverty, with 82 million (13.1%) in extreme poverty.

Thus, implementing strategies focusing on economic growth while ensuring social inclusion is crucial.

Vision for Productive Development Policies

The ECLAC is advocating for a revised vision of productive development policies, elaborated in their recent report, Panorama of Productive Development Policies in Latin America and the Caribbean. This document analyzes existing policies and suggests enhancements for a more sustainable and inclusive development approach. By fostering robust economic relations and strategic cooperation with China, LAC can navigate the low-growth impasse, reduce poverty, and promote high-quality jobs.

Efforts such as the Global Development Initiative and the Belt and Road Initiative present vital platforms for cooperation in critical development areas.

A Mutual Relationship of Importance

For China, its relationship with LAC is equally noteworthy. LAC's share in China’s imports has grown from 2.5% in 2000 to 8.5% in 2022, now surpassing imports from the United States. Equally striking, one-third of China's food imports stem from LAC countries, predominantly Brazil and Argentina. Additionally, LAC's contribution to China's total exports has more than doubled, from 3% to 7%, showcasing a deepening economic dependency.

In a world characterized by rapid technological evolutions and geopolitical realignments, it is vital for LAC countries to articulate a clear vision for transformation and pursue strategic partnerships. The China-LAC partnership holds the potential to breach economic challenges and stimulate pathways toward productive, inclusive, and sustainable development for the future.