China’s penetration in Latin American markets

América Latina-mapa-Dos Aguas Blog

By Josu Kelly

The shift and restructuring of the balance of power in the Latin American region has as much to do with the introverted foreign policy of Donald Trump as the Chinese reaction to pounce on this opportunity and turn into the second commercial partner of the region[1].

Despite Donald Trump’s recent insistence that the ‘America first’ is not strictly an ‘America alone’ policy, the reality is that the American president has insulted Mexico, El Salvador and Haiti discouraging investment in the region and with talks of protectionism; while offers Latin America a strategy of mutual benefit and shared gain[2] which hitherto has been portrayed in considerably less demanding loans than any IMF or American ones which makes them an attractive options for Latin American countries. Moreover, the Asian giant has also pushed for regional agreements and cooperation in addition to bilateral free trade agreements. Firstly; the Chinese government published the first official policy paper on Latin America and the Caribbean in 2008[3], it also created the China-CELAC forum in 2014 as well as resuming conversation with Mercosur after 14 years of silence[4] in their effort to enhance their influence on the region. Furthermore, China has free trade agreements with three countries of the region which are Chile, Peru and Costa Rica which were signed in 2006 the former and the other two in 2010; making their economies very dependent on Chinese investment.

In spite of this progressive shift of main commercial partner of the region, the centre-periphery pattern among countries of the former remains being identical. Governments in the region fear their countries will be condemned to the role of providing agricultural and mining raw materials[5], and rightly so, as the 73% of exportation from Latin American countries to China has been raw materials and commodities while the 91% of the Chinese exportations to the region have been manufactured products; which enables China to extract added value.

With this pattern of growing influence of China in the region, will the US be ousted out of its traditional sphere of influence by the Asian giant?

Concerning foreign trade data:

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About the author:

Josu Mikel Kelly Iturriaga will complete his bachelor’s degree in International Relations at the University of Deusto in June 2019. While studying his degree, he developed a strong interest in international business, global commerce, and sustainability. Born in London but currently living in Bilbao, Josu is particularly interested in UK-Spain relations and trade.

Sources:

[1] El Universal (2018) ‘China se convierte en el segundo mayor socio comercial de América Latina’. Last modification the 29th of November 2018. Available online (link) [Last accessed: 28.01.2018]

[2] The Economist (2018) ‘China moves into Latin America’. Last modification the 3rd of February 2018. Available online (link) [Last accessed: 28.01.2018]

[3] Aguilera-Castillo, Andrés and Barragán, Juan. 2018. ‘China’s Policy Paper on Latin America and the Caribbean: Ten Years After’. Last modification the 5th of November 2018. Available online (link) [Last accessed: 28.01.2018]

[4] MERCOSUR (2018) ‘Diálogo MERCOSUR – China’. Last modification the 26th of October 2018.Available online (link) [Last accessed: 28.01.2018]

[5] Lafargue, Francois (2018) ‘China’s presence in Latin America’. China Perspectives. Available online (link) [Last accessed: 28.01.2018]

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