Saturday, May 12, 2012

Report on Asia-Latin America relationship

On 5 May 2012, the Inter-American Development Bank (IDB) and the Asian Development Bank’s ADB Institute issued a joint report, “ Shaping the Future of the Asia-Latin America and Caribbean (LAC) Relationship,”  at the ADB’s Annual Meeting in Manila, Philippines. This is the first-ever comprehensive study on the subject covering trade, investment and cooperation which are growing rapidly.

Highlights of the report:

Asia- LAC trade has grown at an annual rate of 20.5% in the last decade reaching 442 billion dollars in 2011

Asia has emerged as Latin America's second largest trading partner accounting for 20.8 % of LAC's trade ( it was 10.4% in 2002) as against the US share of 34% and EU 13%.

LAC's share of Asias's trade has doubled to 4.4%

China, Japan,Korea and India account for 90% of Asia's trade with LAC while China alone constitutes 50% of it. Japan was the predominant partner of LAC trade in the past with 77% in 1980 which has declined to 18% in 2010. India's share in 2010 was 6.1%.

LAC account for 8% of China's trade, 6% of Korean trade, 5% of Japanese and Indian trade.

Brazil, Mexico, Chile and Argentina account for 80% of LAC's trade with Asia. Brazil leads with 31% followed by Mexico 28%, Chile 15% and Argentina 7%.

Trade with Asia form 40% of Chile's total trade, 30% of Brazil's trade, 30% of Peru, 20% of Argentine trade, 18% of Mexican and Colombian trade.

Commodities such as iron ore, copper, soy, oil, sugar, paper pulp and poultry form 70% of the total Asia-LAC trade. Share of iron ore 16.6 %, copper ore 13.4%, refined copper 11.3%, soy beans 9.8%, crude oil 7.6%, oil meal and cake 2.5%, sugar 2.3%, wood pulp 1.9% and poultry 1.6%. These are 2010 figures.

Asia and LAC have signed 18 FTAS which are operative. The number of FTAs will increase to 30 by 2020. Chile has signed 6, Peru 4, Panama 2, Taiwan 4, Singapore 4, China 3, Japan, Korea and India 2 each.

Asia and especially China and India will continue to need the Latin American resource imports ( minerals, agriproducts and crude oil) in the long term since they face increasing shortage of land and water while at the same time their GDP growth is high and consumption  is growing.  China has lost 20 % of its crop land in 1975-2009 due to urbanization and faces more desertification of soil. India can hardly avoid the prospect of import of food and minerals in the long term although the current imports are not significant.On the other hand LAC has 140 million hectares of surplus land which could be brought under cultivation and has abundant water reserves. Africa has, of course, 200 million hectares ..but agriculture has to start from a scratch unlike the advanced development of farming in South America.

Asian investment in LAC is becoming significant. China has focussed on mining and oil while Korea, Japan and India are into manufacturing. Compilation of official investment figures complicated due to the fact that some of them have been routed through tax havens.

Brazil, Mexico and Chile are the leading investors in Asia although the figures are modest.

Asia can learn fro Latin American success in poverty alleviation through conditional cash transfers, pension fund systems and agricultural technologies and best practices. Latin America can learn from Asia's manufacturing, IT services, education and export promotion.

The report has highlighted the challenges for future including trade imbalances, commodity dependence and asymmetry in trade baskets. 

The two regions have reached a new level of development decoupling somewhat from the EU-US axis and their problems. They have common challenges such as poverty alleviation, education and health. There is need for greater focus by governments, business, think tanks and academics on the growing strategic importance of Asia to Latin America and vice versa.

Full report 

I compliment IDB and the ADB for this timely initiative and excellent report.

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