Latin American Economic Outlook

OECD Development Centre

English
Frequency
Annual
ISSN: 
2072-5140 (online)
ISSN: 
2072-5159 (print)
DOI: 
10.1787/20725140
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The Latin American Economic Outlook is the OECD Development Centre’s annual analysis of economic developments in Latin America in partnership with UN ECLAC and CAF. Each edition includes a detailed macroeconomic overview as well as analysis on the dynamics shaping the region in the context of shifting wealth, particularly towards emerging economies. Each issue also includes an in-depth look at a special theme related to development in Latin America, taking into account the strategic challenges and opportunities the region will have in the future. Further information can be found on the website.

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Latin American Economic Outlook 2016

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Latin American Economic Outlook 2016

Towards a New Partnership with China You do not have access to this content

OECD Development Centre

English
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Author(s):
OECD, CAF, ECLAC
12 Dec 2015
Pages
220
ISBN
9789264246218 (PDF) ;9789264246201(print)
DOI: 
10.1787/9789264246218-en

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The Latin American Economic Outlook 2016 is devoted to the evolving relationship between Latin America and China, as well as its prospects in the long term. China's transformation involves a gradual shift in its development strategy, including the rebalancing process from investment to consumption, the demographic transition, the structural transformation towards high value-added goods and services, and a "going-out" policy to approach other regions. This report lays the ground for discussing future trends in the relationship between China and Latin America, given these changing patterns. Based on the analysis of potential transmission channels of China’s new model to the region, which include issues on trade, finance and skills, the outlook aims to identify strategies and policy responses for Latin America to overcome development challenges. Latin America and China can complement each other further and build a mutually beneficial partnership for development.

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  • Foreword and Acknowledgements

    The Latin American Economic Outlook analyses issues related to Latin America’s economic and social development. Ever since the first edition was launched at the 17th Ibero-American Summit of Heads of State and Government in November 2007 in Santiago (Chile), the report has offered a comparison of Latin American performance with that of other countries and regions in the world, sharing experiences and good practices with the region’s public officials.

  • Acronyms and abbreviations
  • Editorial

    After a full decade of convergence with advanced economies and important progress in addressing inequality, Latin America’s average growth will fall below the average of OECD countries in 2015 for a second consecutive year. Medium-term prospects are not encouraging either. These developments reflect well-known domestic weaknesses, illustrated by below par productivity and investment growth paired with the external environment’s deterioration and key social challenges. Latin America remains the world’s most unequal region; poverty still affects 28% of its population and labour informality persists. The consolidation of the US economy has been positive for a few economies in Latin America but the medium-term effects are still not visible, particularly as the ensuing monetary retrenchment leads to tighter financial conditions. Economic activity is also recovering but at a slower pace than expected in Europe and Japan.

  • Executive summary

    The Latin American Economic Outlook 2016 explores how Latin America should deepen and improve its partnership with China as part of its development agenda. China has been – and will continue to be – a game changer for the region. The world’s economic centre of gravity has shifted away from OECD economies towards emerging economies during the past two decades, a phenomenon called "shifting wealth". Ties between Latin America and China are now evolving well beyond just trade, challenging Latin American countries to adopt specific reforms to boost inclusive growth and build a mutually beneficial partnership with China.

  • Towards a partnership for development between Latin America and China

    The Latin American Economic Outlook 2016 explores the evolving relationship between Latin America and China. This chapter provides an overview of recent and future economic links, covering key issues from trade and finance to skills and productive development policies. It identifies strategies and policy responses for Latin America to address its development challenges, both in the short and medium term, some of them in partnership with China.

  • Macroeconomic prospects for Latin America

    The high economic growth rates of the 2000s experienced in Latin America fuelled by favourable external conditions are over. Instead, the region continues to deal with a deteriorating external environment that, without experiencing any major internal crises, is leading to modest growth rates. Medium-term growth projections, however, show further downward revisions. This suggests that potential output growth is less robust than expected, which could present a risk to recent socioeconomic achievements. This chapter assesses Latin America’s growth prospects in the challenging international environment and explores how vulnerable the region is to further adverse changes in external conditions. The domestic outlook focuses on the need to stabilise and increase investment rates and productivity. The external outlook focuses on the effect of China’s "new normal" and looks at how slower growth and structural change in China is altering the Latin American landscape, as well. It then discusses how these factors influence the main real and financial indicators in the region, and will shape the external environment for decades to come. The chapter ends with shortand long-term proposals for economic policy, highlighting the diverse socio-economic landscapes in Latin American countries.

  • Shifting wealth, China's new normal and Latin America

    This chapter analyses the role of China and Latin America in the process of shifting wealth. The first section discusses how the integration of China into the global economy shaped the initial phase of shifting wealth, in which Latin America was mostly a spectator. The second section analyses the foreseeable evolution of this process, namely shifting wealth II, in light of several structural and policy trends unfolding in China (e.g. demographic ageing, the rise of the middle class and the structural transformation process). The third section explores the relationship of both China and Latin America with the "middle-income trap", through a discriminant analysis that highlights the characteristics that separates them from the countries that escaped the trap. The chapter concludes with a summary of key findings.

  • Trends and opportunities in trade between China and Latin America

    The recent trade boom favoured commodity exporters in Latin America and resulted in a strong concentration of exports to China in a few products, relative to trade with the world overall. Imports from China also increased considerably, and import penetration and competition with regional manufacturing producers grew in certain markets. The impact of imports remains mixed. In some cases, growth in Chinese imports boosted competitiveness and productivity in the region, through the supply of cheaper and more efficient intermediate inputs for its firms. Trade in intermediate goods and through global value chains (GVCs) also expanded considerably between the two regions. Nevertheless, the dynamics appear to be changing. After strong growth in trade between the region and China for the last decade and a half – which increased the value of trade 20 times between 2000 and 2014, versus 3 times with the rest of the world – trade has weakened recently owing to the slacking off in Chinese demand. This decrease in demand signals the importance of re-evaluating the opportunities that trade with China offers the region, such as increasing demand for agricultural products, as well as presenting challenges for diversification. To increase gains, Latin American countries could deepen regional value chains to take advantage of diverse opportunities globally, particularly in stronger integration in services sectors.

  • Future trends and scenarios for a LatinAmerica-China Partnership

    This chapter lays the ground work for discussing trends in the relationship between China and Latin America, given the changing patterns of China’s development strategy. Based on the analysis of potential transmission channels created by China’s transformation to the region, including the trade, finance and structural challenges that this may trigger, the chapter identifies strategies and policy responses for Latin America to make the most of this partnership.

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  • Expand / Collapse Hide / Show all Abstracts Country notes

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    • Argentina

      China is Argentina’s second trading partner after Brazil, with the export basket mainly concentrated in commodity products. In 2014, 7% of Argentina’s exports were destined to China, and 16% of the country’s total imports came from China. Argentina’s value-added exports to China are concentrated in the agricultural sector (57%), with a smaller participation of mining (6%), low- to high-tech products (20%) and services (17%). In contrast, the majority of value-added imports from China (67%) are from medium-high and high-tech industries.

    • Brazil

      China is Brazil’s main trading partner. In 2014, 18% of Brazil’s total exports were destined to China, while 16% of Brazil’s total imports came from China. Almost two-thirds of the Brazilian value-added exports to China are mining and agricultural products, with a smaller percentage of low- to high-tech products (20%) and services (21%). In contrast, more than half of value-added imports from China (55%) are medium-high and high-tech products.

    • Chile

      China is Chile’s main trading partner, with an export basket concentrated mainly in copper products. In 2014, 25% of Chile’s exports were destined to China, making it Chile’s main export destination. Similarly, 21% of Chile’s total imports came from China, making China Chile’s second import source. Almost 80% of the Chilean value-added exports destined to China are concentrated in the mining and low and medium-low tech sector (mostly related to refined copper, copper ores and unrefined copper), with a smaller participation of services (18%). In contrast, the majority of value-added imports from China are from the service sector (47%) or the medium-high and hightech industries (31%).

    • Colombia

      China is Colombia’s second trade partner after the United States. In 2014, 11% of Colombia’s exports were destined for China. The majority of value-added exports to China were concentrated in mining (57%) and low- and medium- tech products (26%). In contrast, services accounted for 17% of total value-added exports; mainly concentrated in traditional ones. Colombia imported 19% of its goods and services from China in 2014, with more than three-quarters of their value added concentrated in medium-high (30%) and high-tech industries (52%).

    • Costa Rica

      China is Costa Rica’s second trade partner with an export basket concentrated mainly in electronic microcircuits. In 2013, 3% of Costa Rica’s exports were destined to China and 10% of Costa Rica’s total imports came from China, making China Costa Rica’s second source of imports. More than 85% of Costa Rica’s value-added exports to China are concentrated in the mediumhigh and high-tech industries sector (mainly integrated circuits), with a smaller participation of services (14%). Likewise, the majority of value-added imports from China (53%) are from mediumhigh and high-tech industries.

    • Dominican Republic

      Trade ties among the Dominican Republic and China are new but flourishing. In 2014, sales to China represented 2% of total exports of goods, which were concentrated mainly in commodity products. Copper ores represented 32% of total exports followed by ferro-alloys (25%), copper waste (12%), instruments used in medical sciences (7%) and ferrous waste (4%). Imports from China in 2014 totalled 12%, making China the second import source after the United States.

    • Mexico

      China is Mexico’s fourth trading partner; although because of its strong trade ties within the North Atlantic Free Trade Agreement (NAFTA), the full trade potential with China has yet to be developed. In 2014, approximately 2% of Mexico’s exports were destined for China and 17% of Mexico’s total imports came from China. The majority of Mexican value-added exports to China are concentrated in medium-high and high-tech industries (40%) and mining (30%). The majority of value-added imports from China are from medium-high and high tech industries (67%). Notably, 74% of Mexico’s imports from China were intermediate inputs, while 11% were capital goods.

    • Panama

      In recent years, China has become one of Panama’s main trading partners, with the export basket mainly concentrated in commodity products. In 2014, 9% of Panama’s exports were destined for China, making it its third export destination. Similarly, China became Panama’s fourth import source with 8% of Panama’s total imports coming from the Asian economy. Panama’s exports are mainly concentrated in agricultural and mining products, especially copper waste (42% of total exports to China), flours, meals and pellets (24%) and aluminium waste (14%).

    • Peru

      During the past few decades, China has become one of Peru’s most important economic partners, mainly focused in the trade of commodity products such as copper and gold. Peru has shown a significant increase in exports to China, especially between 2000 and 2007 with growth rates between 35% and 50%. Throughout 2014, 18% of Peruvian exports were destined to China, placing this market as Peru’s main export destination. In terms of economic sectors, 30% of exports to China were concentrated in primary productions and 70% in natural resourcebased manufactures. In addition, 21% of Peru’s imports during 2014 came from China, placing this market as its main import source. Within these imports to China, 92% were non-natural resource-based manufactures.

    • Uruguay

      China is Uruguay’s second trading partner. Exports to China represented 17% of total exports (including soy exports from Nueva Palmira Free Trade Zone) in 2014, most of which were concentrated in commodity products. Soy represented 52% of total exports to China, followed by meat (18%), pulp mill (17%), wool and fabrics (6%), products from meat (3%), leather (1%) and wood (1%). Imports from China were 22% of the Uruguayan total imports in 2014, concentrated in technological products, such as mobile phones and computers.

    • Methodological note: Definitions and variables used
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