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Latin American Economic Outlook 2016

Towards a New Partnership with China

image of Latin American Economic Outlook 2016

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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Trends and opportunities in trade between China and Latin America

OECD Development Centre

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.

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