The Impact of Exports to China on Latin American Growth

International Economics, 2020

Most Latin American countries have intensified their economic relationships with China since 1990, and even more as a result of the admission of China to the World Trade Organization (WTO). Therefore, this article has two purposes: (1) to explore if exports to China have a different effect on Latin American economic growth than the effect of worldwide exports and (2) to analyze whether exports to China have a different impact on economic growth between South America and a group of countries comprising Mexico and Central American and Caribbean countries since their sources of comparative advantages are diverse. An export-led growth model that focuses on the effects on economic growth via productivity is estimated using panel data techniques and information from 1990 to 2017. Results show that exports to China have a different effect than worldwide exports on Latin American economic growth via productivity. Furthermore, this study provides a new contribution to the literature by showing that exports to China have a positive impact on South America but a negative impact on the group of Mexico, Central America, and the Caribbean for the period after China enters WTO. This result means that growth in exports to China intensifies the primary exporting character of South American countries.

China has consolidated itself as a global economic power, and its growth has been remarkable. China’s economic influence in Latin America has significantly increased, and the country has become one of the region’s most important and relevant trade partners. Therefore, the trade relations between Latin America and China are considered “strategic.” In this context, the purpose of this study is to analyze the relationship between international trade with China and inclusive economic growth in Latin America from 2004 to 2021, using data from 13 countries in the region (Uruguay, Peru, Paraguay, Panama, Mexico, El Salvador, Ecuador, Costa Rica, Colombia, Chile, Brazil, Bolivia, and Argentina). Our research is quantitative in nature, with a non-experimental design and a correlational scope. The econometric model used panel data and the Newey-West estimator to account for first-order autocorrelation in the error. The results indicate a statistically significant and negative relationship between Latin American exports to China, which has a 10% impact on inclusive economic growth. Similarly, imports from China to Latin America show a statistically significant and negative relationship of 5% with inclusive economic growth. However, no discernible evidence was found to support a relationship between China’s foreign direct investment (FDI) in Latin American countries and inclusive economic growth.

2009

2006

This paper explores whether the rapid growth of China and India in world markets is a threat or an opportunity to Latin America and Caribbean (LAC) exporters. We proceed in two steps. First, we focus on the opportunity that the rapid growth of China and India's markets offer to LAC exporters. Using a gravity model, we measure the impact that China and India's demand growth had on LAC exports. We then focus on the threat or hidden opportunity that the growth of China and India had on Latin American exports to third markets. Using a gravity model, we allow for four different channels through which the growing presence of China and India in world markets may be affecting LAC exports to the rest of the world: 1) their growing presence as an exporter to third markets; 2) their growing presence as an importer from third markets; 3) their growing presence as an exporter to LAC; and 4) their growing presence as an importer from LAC. Results suggest that the growth of the two Asian economies domestic market is a large opportunity that has not been fully exploited, in particular for exporters from the Southern Cone and the Andean regions to China. We also found that the growing presence of China in world markets tended to complement LAC exports to third markets. In the case of India the evidence is mixed, probably signaling a closer specialization pattern to the one observed in LAC. In sum, China and to a large extent India's growing presence in world markets is good news for Latin America, even though some of the potential benefits remain unexploited.

DEStech Transactions on Social Science, Education and Human Science, 2019

In this paper we analyzed the current involvement of China in Latin American and the Caribbean countries during the last 15 years while using the data from 22 countries in the region plus China. Following are the areas that we found significantly related with the trade between the regions. Firstly, the complexity of the imported and exported goods; Secondly, How Intra-regional agreements affected trade with China and, the US immersion in the LAC Region. The analysis of the Impact of trade are involving factors that have more to do with spatiality and geography. We not only surveyed the recent literature, but also made our own analysis in order to examine under which conditions China can influence LAC Trade. Finally an effect of the LAC exports and Imports to USA on LAC trade was set in order to have a better understanding of the actual situation in the region.

2008

In this paper, we use the gravity model of trade to decompose Latin America's export growth into components associated with export-supply capacity, import-demand conditions, and other factors.

Emerging Markets Finance and Trade, 2019

Since 2000, China has established its leading role in the world economy, while Latin American countries do not seem to have strengthened their role as exporters of industrialized products. Chinese economic growth poses a challenge for Latin American countries, particularly because of the exports of industrialized products. We explore the impact of China's exports performance in products with technological content from Brazil and Mexico, in the period 2001-2016. Our empirical study uses a twostage dynamic panel data model, and our results indicate that Chinese exports displace exports from Brazil and Mexico only when China first begins to trade with the partner markets of Latin American countries. In addition, the results indicate that Brazil and Mexico will face a possible loss of market share with their trading partners.

Bilateral trade between China and Latin America has grown very quickly in the last decade. As a consequence, economic relationships with Latin America intensified tremendously, as growing demand for resources drove China into relatively unexplored frontiers. In this paper we deploy an export dependency index to identify the sectors and countries in Latin America which are most exposed to fluctuations in Chinese demand. According to our estimates, dependency on China increased overboard across Latin America for all countries and all sectors between 2008 and 2014. Absolute dependency levels were highest in Costa Rica, Colombia, Uruguay, Venezuela, Brazil, Panama, Peru, Chile, Guyana and Argentina. Of these, the largest exporters to China, namely Brazil, Argentina, Chile, Peru, Colombia, and Venezuela, featured high dependencies concentrated around just four commodities: soy in the form of soybeans and soybean oil; crude oil; copper in the form of copper ore, copper cathodes and unrefined copper; and iron ore. These four commodities, accounted for 80% of the regions total exports to China.

The rise of China has created an unprecedented demand for Latin American and Caribbean exports, which has helped boost the region's growth for almost a decade. But ultimately, such export growth may not be sustainable. Perhaps even worse, Chinese manufactured goods are more competitive than those from Latin America in both home and world markets. These twin trends may jeopardize prospects for long-term growth in the region. This short policy brief is based on the book, The Dragon in the Room: China and the Future of Latin American Industrialization that I co-authored with Uruguayan political economist Roberto Porzecanski. This brief charts how China's rise has stimulated Latin American exports significantly. However, we show that at the same time China has leapt over Latin America to become the most competitive exporter of manufactured goods in the world-leaving 92 percent of Latin America's manufacturing exports under threat from China in 2009. Manufacturing and modern services are the key to longterm growth and prosperity. While China soars ahead by such measures, Latin America seems to be returning to a primary commodity-led export path. At a deeper level, China's focus on building domestic productive capacities has been far more effective than Latin America's "Washington Consensus" approach, which stresses the rapid liberalization of trade and investment, and the general reduction of the state in economic affairs.

2011

This semiannual report-a product of the Office of the Chief Economist for the Latin America and the Caribbean Region of the World Bank-examines short-run and long-run challenges for economic growth for the Latin America and the Caribbean (LAC) region in the aftermath of the 2008-09 global financial crisis.