In 1976, each Chinese citizen was earning US$ 160 a year on average. Forty years later the same annual income is US$ 4,000: it multiplied itself by 25. The question for Latin America is immediate: how did they do it?
Other remarkable details of China’s development: migration from the countryside to cities led to build 100 cities with capacity to accommodate at least one million inhabitants. In the past four decades, 600 million Chinese made it out of poverty. At that time 1,000 new universities were created and investment in Research & Development rose from 0.3% of GDP to more than 2%, and in 2020 is expected to exceed OECD member countries’ average, almost five times more than Latin America and the Caribbean.
The 40° Edition of Integration&Commerce Magazine, “Made in CHI-LAT. Keys to renew the convergence between Latin America and China“, takes the Chinese exponential growth as a starting point, analyzes in depth what were the characteristics of the link of the region with the giant Asian country in recent years and, most importantly, wonders how to create a regional agenda to promote cooperation in light of global transformations.
The task is essential for integration. After maintaining high prices on raw materials and an active investment policy in the region, China’s economy grows at a slower rate, shows greater financial volatility and shifts the focus from production to consumption.
How this metamorphosis of China’s economic model will impact Latin America and the Caribbean?
In the last decade, China became one of the main partners for Latin America: seventeen countries reached at least US$ 1,000 million in bilateral trade. However, more than 50% of exports are concentrated in just four products: soy, iron, copper and crude oil. Also the bulk of Chinese investment in the region exceeding US$ 120,000 million, focus on transport infrastructure that complements the primary activity. Will the demand for food and natural resources continue?
The challenge is to accelerate technology transfer, add value to exports and achieve the goal of US$ 500,000 million by 2024. Only fixed exchange closing the technology gap we can overcome the stage of mere exchange of commodities for industrial products and underpin export diversification.
The task also has a counterpart in terms of social inclusion: increasing the complexity of the production and export structure is the best way to reduce poverty.
We need to gather efforts; despite the different experiences of integration with China.
A common agenda, such as Plan 1+3+6: 1 plan, 3 engines (trade, investment, financial cooperation), 6 sectors (energy, infrastructure, agriculture, industry, ICT’s, innovation), financial cooperation (such as the IDB’s Chinese Fund for Co-financing of US$ 2,000 million), or shared infrastructure projects such as the Antofagasta-Paranaguá Bi-oceanic Rail Corridor are just some samples of recent developments.
Initiatives such as the MERCOSUR-China dialogue, where even proposals to deepen trade relations were conducted, go along these lines. New trade agreements are leaving behind old dogmas and allowing customizes negotiations with more flexibility and range of issues, as evidenced by the recent agreement between China and Australia. A regional approach would reach consensus of interests and balance the disparity in bargaining power.
Synergies multiply and mutual benefits are higher when working for a development that has innovation and diversification as real protagonists.