Chinas Impact on Latin America An Angel or a Devil for Latin Emerging Economies

1
Chinas Impact on Latin AmericaAn Angel or a
Devil for Latin Emerging Economies?
Javier Santiso Chief Development Economist
Deputy Director OECD Development Centre
ABCDE World Bank Tokyo ? 29-30 May 2006
2
1
The cognitive effect new emerging capitalisms.
2
The trade effect the dark side of the boom.
3
China and India as a wake up call.
3
China extraordinary or back to normal?
According to IMF estimates Chinese gross domestic
product based on purchasing-power-parity (PPP)
amounts to 13.6 of 2005 world GDP (20.7 in the
case of USA).
4
The cognitive impact The emergence of new
capitalisms. Center and Periphery rebalanced
GDP share of world output (WEO, 2004)
Emerging Asia 8.0
China 4.2
Asia represents more than one fifth of world
output.
5
China has doubled its GDP in 8 yearswithout the
help of Money Doctors!
PPP per capita GDP in constant prices (thousand
of US, 2004-5 estimate)
Source based on WEO and PWT
Chinese growth rates have been higher than those
observed in Brazil and Mexico during their
glorious years.
6
Asias growth on an outward looking strategy a
development strategy to follow.
Chinas trade openness surpasses that of all
Latin American countries
Source WTO, National Statistics
7
1
The cognitive effect new emerging capitalisms.
2
The trade effect the dark side of the boom.
3
China and India as a wake up call.
8
Are raw material prices facing a Chinese shock?
Many economists are putting the blame on China
and -to a lesser extent- on other emerging
economies (India) of the current increase in raw
material (70 in real terms).
9
The stars have been lined up for Latin
AmericaCommodity boom has been a bonanza
Source BBVA from original FMI and Bloomberg
data Projection
10
The stars have been lined up for Latin
AmericaCommodity boom has been a bonanza
Exports of commodities
BBVA-MAP Index of Latin America commodity prices
(100 jan03)
over total exports (2004)
170
160
Venezuela
83.1
150
Peru
70.7
140
Without oil
130
Chile
59.1
120
Colombia
46.3
110
TOTAL
100
Argentina
38.0
90
Brazil
29.6
80
70
Mexico
14.6
60
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Latam
31.2
Source BBVA
Source BBVA
11
The stars have been lined up for Latin
AmericaAsia is becoming a major growth pilar
Exports of agricultural, energy and minery
products
(in over the total) (2003)
100
90
Latin America
80
70
60
50
40
30
20
10
0
Chile
India
UK
China
Bolivia
Italy
Peru
US
Ecuador
Spain
Uruguay
Brazil
Japan
Paraguay
Colombia
Venezuela
Argentina
Indonesia
France
Taiwan
Canada
Mexico
Thailand
Malaysia
Belgium
Germany
Singapore
Netherlands
Hong Kong
South Korea
Source WTO
12
The stars have been lined up for Latin
AmericaChina became a major trading partner

• Growth of GDB in China
• (Annual Percentage variation)

Exports to China in 2003 (Percentage of total)
Source Based on domestic sources. Figures for
2004 and 2005 are forecasts
13
Chinas strong demand for energy and
commodities a bonanza or a threat?
Source BBVA, Cochilco
14
Chinas demand for commodities a bonanza or a
threat?
Source C.HJ.Kwan, Nomura Institute of Capital
Markets Research
Source Blázquez, Rodríguez and Santiso (2006)
15
Does China compete with Latin American countries
?
Source Blázquez, Rodríguez and Santiso, OECD
Development Centre (2006)
16
Does China compete with Latin American countries
?
Source Blázquez, Rodríguez and Santiso, OECD
Development Centre (2006)
17
Does China compete with Latin American countries
?
Source Blázquez, Rodríguez and Santiso, OECD
Development Centre (2006)
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China has become a major destination of Brazilian
exports The bonanza.
Major countries of destination of Brazilian
exports
1999
2004
United States
22,6
1º
United States
21,1
Argentina
11,2
2º
Argentina
7,6
Netherlands
5,4
3º
Netherlands
6,1
4º
China
5,6
Germany
5,3
Japan
4,6
5º
Germany
4,2
Italy
3,8
6º
Mexico
4,1
Belgium
3,8
7º
Italy
3,0
United Kingdom
3,0
8º
Japan
2,9
France
2,5
9º
Chile
2,6
Spain
2,4
10º
France
2,3
Mexico
2,2
11º
United Kingdom
2,2
Chile
1,9
12º
Spain
2,1
Russia
1,6
13º
Belgium
2,0
Paraguay
1,6
14º
Russia
1,7
China
1,4
15º
Venezuela
1,5
Source SECEX
Source BBVA
19
Brazilian exports of primary products more is
not better (Dutch disease and monopsony).
Source BBVA and Bradesco
20
1
The cognitive effect new emerging capitalisms.
2
The trade effect the dark side of the boom.
3
China and India as a wake up call.
21
China competes intensively with Mexico on a
global level
Source Blázquez, Rodríguez and Santiso (2006)
22
Mexicos competitive advantage proximity to
export markets
Mexico benefits from its geographic proximity to
its major export markets

• Lower transport and communication costs
• Access to FTA
• Just-in-time delivery

24 Days
4 Days
160 Km
11,700 Km
Shipping time
Mexico is more competitive in manufacturing more
sophisticated products which require frequent
communication with the client or supplier and
short reaction times.
23
Pending reforms the upgrade of port facilities
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Conclusions A Watch List

• Africa and Latin America Out of the Value-Chain
  Game?
• The share of Chinas total exports produced by
  foreigners has risen sharply, from 32 to 60
  between 2000 and 2005.
• Foreign outsourcing is becoming a major driver of
  Indias and Chinas high tech exports, both
  countries moving up quickly in the value added
  ladder.
• In 2005 for example, of Chinas top 100
  exporters, 53 were foreign companies and all were
  electronics/information technology companies.

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Thank you

• Based on
• Jorge Blázquez, Javier Rodríguez and Javier
  Santiso, Angel or Devil? Chinese Trade Impact on
  Latin American Emerging Markets, OECD
  Development Centre, Working Paper, May 2006.