China’s Economic Relations with Latin America 

In the preliminary stages of the relation between the People’s Republic of China, from now on China, and Latin America between 1949 to 1979 based on political aspects regarding China’s interest of diplomatic recognition over Taiwan. More recently, in the 70’s, the discourse was more focused on issues regarding “sovereignty, economic justice, and the right to self-determination” (Wise & Chonn, 2018). Yet, by the end of the 20th century, the discourse of China changed radically to focus on economic exchanges and business. Jenkins (2012) states that the reason was mainly because of China’s scarcity, which led the country to seek international partners from whom obtain raw materials needed to continue their growing. By 2001 China joined the World Trade Organization (WTO), event that led to the opening of Latin American markets to China’s imports and competitive manufactured products. Ultimately, China benefited from the most favored nation treatment policy, which implied the undeniable China’s “emergence as a global trading power” (Jenkins, 2010, p. 813). This essay aims to establish a general view of the relation between China and Latin America, at the end it is argued that Latin American countries should focus on developing a more balanced and equitable relationship with China. In today’s world having insights about the economic relations between China as an emerging power and countries in Latin America is fundamental, given the current changing situation in the international system. 

When talking about the effects in the Latin American region of their relationship with China there are a variety of positions. Jenkins (2010) identifies two main positions on this phenomenon: an optimistic and a pessimistic view. In the optimistic side he argues that the opportunities in terms of improving the region export market and revenues is huge. Also, the price of the commodities the region export improved because of the increasing of China's demand. According to indicators from the World Integrated Trade Solution (WITS) (n.d.), it is shown that throughout the years the amount of trade increased between China and Latin America, also the main sectors of the trade between China and Latin America are Ores and Metals, Food, Fuel and Manufactures (See the image below). 
 

The imports from China improved the regions cost of living by providing cheap products and increasing local producers' competitiveness. Finally, China’s Foreign Direct Investment (FDI) is seen as a way for developing infrastructure. On the pessimistic side, the great competitiveness of China's exports in other markets becomes a challenge for the Latin American exporters. There is little diversification in the exports of the region and the products are exported at a considerably basic level of specialization, which in consequence makes the region vulnerable to the volatility of prices. Additionally, the imports from China affect local producers as they cannot compete with such economy, that leads to unemployment. Finally, the FDI that was before invested in Latin America is migrating to China, as Latin American countries are specializing in primary commodities and by the contrary in China there are the main value and production chains. On the contrary, Wise & Chonn (2018) critique the claim of an asymmetrical relation by arguing that some important regional economies such as the ones of Brazil, Costa Rica and Mexico have increased their exports of manufactured goods. The authors explain that the problem of the region is that “domestic markets are still too weak”. They conclude by pointing out that the region backsliding in comparison with China is because of inadequate domestic institutions and management (Wise & Chonn, 2018, p. 559). 

According to Wise & Chonn (2018), China’s interest in Latin America is based on its need of natural resources, its need to feed its growing middle-class population, and to continue their economic growth. Jenkins (2010, 2012) points out something similar by arguing that the main drive of China in Latin America is based on economic interests and by its need on primary products. Also the access to Latin American markets and for strengthening diplomatic relations in face of the One-China policy. On the side of Latin American countries, the main reasons why they would stablish a relation with China according to Wenner & Clarke (2016) are the attractive export market. And because of the easiness and flexibility of China’s finance system in terms of loans and FDI, compared to the western economic system in which political restructuring is required. Finally, Jenkins (2019) explain the current situation of Latin American economies in which they are trapped in the so called “middle-income trap”, that means that the economies are neither able to compete with low-wage countries in low-technology industries, nor have the technological capabilities to compete in the high-technology sector. 

In conclusion, one could argue that China’s economic relationship with Latin American countries is based on economic matters and that Latin American countries could benefit from those links by improving domestic institutions and policy. However, it is important to clarify that most Latin American economies are trapped in a position where they are not competitive neither in the low-tech sector nor in the high-tech sector. Keeping this in mind, Latin American governments should focus on improving its internal capacities and implement a clear economic path. By having clear goals at a domestic level and at a regional level, the balance in economic development could potentially change. 

References 

China SITC Rev2 Products Imports from Latin America & Caribbean in US$ Thousand 2015-2021. (s/f). World Integrated Trade Solution. Recuperado marzo de 2024, de https://wits.worldbank.org/CountryProfile/en/Country/CHN/StartYear/2015/EndYear/2021/TradeFlow/Import/Indicator/MPRT-TRD-VL/Partner/LCN/Product/sitc-rev2-groups 

Jenkins, R. (2010). China’s Global Expansion and Latin America. J. Lat. Amer. Stud., 42, 809–837. 

Jenkins, R. (2012). Latin America and China—a new dependency? Third World Quarterly, 33(7), 1337–1358. https://doi.org/10.1080/01436597.2012.691834 

Jenkins, R. (2019). How China is Reshaping the Global Economy: Development Impacts in Africa and Latin America. Oxford University Press. 

Wenner, M., & Clarke, D. (2016). Chinese rise in the Caribbean: what does it mean for Caribbean stakeholders?