LATIN AMERICA: Don't Miss the Train to
Beijing, Delhi, Moscow
By Humberto
Márquez
CARACAS (IPS) - Latin America and the
Caribbean should turn their gaze towards the
economies of China, India and Russia to
diversify exports and strengthen efforts to
bring down unemployment and poverty,
according to the Latin American Economic
System (SELA), based in the Venezuelan
capital.
The region "concentrates its trade in the
United States and the European Union, while
there are possibilities of more and better
trade with other countries of significant
weight in the world economy," said SELA
Permanent Secretary José Rivera during a
recent meeting held to examine ties with
China.
That has been driven home "by the impact of
the current global economic crisis, which
has led to a major recession in the U.S. and
European economies, while in China, although
the annual growth rate has slowed down, it
has remained at a level of around 6.5
percent," the Mexican economist said.
Not only are this region's exports
concentrated in the U.S. and EU, but it
mainly exports commodities and low value
added manufactured goods to countries like
China, India and Russia.
"There is a negative correlation between
sectoral concentration of exports and
economic growth and job creation," Rivera
told IPS.
"Lack of diversity of exports implies a high
level of vulnerability to clashes in
specific sectors and swings in foreign
exchange earnings, while limiting growth of
productivity because it does not favour the
efficient use of inputs or learning through
export activities," he said.
The need for diversified trade in terms of
markets and products with greater value
added is felt even more "in a year like this
one, when the region will post minus two
percent economic growth, impacting the
economy as a whole and efforts to reduce
unemployment and poverty," said Rivera.
In the case of Russia, India and China, SELA
– a 27-member regional body for economic
coordination and cooperation – plans to
carry out more in-depth studies, assess
prospects for trade on a biennial basis, and
promote contacts among governments and
companies.
India thirsty for oil
The world's second-most populous country and
the 12th largest economy, India grew at an
annual rate of 8.5 percent between 2004 and
2008, and the study produced by the SELA
Permanent Secretariat for discussion at the
Jul. 20-22 SELA meeting projected 4.5
percent growth for 2009.
India's economic ties with Latin America and
the Caribbean (LAC) are limited but growing.
In 2004, the region absorbed just 2.4
percent of India's exports and supplied a
mere 1.8 percent of its imports –
proportions that rose to 3.2 and 2.1
percent, respectively, in 2008.
Trade between India and LAC, which amounted
to nine billion dollars in 2008, was
concentrated in just six countries in this
region: Brazil, Mexico, Colombia, Argentina,
Chile and Peru, and in commodities and
manufactured products based on natural
resources.
But SELA points out that India, which
receives 40 billion dollars a year in
foreign direct investment, invests around 20
billion dollars a year abroad, and is
starting to make inroads in capital
intensive sectors in this region.
There are extremely good prospects for the
development of relations between India and
Latin America and the Caribbean because they
are complementary economies, said India's
ambassador to Venezuela, Yashvardhan Kumar
Sinha.
India is very interested in the oil that is
abundant in countries like Venezuela and
Brazil, and offers in exchange cooperation
in sectors like pharmaceuticals and
engineering, and in agriculture - in areas
like dairy products, rice and tea, said
Kumar Sinha.
Energy companies from India have signed
agreements to explore for oil in Cuban
waters in the Gulf of Mexico, Brazilian
waters in the Atlantic ocean, Venezuela's
Orinoco Belt, Peru and Colombia.
India has also made investments in the
production of iron in Bolivia, Brazil and
Colombia, steel in Argentina and Trinidad
and Tobago, and magnetite in Chile. In
addition, India sells cars and tractors in
several countries.
Russia – weapons for beef
Trade between Russia and LAC grew nearly
threefold from 2004 to 2008, climbing from
5.8 to 16 billion dollars, and their
economies can benefit from their
complementarity: Russia can provide
industrial goods and in turn needs
agricultural products, said Yuri Lezgintsev,
the economic adviser at the Russian Embassy
in Caracas.
More than 900 Russian-made planes and
helicopters are used in LAC; over one-third
of Argentina's electricity is produced using
Russian equipment; more than 20,000 Russian
machines are operating in Brazil; Lada
vehicles are assembled in Colombia, Ecuador
and Uruguay; and Russian rockets have
launched satellites in the region.
However, trade is dominated by products with
little value added, and prospects for growth
in investment and trade lie at least three
years in the future, according to SELA, due
to the financial blows received by Russian
corporations in the current crisis.
Russia's biggest trade partners in the
region are Brazil, Argentina, Mexico,
Venezuela and Ecuador. Russia is Brazil's
main supplier of fertiliser, and buys beef,
pork, chicken, sugar, tobacco and coffee
from South America's giant.
Argentina also buys fertiliser and petroleum
products from Russia, selling it beef,
fodder, wine, dairy products and peanuts.
Since 2003, Russia has also been Argentina's
largest market for fruit, exporting 284
million dollars in pears, apples, quince and
other fruit to Russia in 2008.
Russia buys cars and equipment from Mexico
and bananas from Ecuador. And while it
imports practically nothing from Venezuela –
400,000 dollars in aluminum oxide – it has
sold this country 4.4 billion dollars in
arms since 2005.
Cuba, whose economic ties with Moscow
crumbled when the Soviet Union collapsed in
1991, has purchased seven passenger and
cargo planes from Russia since 2005, on
credit.
In 2008, bilateral trade totalled just 265
million dollars, with Cuba buying vehicles,
spare parts for planes and other equipment
from Russia and selling it sugar, tobacco
and rum.
SELA recommends that its members pay
attention to Russian equipment and
technology for producing electricity, its
competitive weapons systems to use in
upgrading armed forces, and possibilities of
cooperation in nuclear energy, space
research and the fishing industry.
China's huge appetite
The SELA study notes that according to the
International Monetary Fund (IMF), China
accounted for more than one quarter of the
world's economic growth between 2005 and
2009 – twice the U.S. share – and states
that "China’s hunger for commodities and
basic inputs is still strong."
While China's world trade quadrupled this
decade - from 510 billion dollars in 2001 to
2.19 trillion dollars from January to
October 2008 alone – its trade with LAC rose
ninefold, from 14.9 billion dollars in 2001
to 124 billion dollars from January to
October 2008.
In 2003, China surpassed Japan to become
Asia's largest buyer of Latin American
exports, and it has a growing presence in
the region with its manufactured goods and
technology and in the area of finance, both
in countries with which it competes – for
example, it overcame Mexico as the
second-largest supplier of goods to the
United States – and countries that it
complements.
SELA says the region should rethink its
global insertion strategies, in order to
complement complex economies like India and
China, rather than merely specialising in
commodity exports.
"There is a big difference: in China you
find well-defined interests and objectives
for its global relations and ties with our
region, while we have paid little attention
to our relations with that giant, and the
current interest in China has largely been a
reaction rather than proactive," said
Rivera.
Latin America and the Caribbean should take
two steps to take advantage of China's
growth while at the same time facing it as a
competitor, said Rivera: decide how the
region wishes to insert itself in the global
economy, and increase knowledge about China
among politicians, the business community
and academics. |
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