Osvaldo Rosales, Director of ECLAC's International Trade and Integration Division:

A Historic Opportunity for Relations between China and Latin America and the Caribbean

Photo: Carlos Vera/ECLAC

High growth prospects for the next 10 or 15 years in China generate the possibility of a long cycle of favorable terms of trade with Latin American and Caribbean economies – especially with South America. This would provide the countries with resources that would allow to close innovation and competitiveness gaps if they are used adequately.

This is a historic opportunity that we cannot miss. If the countries of our region manage to make progress regarding innovation processes, competitiveness and the internationalization of enterprises, as well as a greater presence in global or regional value chains, the quality of employment and salaries will improve. As these processes are complemented by active policies for integrating small and medium-sized enterprises (SMEs), it will also be possible to make progress concerning growth, equality and international integration challenges.

On the other hand, if this momentum is not properly leveraged, the process of "re-primarization" could be intensified, which would establish renewed patterns in the centre-periphery linkage between China and Latin America. Such a process could generate hindrances to commerce – particularly in Latin American economies that are mostly industrial.

If our region wants to become a significant partner of China and Asia-Pacific, it is critical to unite efforts with several countries and define a joint regional priorities agenda. Therefore, it is necessary to promote technical, entrepreneurial and high-level political meetings that will – hopefully soon – result in the organization of a Summit of Chinese-American Heads of State – similar to those held between China, Europe, Asia and Africa.

This is the right moment for a quality leap in the relationship with China and Asia-Pacific. China is expanding through investments abroad with increasing, yet comparatively minor amounts. In this regard, trans-Latins (transnational Latin American corporations) have more advanced learning curves than many Chinese corporations – especially concerning banking, financial and business services, energy, mining and agrifood.

For this reason, in all those sectors in which trans-Latins have advantages, it is necessary to shortly define innovative policies that grant access to a large amount of resources deriving from Chinese sovereign wealth funds, their banks and corporations. These sectors are adequate for stimulating Chinese-American business alliances, in which joint initiatives in the context of an emergent internationalization of the renminbi could be explored.

The first challenge we are facing is internal. This is about how to link the domestic innovation and competitiveness agenda with a renewed economic linkage to China. For instance, in order to avoid an excessive "re-primarization" of exports, it is necessary to increase innovation and knowledge. This requires active policies for productive development that foster progress on productivity, innovation, infrastructure, transport, logistics and the quality of human resources. For each of these topics, an agenda for regional cooperation with China could be elaborated. This would bring mutual benefits.

For this task, increased and improved regional integration would be helpful. Joint regional or subregional innovation, competitiveness, infrastructure and climate-change related initiatives would complement national public policies. As we actively make use of these initiatives, attractive trade and investment opportunities will emerge, both for diversifying intraregional commerce and our trade and investment relations with Asia-Pacific.

One step forward is the creation of a Latin American and Asian-Pacific Relations Observatory, supported by the Latin American Integration Association (ALADI), the Development Bank of Latin America (CAF) and ECLAC, put into operation on 31 May 2012 after the signing of a tripartite cooperation agreement. This observatory will allow deepening knowledge of economic relations between both regions, as well as facilitating a permanent mechanism that will grant member countries of ALADI access to all the information necessary for adopting policies and implementing strategies on these issues.

To sum up, the main challenge in the relationship between both regions is how to link domestic and regional innovation and competitiveness agendas with the growing trade relation to China and Asia-Pacific. The countries of the region need to reach consensus regarding their priorities and join efforts. This implies giving more priority to multinational approaches and less priority to unilateral initiatives for approaching China and Asia-Pacific. The next visit of the Chinese Prime Minister Wen Jia Bao to the region, in the context of his participation at the United Nations Conference on Sustainable Development (Rio+20), represents a new opportunity for coordinated progress on these challenges.