- Development & Aid
- Economy & Trade
- Human Rights
- Global Governance
- Civil Society
Thursday, June 24, 2021
WASHINGTON, Sep 20 2011 (IPS) - With a shifting global landscape breeding strange bedfellows in the realm of international trade, analysts and economists gathered at the World Bank headquarters Tuesday to discuss what will likely be one of the defining partnership of the decade – China’s connection with Latin America and the Caribbean (LAC).
According to the semiannual report of the Office of the Chief Economists for the Latin America and Caribbean Region of the World Bank, the LAC region has made tremendous strides in the last 10 years.
Compared to the “lost decade” of the 1980s and the mild, stable growth that characterised much of the 1990s, the first decade of the 21st century saw considerably higher growth rates in the region, rising commodity prices, increased capital inflows and sharply declining poverty rates, with over 50 million Latin Americans stepping over the poverty line between 2002 to 2008, and another five million expected to cross over by the end of the year.
Having ballooned by six percent during its 2010 rebound from the global financial meltdown in 2008 – which the LAC weathered stolidly, emerging without balance sheet impairment – the region is expected to grow in the 3.5-4.5 percent range throughout 2011.
The report also claims that, “in an unprecedented moment in history, markets now perceive that the sovereign debt default risk of several countries in LAC – including Chile, Colombia and Peru – is lower than that of France.”
Due in large part to China’s seemingly insatiable appetite for LAC- produced goods, the region owes much of its stability during the recent, tumultuous depression to the rising East Asian giant, which has, according to the report, broken LAC’s “hundred years of growth solitude”.
It is already leading in Brazil, Chile and Peru, with flows to and from China accounting for 10-20 percent of total trade. Chilean exports to China have shot up from five to nearly 25 percent of total exports since 2000.
While World Bank economists are convinced that “the robust growth observed in LAC over the past decade is an important measure of its connections to China,” some experts have warned that the “China Connection” must be monitored sharply, for though it has nurtured rapid growth, the partnership also contains seeds of collapse.
“Latin America and the Caribbean’s Long Term Growth: Made in China?” concludes that China’s role in Latin America will have to undergo structural changes if it is to achieve success and longevity.
“There is little evidence that China can play a role in fostering productivity growth for Latin America,” the World Bank’s chief economist for the region, Augusto de la Torre, told a press conference at the headquarters Tuesday.
“In the context of the lacklustre economic performance in the U.S. and Europe, the key question is whether LAC can leverage its connection with China and turn it into an [independent] source of long-term growth,” he added.
“The extent to which this growth will be inclusive and sustainable, however, depends upon the ways in which Latin American governments formulate macroeconomic policy and use their growing reserves,” Margaret Myers, programme director at the Inter-American Dialogue, told IPS.
“Some, like Chile, have adopted sound macroeconomic policy and invested in social programmes intended to promote long-term growth. Others have not been so prudent,” she said.
“Latin America cannot count on fast growth (from) demand for commodities from China forever,” Mauricio Cárdenas, director of the Latin America Initiative at the Brookings Institution, said last month.
“Latin America has to begin thinking about ways to generate growth more indigenously,” he said, adding that since China’s predominant demand is for crude power to fuel its manufacturing sector and satisfy a swelling class of automobile drivers in the country’s megacities, its dependence on LAC could soon peter out.
“If Chinese growth were to slow, and if slower growth were accompanied by a decrease in demand for commodities, this could have a disastrous effect on certain countries in Latin America,” Myers told IPS.
The China connection has already upset trade balances in the region, with oil- and mineral-rich countries like Venezuela and Brazil enjoying enormous trade surpluses with the soaring Asian giant, while Mexico is tending to a deficit wound of a staggering 11 billion dollars.
And China’s desire to leave its “economic footprint” in the oil and gas fields of the region only appears to be increasing.
Last year Cnooc, a unit of the China National Offshore Oil Corporation, paid 3.1 billion dollars in cash for a 30-percent share in the Bridas Corporation, a subsidiary of Argentina’s largest oil explorer, Bridas Energy.
The company owns fields in Argentina, Chile and Bolivia, home to reserves amounting to 636 million barrels, and produces 92,000 barrels a day.
China’s demand for oil, and thus for LAC products and markets, will likely soar for sometime before showing signs of decline.
While first-world oil demand shrivels, China’s is surging. Last year the International Energy Agency reported that China’s oil demand leapt up by “an astonishing 28 percent”. In 2009, it produced 3.8 million barrels a day, and consumed more than double that amount, 8.5 million barrels a day, up from 4.8 million in 2000.
Meanwhile, fears of what increased Chinese engagement might mean for local communities remains unclear, though a lingering sense of unease hangs in the air, given China’s own track record of labour, environmental and human rights abuses.
“There is certainly no guarantee that China’s loans will positively affect workers in countries like Ecuador,” Myers told IPS. “China’s Development Bank loans tend to lack stipulations supporting labour rights and in countries like Ecuador and Venezuela, which lack institutional controls and macroeconomic foresight, oil-tied investments are unlikely to generate long-term, sustainable growth.”
“China’s nascent civil society and state-controlled media are incapable of monitoring abuses or controlling the corruption that so often leads to environmental degradation and labor violations,” she added.
“However, many Latin America countries are in a much better position to guard against labour violations or harmful environmental practices. In fact, Chinese companies are often better behaved in certain Latin American countries than they are at home. Relatively strong institutions and civil society ensure a degree of compliance,” Myers concluded.
IPS is an international communication institution with a global news agency at its core,
raising the voices of the South
and civil society on issues of development, globalisation, human rights and the environment
Copyright © 2021 IPS-Inter Press Service. All rights reserved. - Terms & Conditions
You have the Power to Make a Difference
Would you consider a $20.00 contribution today that will help to keep the IPS news wire active? Your contribution will make a huge difference.