ECONOMY: Japanese Urged to Look Beyond Asia

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jul 2 1998 (IPS) - Latin American countries, having fully recovered from the economic shock in the last decade, are sounding a “wake-up” call to Japan to increase its presence in the region.

At a two-day symposium which ended Wednesday, Latin American businessmen said the region was poised for strong growth in the next century and urged Japanese investors to take advantage of the improved conditions.

Prime Minister Ryutaro Hashimoto told the packed audience that Latin American countries will hold the key to the development of the world economy through the 21st century.

He praised the region’s turnaround from the situation in the 80s when economies struggled with excessively high external debt and high inflation made worse by currency devaluations.

Compared to that bleak period “Latin American nations have been witnessing increased investment opportunities thanks to regional trade groupings as Mercosur and NAFTA”, he said.

Mercosur comprises Brazil, Argentina, Uruguay and Paraguay while NAFTA consist of United States, Canada and Mexico.

Latin America, which only a decade ago limped behind Southeast Asia’s sparkling economic performance, is now turning the tables with impressive growth rates.

Compared with Asian countries that are struggling with a currency crisis that has curbed its productivity — effectively ending a high growth period — Latin America has recorded an average 5.0 percent GNP growth last year.

Inflation has dropped from an average 200 percent in 1991 to 10.5 percent last year.

“The countries have been successful in their privatization programmes and established successful democratic governments, two points that need to be praised highly,” said Kazuo Haruna, senior advisor of Marubeni Corporation.

The symposium was proposed by Hashimoto during his visit to five Latin American countries in the summer of 1996. It was organized jointly by the Export-Import Development Bank of Japan and the Washington based Inter-American Development Bank (IDB).

The focus was on drawing more Japanese investment and assistance to Latin America.

Peruvian President Alberto Fujimori, who made a special visit to Tokyo for the conference, said that Japan’s presence in the region is needed not only from “the standpoint of traditional economics but also for forming complementary relationships towards the next century”.

Japan lags behind the United State and Europe in economic involvement in Latin Amercia. Only 12 percent of Japanese investment goes to Latin America, dismal compared to figures for the U.S. and Asia which are the most attractive markets.

On foreign aid too, Japan, the world’s top donor, extends only 28 percent of its budget to Latin America. Asia, its biggest recipient, has 45 percent of the total.

Official development assistance loans to that region are largely for environmental protection and resource development like improving electricity and mining.

Other areas for prospective investors are infrastructure and technology, delegates said.

Latin America represents the world’s third largest market for infrastructure projects. In 1997, more than 27 billion dollars was poured into building roads and bridges, railway and ports in the region.

Japanese executives at the symposium expressed renewed interest in Latin America, saying they are impressed with the changes the countries have managed to achieve.

“The countries are doing well and the situation is now attractive,” said a businessman from large construction company. “With the current crisis in Asia, we are looking at expanding in Latin America.”

Businessmen say the intergration programmes, such as Mercosur, have increased the attractiveness of the region by providing easier access and bigger markets for Japanese companies.

Japan is not a member of any regional integration, taking the position that such blocs could work against fair trade. With the establishment of NAFTA, Mexico remains the biggest recipient of Japanese investment in the region because of the access to the US market by Japanese companies.

But Latin American participants noted that during the last 30 years Japanese companies have invested mainly in natural resource exploitation in Latin America. They said there was need to change this by diversifying into other areas that will create employment and add further value to the country’s resources.

Businessmen say some of the reasons for the lukewarm response from Japan is distance, the language, and the general impression that U.S. companies have already established themselves there.

“There is hesitation for these reasons and the symposium has not managed to erase this. But the new and more stable image of the region is certainly an important start,” summed up Jorge Barreiro, from El Salvador, who works for Daiwa Insitute of Research, a leading private research company in Japan.