Third Asia-Latin America Conference

Asia and Latin America are both home to several of the world’s fastest developing economies. With their compatible markets, increased bilateral trade and investment reflect the bright outlook for relations between the two regions. To promote dialogue on this growing relationship, the Americas Society and Council of the Americas brought together private sector representatives, government leaders, and academics from the two regions for the third Asia-Latin America Conference. The program offered participants a unique opportunity to examine cross-regional investment and trade relations and to analyze economic growth. Featured speakers represented Asian and Latin American perspectives and included:

 

 

The conference was divided into two panels: “Implications and Prospects of FDI, non-FDI, and Trade Flows between Asia and Latin America” and “Asia and Latin America: Successful Strategies.” The following panelists offered concrete, in-depth analyses of economic and business relations between the two regions:

 

 

Over the past decade, a proliferation of trade agreements and a surge in bilateral investment have expanded the two regions’ economic linkages. In 2006, the World Trade Organization reported two-way regional trade of $130 billion. Increased regional ties are also evident by the decision of the Asia-Pacific Economic Cooperation (APEC)—an association of 21 member countries that promotes liberal trade and economic policies along the Pacific Rim—to hold its 2008 annual meeting in Lima, Peru. A member since 1998, Peru is the newest Latin American APEC member, both Chile and Mexico joined in the mid-1990s. Another avenue for collaboration, the Forum for East Asia Latin America Cooperation (FEALAC) promotes education, science and technology coordination among its 30 East Asian and Latin American members.

 

Our half-day conference focused on trade and investment between Latin America and China, India, South Korea, and Singapore. Speakers highlighted current and future areas of cooperation and the prospects for improving social and economic development. For Latin America, strong Asian economies have helped to create a new crop of investors in the region and another export market.

 

 

Recent developments in both regions help to explain the significant increase in inter-regional trade over the last decade. Ambassador Capuñay noted that Latin America is a good source for Asia’s agro-industrial product demand, while Asian businesses offer Latin America investment and technology for improving harbors, transportation networks and other infrastructure projects.

 

Leading the charge, China continues to look abroad for new economic partners and sources for raw materials such as soy beans, copper and other agricultural products. Kuang pointed out that China has become the third largest importer of Latin American goods and the fourth largest exporter to the region. In 2006, according to Ambassador Capuñay, Latin American exports to Asia totaled $52 billion, or 14 percent of Latin America’s total trade. That same year, Asian exports to Latin America reached $82 billion, but represented only three percent of total Asian trade. According to Satvinder Singh, between 2004 and 2006 Latin America-Singapore trade grew by an average of 29 percent per year.

 

Free trade between the two regions has been strengthened through a proliferation of new accords to open markets. Chile, for example, is the first Latin American country to ratify a free-trade agreement (FTA) with China—the agreement entered into force on October 1, 2006. Ambassador Capuñay also noted that Chile and South Korea enjoy a bilateral FTA, an agreement has been signed with Japan, and negotiations are underway with India. According to Ambassador Hyun, South Korea-Chile trade more than doubled in the last three years.

 

APEC will host its 2008 annual meetings in Peru. Under its chairmanship, the APEC meetings will continue to focus on key items from the Australia agenda: structural reforms, regional integration and energy. However, Peru will also introduce new agenda items such as small and medium-size enterprises (SMEs), education, anti-corruption, corporate social responsibility, and public-private partnerships. If APEC lifts the new member moratorium next year, he sees Colombia and India as prime candidates to join the group. According to Ambassador Capuñay, APEC is studying how to replace the myriad of bilateral trans-Pacific agreements with a single, unifying FTA Asia Pacific (FTAAP). For him, any new FTAs should focus on SME development, as these businesses are the key to inter-regional trade.

Asian investment is an important source of new monies flowing into the region at the same time that Latin American-based businesses are also expanding abroad. For example, India’s Jindal Steel and Power recently made a large investment to develop iron ore mines and set up a steel plant in Bolivia. Looking at Latin American expansion, Ambassador Capuñay pointed out that in April 2007 Mexico’s Cemex agreed to purchase Rinker Group, an Australia-based manufacturer of building materials, for $15.3 billion. Ambassador Capuñay also mentioned that Embraer, the Brazilian aircraft manufacturer, has expanded operations to Singapore.

In recent years, Chinese direct investment is primarily in the energy and commodities sectors and concentrated in Brazil, Peru, Mexico, Colombia, Chile, Ecuador, and Venezuela, among others. In 2006, Ambassador Capuñay noted that Brazil received $19 billion in foreign investment and invested a total of $24 billion abroad. Singapore now serves as the second largest Asian source of foreign direct investment in Latin America, with Singaporean investments totaling $129 million in Brazil and $556 million in Mexico, according to Singh.