LatAm’s Long Term Growth: Made in China?

Augusto de la Torre, the World Bank’s chief economist for Latin America, is speaking at AS/COA’s Panama conference on March 2. For his presentation he’ll be discussing the September 2011 report for the World Bank on Latin America’s swelling economic bonds to China.

Access the World Bank report on the Chinese-Latin American economic relationship (PDF) English | Español

The report examines Latin America’s growing trade with the Asian giant and looks at whether the region can maintain consistent growth while avoiding the recurring curse of boom and bust cycles and also whether Latin America can use these Chinese ties to leverage growth into higher standards of living.

One of the central themes around this is productivity: though Latin growth ran parallel with climbing Chinese trade, researchers believe that in the long term, trade alone will not spur productivity. The report says that “human capital formation, investments in innovation, technological adoption, and cumulative learning” must also take place in order to affect productivity. However, Latin America lags behind in these areas, and the connection to China is not a silver bullet to fix these issues.

The report also compares Latin America’s trade relationship with China with that of East Asian economies with Japan, the other Asian giant, from 1970 to 1990. However, while Japan’s relationship with East Asia consisted of “large flows of intra-industry trade and FDI, rising, network-type connections…and significant diffusion of technology and knowledge,” this is not the case with China and Latin America. In Latin America, foreign direct investments focuses on Chinese acquisition of natural resource-based companies.

Rachel Glickhouse is the editorial associate at AS/COA Online.