Is China eating Latin America’s lunch?

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Probably not, according to panelists at today’s PSD Forum. Preliminary findings from a World Bank study indicate that while China does represent a competitive challenge to Latin America as far as economic growth is concerned, the picture is much less dramatic than the current level of discussion would indicate. Pravin Krishna of SAIS gave a close look at the data. To pick three findings:

  1. there is limited technological similarity in the structure of exports between Latin America (except Mexico) and China,
  2. while China has surpassed Mexico as the US’s second largest trading partner, there is little correlation between Chinese gains and Mexico’s losses in US market share (except for a couple of sectors), and
  3. Latin America has experienced a boom in primary goods exports as Chinese demand has driven up world commodity prices.

Former Brazilian finance minister Pedro Malan called China’s tremendous growth “a tectonic change” that serves as a wake-up call to Latin America. Chinese growth should remind Latin American countries that they need to speed up the process of adaptation to the changing world economy. He suggests that countries fund centers of excellence to promote innovation, and that they concentrate these resources on a few select universities rather than building research institutes all over the place.

Update: From the IDB, also see: Should Latin America Fear China?, The Emergence of China: A View From Central America, The Emergence of China: Opportunities and Challenges for Latin America and the Caribbean and a related event.

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