Capitalizing on the China Cycle:
Time is Running out For Latin America
By Kevin P. Gallagher
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This policy brief reviews the prospects for economic growth in Latin America in the event of a slowdown in Chinese demand for primary commodities. The brief argues that in the long run China's appetite for Latin American commodities will decline, as will prices. Yet, we are still in a China "super-cycle" that should benefit Latin America for the foreseeable future. The challenge will be for Latin America to seize this opportunity while it can and use the benefits from China trade to generate long-run sustainable development.
In Latin America and the Caribbean (LAC), as in many other parts of the world, there is much concern about changes in the Chinese economy. The China Boom from 2000 to 2011 was very good to the world in terms of trade and growth, and Latin America was no exception. China registered impressive growth at 9.2 percent in 2011 but that growth has slipped to the 7 percent range, where it will remain for the foreseeable future. This slowdown is causing anxiety throughout the world, including in LAC.
Indeed, sluggish Chinese demand will put a drag on LAC growth in the short term. But the medium- and longer-run prospects depend on public policy in both China and Latin America. If China manages to re-balance its economy, there is potential for steady imports from LAC. However, it will be up to LAC to put in place appropriate institutions to channel the benefits of Chinese trade and investment toward longer-range development.
In June of 2012, Chinese Premier Wen Jiabao proposed a multi-billion-dollar collaboration with the region in manufacturing and agriculture—a major, positive step for both China and LAC. The question now is whether LAC will rise to the challenge. The region’s ability to implement much-needed economic and institutional reform may be of far graver concern than China’s ability to post high rates of growth.
Download the policy brief, Capitalizing on the China Cycle: Time is Running out For Latin America
Learn more about GDAE's work on China and Latin America.
The Global Development and Environment Institute’s Globalization and Sustainable Development Program examines the economic, social and environmental impacts of economic integration in developing countries, with a particular emphasis on the WTO and NAFTA's lessons for trade and development policy. The goal of the program is to identify policies and international agreements that foster sustainable development.