Trade with Asia Protects Latin America from Global Economic Swings

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Written by Ryan Burkhart, Contributor

The Latin America Program at the Wilson Center held a conference on June 20th discussing the region’s burgeoning economic relationship with Asia, featuring many experts on Latin America’s economic integration with Asia. Cynthia Arnson, Director of the Latin American Program at the Wilson Center, opened the event with an introductory speech.

The keynote address was given by former Colombian Ambassador to the United States and current Inter-American Development Bank President, Luis Alberto Moreno. He began his speech by identifying that Latin America has the resources that a rapidly-growing Asia needs. “If current trends continue, Asia will be Latin America’s largest trading partner in four years.”

He further elaborated that there was much more work to be done between the two economically vital regions. He stated that trade costs were still high, and tariffs were still a problem for some nations. He also said that even though the regions had few cultural and political similarities, they both had the challenge of maintaining all-inclusive, environmentally friendly, and sustainable growth. He posited that the two regions have much more in common than just economics—for example, as economies rise and the population begins to shift toward urban areas, smart city development is needed. This is occurring in both regions.

Each panelist then spoke about a Latin American country they were most familiar with. Most every speaker talked about China’s meteoric rise and its insatiable demand for more resources. In fact, former Chilean Ambassador Jorge Heine noted that this was the first time in 200 years that Latin American did not drop simultaneously as larger North American economies did during the Great Recession. This was due to its dramatically increased ties with Asia, specifically China’s incredible consumption of resources.

Richard Feinberg, a nonresident senior fellow at the Brookings Institution, continued in this vein and said that the boom and bust cycle of years past was gone. Thanks to Asia’s rise, commodity prices will not go down, he contended. Further, the quality of governance in Latin America is much better than what it was in 20th century.

The rest of the speakers all focused on what their country was importing—or more importantly exporting—to Asia and specifically China, and how Asia’s rise has improved all of their economies. However, economic improvement due to trade with Asia looked different in each country. For example, Mexico has a huge trade deficit with China, but this is because Mexico imports components from China to then assemble and export to the U.S.

Many of the speakers also discussed the development of the TPP, as well as the differences between the market-oriented Pacific Alliance and the more statist Mercosur. The Pacific Alliance consists of many Washington-aligned countries such as Colombia, Peru, and Mexico. Mercosur, which translated into English means Southern Common Market, has several regional powerhouses such as Brazil and Argentina.

Photo: Tijs Zwinkels (cc). Photo of downtown Bogota.