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The Visible Hand of China in Latin America


Latin America is looking towards China and Asia—and China and Asia are looking right back. This is a major shift: for the first time in its history, Latin America can benefit from not one but three major engines of world growth. Until the 1980s, the United States was Latin America’s major trade partner. In the 1990s, a second growth engine emerged with the European investment boom in the region. Now, at the dawn of the new century, the emergence of Asia, and in particular China, has the potential to act as a third engine of growth.

This book describes the opportunities and challenges that Latin American economies will face as Chinese importance in the world economy—and in Latin America's traditional markets—continues to grow.









17 June 2008 / Madrid: China and India in Iberoamerica: Economic Complementarity?




  • Table of Contents
  • Acknowledgements
  • Preface
  • Introduction. China: A Helping Hand for Latin America?
    by Javier Santiso
    China’s economic boom represents a major global change. Over the last few years, China has expanded by leaps and bounds
    and become both a threat to and an opportunity for emerging markets. Its growing demand for raw materials is at the same time a bonanza and a challenge for developing countries. (more...)


Did you know?

> Since the year 2000, Latin American exports to China have increased three-fold, while Chinese trade and investments in Latin America were worth $50 billion in 2005 alone.

Chapter 1. Should Latin America Fear China?

By Eduardo Lora

This chapter compares growth conditions in China and Latin America to assess fears that China will displace Latin America in the coming decades. China’s strengths include the size of the economy, macroeconomic stability, abundant low-cost labour, the rapid expansion of physical infrastructure and the ability to innovate. Its weaknesses stem from insufficient separation between market and state. They involve poor corporate governance, a fragile financial system and misallocation of savings. The chapter also examines some important weaknesses both regions share: a weak rule of law, endemic corruption, and poor and poorly distributed education.

Did you know?

> Wages in China are on average one-fourth of those in Latin America, allowing China to produce goods at much lower costs.
> Between 2000 and 2005 China represented nearly 40% of the global growth in world demand for oil, one of Latin America’s leading export commodities.
> China surpassed Mexico in 2003 as the United States’ second most important supplier, behind Canada.

Chapter 2.  Angel or Devil? China’s Trade Impact on Latin American Emerging Markets

By Jorge Blázquez-Lidoy, Javier Rodríguez and Javier Santiso

China presents both a threat and an opportunity for Latin American emerging markets. On average and despite some exceptions, Latin America is a clear trade winner from Chinese global integration. This chapter studies China’s exporting and importing structure, using a database of 620 different goods. It builds two indices of trade competition to compare Chinese impacts over 1998-2004 on 34 economies, of which 15 are Latin American. The results generally confirm that there is no relevant trade competition between China and Latin America products in the US market. Not surprisingly, countries that export mainly commodities face lower competition, because China is a net importer of raw materials and an exporter of manufacturing products. At the same time, China is a wake-up call for other trade champions like Mexico, as the country has emerged as a major exporter at both the labour-intensive, low technology and, increasingly, at the knowledge-intensive, higher technology end of the product spectrum.

Chapter 3.  China and Latin America: Trade Competition, 1990-2002

By Sanjaya Lall and John Weiss

This chapter explores the competitive threat posed by China to the Latin America and Caribbean region. It focuses on the impact of China’s rise as a major exporter of manufactures, and examines these issues with trade data for 1990-2002. The chapter analyzes and compares China’s and Latin America’s export performance and specialisation patterns in the world as a whole and in the United States in particular, the main market for both China’s and Latin America’s exports.

Chapter 4.  Competing with the dragon: Latin American and Chinese Export to the US Market

By Ernesto López-Cordova, Alejandro Micco and Danielken Molina

How sensitive are Latin American exports to the impact of Chinese competition in the United States, their main market? This chapter calculates US import-substitution elasticities and uses them to estimate changes in Latin American and Chinese market shares under three scenarios: a substantial appreciation of the Chinese currency, regional free trade in the Americas and full elimination of US import quotas on textiles and apparel. The first two of these international policy shifts would benefit Latin American exports in US markets, and the third would not, but all three effects are not as large as one might imagine. External events cannot suffice to redress Latin America's relatively poor trade performance vis`a vis China. The authors suggest attention throughout the region to policies that could boost its productivity performance.

Did you know?

> More than 36% of Chile's exports were directed towards Asia in 2006, with China taking a record of 12% of the total.
> Trade between China and Brazil has more than quadrupled over the past four years, with only five products accounting for 75% of Brazilian exports to the Asian country.

Chapter 5.  Does China Have an Impact on Foreign Direct Investment to Latin America?

By Alicia García-Herrero and Daniel Santabárbera

This chapter analyses empirically whether the emergence of China as a large recipient of FDI has affected the amount of FDI received by Latin American countries. For the longest possible period given data availability (1984-2001), it finds no substitution from inward Latin American FDI to China when other relevant factors are taken into account. Concentrating on the last few years (1995-2001), however, when FDI boomed worldwide and negotiations for China’s WTO membership accelerated, the “Chinese effect” becomes highly significant. Assessing the impact country by country, China’s inward FDI appears to have hampered that of Mexico and Colombia, but not the other four large Latin American economies studied


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> Related publications by the OECD Development Centre on the topic


> Related articles by Javier Santiso on the topic


> References on Javier Santiso's work on China and Latin America




América Latina. La Economía política de lo posible
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En miras al 2030: Las economías más competitivas del futuro en
América Latina
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Website |


The Visible Hand of China in Latin America
Presentation hosted by the Central Bank of Chile, Santiago de Chile, Chile.
Website & AgendaPresentation


The emergence of Latin Multinationals: Spain, Mexico and Brazil
Conference given at the World Economic Forum on Latin America, Santiago de Chile, Chile.
Website | Agenda  | Presentation



The Visible Hand of China in Latin America
London Business School
Latin American Business Forum 2007
London, United Kingdom.



China sucede a EEUU y Europa como gran socio comercial e inversor en Latinoamérica
Article on the book - Expansión - Spain




Presentación del libro The visible hand of China in Latin America

Sala Samarcanda, Casa Asia. Avenida Diagonal, 373, Barcelona.

Observatorio Iberoamericano de Asia – Pacífico





For further information, journalists are invited to contact Colm Foy (, OECD Development Centre (tel. +33 1 45 24 84 80).


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