Changes in China prevent necessary diversification of exports in Latin America

China’s profound economic transformations in recent years do not predict changes in Latin American exports to the Asian giant, focused on raw materials, although food represents the greatest opportunity to add value to shipments, the agency said on Thursday. ECLAC.

The organization stated that the balance of the trade relationship between the region and China in the last two decades is mixed, since despite the “extraordinary dynamism” of exchange, the expansion of trade has not been accompanied by a diversification of exports.

“To this day they remain concentrated in a small number of basic products.”said the report International Trade Outlook for Latin America and the Caribbean 2023 presented in Santiago.

The outlook is worsening with the growing penetration of Chinese manufacturing, also with conflicting effects in the region because although the access of households and companies to more goods has improved, “It has also significantly displaced regional production in various segments, with the consequent loss of employment and industrial capacities.”.

“The Chinese economy has undergone important transformations (…) especially since the mid-2010s. As output growth converges towards levels around 5% annually, its sources progressively shift from gross fixed capital formation and exports towards household consumption”the report said.

Therefore, in the current situation, from the perspective of Latin America and the Caribbean, export diversification “It is the main pending subject”.

“However, the profound economic transformations registered in China do not allow us to see significant changes in the pattern of raw materials for manufactures that characterizes bilateral exchange.”said ECLAC.

While some primary products such as oil could lose weight in the export basket as China advances in energy decarbonization, others such as copper and lithium will probably acquire an increasing weight for the same reason.

“In this context, the main opportunities to add value to regional exports to China in the short term lie in the food sector. China, with only 7% of the world’s arable land, must feed 18% of the world’s population”, in the midst of intense processes of urbanization and expansion of the middle class.

Among the region’s main exporters to China are the largest South American economies, such as Argentina, Brazil, Chile and Peru.

“The region, with its vast natural and water resources, has the comparative advantages necessary to supply China with high-quality, safe and nutritious food.”, said ECLAC, attributes could become more important amid growing trade tensions between China and the United States or conflicts such as the war in Ukraine.

The region is already a major food supplier to China, with products such as cane sugar, soybean oil, cherries, shrimp and frozen beef, among others. Between 2010 and 2022 it was the origin, on average, of almost a third of its total imports and Brazil alone supplied on average 21% of Chinese food imports.

Trade with China went from about US$14 billion in 2000 to nearly US$500 billion last year. In 2022, ECLAC added, 95% of the region’s exports to China corresponded to raw materials and manufactures based on natural resources.