Chapter 4 - Trade for Development
China, India and the Challenge of Specialisation
China and India represent trade opportunities rather than trade competition for the bulk of Latin American countries. Most of China’s increased exports raise stronger competitive challenges to its Asian neighbours than to Latin American countries, although some of the latter, such as Mexico, do face substantial Asian export competition. Chinese and Indian growth also opens Latin American export opportunities to new markets. For a few countries, notably Mexico and Brazil, this includes intra-industry trade, though for a majority of Latin American countries, the foremost trade opportunities are to be found in commodity exports. Already, the Asian drivers’ heightened demand for oil and minerals has increased both revenues ¬– through the rising prices of commodities – and direct trade with Latin America. Commodity-export specialisation can, however, have some unwanted effects on the economy unless it is managed by responsible macroeconomic policies and well-governed and efficient institutions. Most Latin American economies appear to be coping well, but the challenges will persist. One of the important factors for ensuring long-term diversified growth is investment in innovation. Brazil and Chile are among the prime innovators in Latin America but are still behind OECD levels, mainly because innovation in the private sector has remained limited. Another important factor that would help long-term competitiveness and growth is well-functioning and efficient infrastructure. In 2007, this is one of the most important drawbacks in Latin American economies. Investment in infrastructure is therefore also a golden opportunity for improving export competitiveness and, particularly for Mexico and the countries in Central America, for capitalising on their favourable geographic position.