ECLAC report: Latin America should improve its relations with the Asia-Pacific

The Economic Commission for Latin America and the Carribean’s (ECLAC) latest report entitled Latin America and the Caribbean in the World Economy, 2007 calls for a redoubling of Latin American efforts to improve trade with the Asia-Pacific. Report data indicates that Latin American trade with Asia is low.

As such, the ECLAC report is categorical when it states, “Latin American and Caribbean officials should redouble their efforts to identify and capitalize on these new opportunities, thereby increasing any potential complementarity between Latin America and the Asia-Pacific.”

This comes as no surprise, whereas a majority of Latin American countries have limited trade with Asia Pacific, despite its being a market that has experienced solid growth and which is characterized by cutting-edge, innovative technology. The region has also experienced significant growth in its foreign exchange reserves.

The report also reveals clear differences between the two regions: the Asia-Pacific is home to 2.5 billion (i.e. 60% of the world's population), while Latin America only has 9%. As for GDP, the differences are again quite clear: Asia-Pacific contributes 20% to the world GDP, while Latin America contributes to 6%.

Trade between the two regions is generally between industrial concerns. That is, Latin America mainly exports raw materials to Asia. These include grains, fruits, copper and other metals, wood, and other raw materials. In turn, Asia-Pacific manufacturing exports high-tech products to sectors such as the automotive and electronic.

In light of this, countries such as Argentina, Brazil, Mexico, Colombia and Costa Rica, have recently begun to gain a significant stake in manufactured exports, particularly those from the low and medium technology sectors.

This is exactly why ECLAC stresses that Asia-Pacific trade can be highly beneficial for Latin America. Its argument states “Latin America and the Caribbean should strengthen their trade ties in order to enhance the complementarity of their production with the Asia-Pacific, and establish trade and investment associations, which provide new access to those markets and help them integrate into the chains of production and export to Asia.”

However, the situation is not all bad. While the importance of the Asia-Pacific as an export market varies considerably among the countries of Latin America, the MERCOSUR nations have depended heavily on the market earlier this decade. In Chile, for example, exports to the region increased in 2007 and represented 40% of national exports.

On the import side, the most outstanding feature is Mexico’s growing market share, which reached “approximately 53% of total imports to Asia-Pacific during the period, compared to 25% as of early 1990.”