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Latin american looks to fill asian demand Original Source Link: (May no longer be active)
http://www.forbes.com/home/feeds/ap/2004/11/19/ap1666576.htmlhttp://www.forbes.com/home/feeds/ap/2004/11/19/ap1666576.html
Associated Press
Latin America Looks to Fill Asian Demand
11.19.2004, 09:34 AM
Driven by voracious Asian demand, Brazilian and Argentine farmers are scrambling to plant as much soy as they can while Chilean mine workers rack up overtime burrowing into the earth for copper.
With China buying up all the raw material it can to fuel an unprecedented economic expansion, Latin America is looking east across the Pacific Ocean to build on a booming trade relationship that has no end in sight. And Asian countries - particularly China - are looking for political payback for being good customers.
Before he arrived at this week's Asia-Pacific Economic Cooperation summit of 21 economies facing the Pacific, Chinese President Hu Jintao got the red carpet treatment in a weeklong trip to Brazil and Argentina.
Hu was quickly rewarded by Brazil and Argentina with a prize: Declarations by both countries that the Asian giant is now a market economy, a status China has been seeking worldwide to keep countries from imposing penalties on the dumping of Chinese exports.
In return, China pledged multibillion dollar investments in Argentine energy production, infrastructure and railways. Brazil got accords that will increase its imports of chicken and beef to China, and a US$1 billion (euro770 million) agreement to build a a natural gas pipeline.
South Korean President Roh Moo-hyun also spent three days in Brazil ahead of the APEC summit, endorsing a free trade zone for his country with the Mercosur bloc - Brazil, Argentina, Uruguay and Paraguay.
Brazil wants to export ethanol fuel and mid-sized airplanes to South Korea and hopes the Asian nation will invest in Brazil's crumbling infrastructure.
Although experts say Latin America still wants to maintain close relationships with the United States, Latin American countries clearly want to increase their trade flow to Asia and are willing to grant political concessions in return.
"I see this as a new initiative that has legs and is going to walk," said Riordan Roett, Western Hemisphere department chairman at Johns Hopkins University's Paul H. Nitze School of Advanced International Studies. "Is there going to be a quid pro quo the Chinese ask of Latin America? Politics is always linked to trade, and there is no reason the Chinese should act any differently."
From 2001 to 2003 alone, exports from Latin America to Asia jumped from US$22 billion to US$29 billion (euro17 billion to euro22 billion) - an increase of 32 percent - due mainly to Chinese growth of more than 9 percent annually. Latin American exports of raw materials have also increased to countries like South Korea, Japan and Australia.
The growth has created jobs, though experts say most of the profits have been pocketed by large companies and rich Latin Americans with cash to invest.
Brazilian soy production has boomed over the last decade amid rising worldwide demand, especially from China for soy used in products ranging from animal feed to cooking oil. So has Chilean copper production as China keeps constructing buildings requiring kilometers (miles) of copper plumbing pipes.
A recent study by the Inter-American Development Bank noted that Latin America is well-poised to feed additional Asian demand.
"As incomes rise, tastes should also diversify in China, offering growth for exports such as wines, coffee, meats, fruits and vegetables," the report said.
While experts warn that most Latin American exports to Asia are commodities that can be subject to wild price swings, delegates at the APEC conference say they're not worried about Asian demand suddenly dropping in a surprise economic downturn.
"The Chinese are trying not to freeze their economy, but to calm it down to 7 percent growth instead of 10 percent, but for the Chilean purpose that's enough," said Mario Matus, a top economic official with the Chilean Foreign Ministry.
Chile is trying strike new free trade deals in places like China, New Zealand and Turkey in a coordinated strategy aimed maintaining export levels roughly equal between Asia, the United States and Europe "so we are not dependent on a single area of the world," Matus said.
But experts warn that Latin America's Asian export boom is showing few signs so far of decreasing the region's long-standing problems of poverty and its historically wide gap between the area's haves and have-nots.
Latin America has gone through commodities booms and busts since World War II, but most countries in the region have never used the good times to invest in education, infrastructure or industrialization, said Gary Hufbauer, an economist and trade expert with the Washington-based Institute for International Economics.
"What you are doing is making a lot of people who are owners of the resources in question very rich very quick," he said. "The question of the use of those funds is not a happy history in Latin America."
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