Friday, April 16, 2010

The Count: China edition

19.3... the percentage of total Latin American and Caribbean exports that will go to China in the year 2020. And before you ask: no, maladjusted is NOT clairvoyant...... or at least not yet.

According to a study prepared by ECLAC the world's workshop will soon also surpass the European Union as the second largest destination for Latin America and the Caribbean's exports. The graph below shows the share of the region's exports that go to its top three markets. The key take away here is that over the last ten years the region is significantly less dependent on US markets than before and that China has rapidly become an important alternative destination for exports.

[Latin America and the Caribbean: top three export markets share of total 2000-2020 (percentages)]

Of course, the U.S. will continue to be the region's main export market but it's relative importance will have dropped tremendously, from 38.6 percent in 2009 to 28.4 by 2020. The EU's share will more or less stay the same while China's will continue its impressive increase, from 7.6 percent in 2009 to 19.3 in 2020.

Yes indeed, while the US and EU were stuck in a severe recession last year, China's economy still grew 8.7%. Also, while the value of exports to the US and EU plummeted 26 and 28 percent, respectively, the value of exports to China actually grew 5 percent.

Significantly, the assumptions underlying ECLAC's projections don't require Chinese demand for the region's products to continue growing at the same pace. As the report notes:
"If demand for our products in the United States, European Union and rest of the world continues to grow at its current pace, and assuming that Chinese demand only grows at half its current pace, China would surpass the European Union in 2014 and would become the second largest market for the region's exports."

As can be seen below, China already represents a key export market for many Latin American countries. 13% of Chile's exports go to China, followed by Peru, with 11% and Argentina, with 9%.

[Latin America and the Caribbean: Asia-Pacific country/regions average export shares 2006-2008]
But what's more, it attained this huge share of Latin American exports very, very, very quickly. Between, 2000 and 2008 it climbed from being Brazil's 12th largest export market to being number one. For Costa Rica it went from being 26th to second. Chile: from 5th to first. Colombia: 35th to fourth. Venezuela: 37th to third.

But there's a downside to this story. The pattern of trade between China and Latin America and the Caribbean is not very encouraging. With a few exceptions, the region is only exporting raw materials.

[Latin America and the Caribbean: technological content of exports to China, 1995-2008]
Not much of a clear trend in this one, except for that big blue space at the bottom. Yup, that shows the share of raw materials in total exports to China increasing.

So in the end, if these projections hold up, by 2020 Latin America and the Caribbean will be less dependent on US markets and much more dependent on Chinese ones. It would be nice if the moral of the story was that trade between developing countries meant a better pattern of trade for the region, but so far this doesn't seem to be the case. There are some exceptions though. For instance, virtually all of Costa Rica's exports to China are high-tech goods. Mexico also exports a large amount of high-tech manufacturing. But at the end of the day these are just exceptions.


  1. The Count rocks, but gotta say something here. After reading the post I went over, checked a Mercator map of the world and......yep.....
    there's China in the northern hemisphere.

    I know it isn't only you guys, still....

    Never mind. We lurve The Count truly we do.

  2. uuurrrgh... I'll blame that one on the couple beers i was drinking at the time... ooops... an edit is certainly in order!