1
China’s Impact on Latin China’s Impact on Latin AmericaAmericaAn Angel or a Devil for Latin Emerging An Angel or a Devil for Latin Emerging Economies? Economies?
ABCDE World Bank
Tokyo 29-30 May 2006
Javier SantisoChief Development Economist & Deputy Director
OECD Development Centre
2
11 The cognitive effect: new emerging capitalisms.The cognitive effect: new emerging capitalisms.
The trade effect: the dark side of the boom. The trade effect: the dark side of the boom. 22
China and India as a wake up call.China and India as a wake up call.33
3
China: extraordinary or back to normal?China: extraordinary or back to normal?
China GDP (% of world total)
0%
5%
10%
15%
20%
25%
30%
35%
1500 1600 1700 1820 1870 1900 1950 2001 2045
Source:Angus Maddison
?
2005 - GDP in US$ (% of world)
28.4
10.66.4
5.04.8
4.33.9
2.62.5
0 5 10 15 20 25 30
United StatesJapan
GermanyUnited Kingdom
FranceChina
Italy
SpainCanada
Source: IMF
According to IMF estimates Chinese gross domestic product based on purchasing-power-parity (PPP) amounts to 13.6% of 2005 world GDP (20.7% in the case of USA).
4
EmergingAsia8.0%
GDP share of world output (WEO, 2004)
EU30.7%
US29.6%
Korea&Japan12.7%
China4.2%
The cognitive impact: The emergence of The cognitive impact: The emergence of new capitalisms. Center and Periphery new capitalisms. Center and Periphery
rebalanced…rebalanced…
LatAm4.8%
Asia represents more than one fifth of world output.
5
China has doubled its GDP in 8 years…China has doubled its GDP in 8 years…without the help of Money Doctors!without the help of Money Doctors!
Chinese growth rates have been higher than those observed in Brazil and Mexico during their glorious years.
Source: based on WEO and PWT
PPP per capita GDP in constant prices
(thousand of US$, 2004-5 estimate)
0
4
8
12
16
20
24
2819
85 1
950
1988
195
3
1991
195
6
1994
195
9
1997
196
2
2000
196
5
2003
196
8
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
e
China
J apan
Korea
Brazil
Mexico
6
Asia´s growthAsia´s growth on an outward looking on an outward looking strategy: a development strategy to strategy: a development strategy to
follow.follow.
Source: IMF DOTS
… and its share in world merchandise trade has doubled in less than a decade.
China's share in world merchandise trade (%, 1980-2004)
0%
1%
2%
3%
4%
5%
6%
7%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Trade openness (X+M/GDP, 2004)
0%
50%
100%
150%
200%
250%
Mal
aysi
a
Tha
iland
Chi
na
Sou
th K
orea
Indo
nesi
a
Indi
a
Chi
le
Mex
ico
Ven
ezue
la
Uru
guay
Arg
entin
a
Col
ombi
a
Per
u
Bra
zil
Region's Average 2004
Source: WTO, National Statistics
China’s trade openness surpasses that of all Latin American countries …
7
11 The cognitive effect: new emerging capitalisms.The cognitive effect: new emerging capitalisms.
The trade effect: the dark side of the boom. The trade effect: the dark side of the boom. 22
China and India as a wake up call.China and India as a wake up call.33
8
Are raw material prices facing a Are raw material prices facing a Chinese shock?Chinese shock?
Source: University of Oxford
Commodities Prices in real terms
40
60
80
100
120
140
1900 1915 1930 1945 1960 1975 1990 2005
China?
Many economists are putting the blame on China and -to a lesser extent- on other emerging economies (India) of the current increase in raw material (70% in real terms).
9
Source: BBVA from original FMI and Bloomberg data; * Projection
0
1
2
3
4
5
6
7
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
0
10
20
30
40
50
60
70
Worldwide GDP growth and oil price
Price of Brent barrelin USD (right-hand side scale)
Worldwide GDP growth (in %)
The stars have been lined up for Latin The stars have been lined up for Latin America:America:
Commodity boom has been a bonanzaCommodity boom has been a bonanza
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Venezuela 83.1%
Peru 70.7%
Chile 59.1%
Colombia 46.3%
Argentina 38.0%
Brazil 29.6%
Mexico 14.6%
Latam 31.2%
Source: BBVA
over total exports (2004)
Exports of commodities
60
70
80
90
100
110
120
130
140
150
160
170
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Source: BBVA
BBVA-MAP Index of Latin America commodity prices (100 =jan03)
TOTAL
Without oil
The stars have been lined up for Latin The stars have been lined up for Latin America:America:
Commodity boom has been a bonanzaCommodity boom has been a bonanza
11
Latin America
0
10
20
30
40
50
60
70
80
90
100Ecu
ad
or
Para
gu
ay
Boliv
ia
Ven
ezu
ela
Ch
ile
Arg
en
tin
a
Uru
gu
ay
Colo
mb
ia
Peru
Ind
on
esi
a
Bra
zil
Can
ad
a
Neth
erl
an
ds
Ind
ia
Th
aila
nd
Sp
ain
Mala
ysi
a
Mexic
o
Belg
ium
UK
Fran
ce
US
Sin
gap
ore
Italy
Ch
ina
Germ
an
y
Sou
th K
ore
a
Taiw
an
Hon
g K
on
g
Jap
an
Source: WTO
Exports of agricultural, energy and minery products(in % over the total) (2003)
The stars have been lined up for Latin The stars have been lined up for Latin America:America:
Asia is becoming a major growth pilarAsia is becoming a major growth pilar
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Source: Based on domestic sources.
Figures for 2004 and 2005 are forecasts
0
1
2
3
4
5
6
7
8
9
10
1997 1999 2001 2003 2005
Growth of GDB in China
(Annual Percentage variation)
0
1
2
3
4
5
6
7
8
9
10
Chile
Arg
enti
na
Perú
Bra
sil
Uru
guay
Venezu
ela
Colo
mbia
Méxic
o
Exports to China in 2003
(Percentage of total)
The stars have been lined up for Latin The stars have been lined up for Latin America:America:
China became a major trading partnerChina became a major trading partner
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China´s strong demand for energy and China´s strong demand for energy and commodities: a bonanza or a threat?commodities: a bonanza or a threat?
Source: BBVA, Cochilco
Consumption of aluminum, 2004(estimate)
24%
22%
20%
23%
11%
North America
Western Europe
China
Other Asia
Rest of world
Consumption of nickel, 2004(estimate)
11%
38%
11%
13%
20%
7%
North America
Western Europe
China
J apan
Other Asia
Rest of world
Source: JP Morgan estimates
Source: BP
Share of total oil exports by destination region/country, 2003 (%)
28%
2%
0%
2%
26%1%
6%
12%
19%
1%
3% USA
Canada
Mexico
S. & C. America
Europe
Africa
Australasia
China
J apan
Other Asia P acific
Rest of World
Share of total copper exports by destination region/country, 2004
18%
0%
31% 9%
17%
5%
14%
6%
50%
America
Others
Europe
South Korea
China
Taiwan
J apan
Others Asian
Asia
14
Source: C.HJ.Kwan, Nomura Institute of Capital Markets Research Source: Blázquez, Rodríguez and Santiso (2006)
China’s demand for commodities: a China’s demand for commodities: a bonanza or a threat?bonanza or a threat?
Asian countries competition* vs. Chinese exports to US, %
010203040506070
*Value of exports to US from China in same product categories as country´s exports, as % of country´s total exports to US
Latin American countries competition* vs. Chinese main export products
0%
10%
20%
30%
40%
50%
60%
México
Bras
il
Colombia
Arge
ntina
Perú
Urugu
ayChil
e
Vene
zuela
*Arithmetic average of the following indexes: CC= and CS=
where ajt and ait equals the share of item “n” over total exports of countries j (China) and i in time t.
å --n
njt
nit aa
2
11
åå
å
n
njt
n
nit
n
njt
nit
aa
aa
22 )()(
15
Chinese commercial competition with Paraguay
7% 7%
8%
7%
6%5%
0%
2%
4%
6%
8%
10%
1998 1999 2000 2001 2002 2003
Competencia comercial china con Argentina
17% 16%18% 17%
15%13%
0%
5%
10%
15%
20%
1998 1999 2000 2001 2002 2003
Competencia comercial china con Chile
11% 11% 11% 11%10%
9%
0%
2%
4%
6%
8%
10%
12%
1998 1999 2000 2001 2002 2003
Does China compete with Latin American Does China compete with Latin American countries ?countries ?
Chinese commercial competition with Uruguay19%
17% 16% 16%
13% 13%
0%
5%
10%
15%
20%
1998 1999 2000 2001 2002 2003
Source: Blázquez, Rodríguez and Santiso, OECD Development Centre (2006)
16
Does China compete with Latin American Does China compete with Latin American countries ?countries ?
Chinese commercial competition with Costa Rica
31%
26%28%
33%36%
31%
0%
10%
20%
30%
40%
1998 1999 2000 2001 2002 2003
Chinese commercial competition with El Salvador
21%23% 23%
27%26%
24%
0%
10%
20%
30%
1998 1999 2000 2001 2002 2003
Chinese commercial competition with Guatemala
16%15%
16%
17%
16%
18%
13%
14%
15%
16%
17%
18%
19%
1998 1999 2000 2001 2002 2003
Chinese commercial competition with Panama
12% 11% 11% 11%
10%
8%
0%
2%
4%
6%
8%
10%
12%
14%
1998 1999 2000 2001 2002 2003
Source: Blázquez, Rodríguez and Santiso, OECD Development Centre (2006)
17
Does China compete with Latin American Does China compete with Latin American countries ?countries ?
Chinese commercial competition with Bolivia
11%12% 11% 11%
8% 8%
0%
2%
4%
6%
8%
10%
12%
14%
1998 1999 2000 2001 2002 2003
Chinese commercial competition with Colombia
19%
16%
19%
21%
19% 18%
0%
5%
10%
15%
20%
25%
1998 1999 2000 2001 2002 2003
Chinese commercial competition with Peru17%
16%17% 17%
15%13%
0%
5%
10%
15%
20%
1998 1999 2000 2001 2002 2003
Chinese commercial competition with Venezuela11%
8%
9%8%
7%6%
0%
2%
4%
6%
8%
10%
12%
1998 1999 2000 2001 2002 2003
Source: Blázquez, Rodríguez and Santiso, OECD Development Centre (2006)
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China has become a major destination China has become a major destination of Brazilian exports: The bonanza.of Brazilian exports: The bonanza.
Source: SECEXSource: BBVA
Trade Balance with China
574
966
2.385
1.729 1.694
0
500
1000
1500
2000
2500
3000
2001 2002 2003 2004 2005p
US$ millions
Major countries of destination of Brazilian exports
United States 22,6% 1º United States 21,1%Argentina 11,2% 2º Argentina 7,6%
Netherlands 5,4% 3º Netherlands 6,1%Germany 5,3% 4º China 5,6%Japan 4,6% 5º Germany 4,2%Italy 3,8% 6º Mexico 4,1%
Belgium 3,8% 7º Italy 3,0% United Kingdom 3,0% 8º Japan 2,9%
France 2,5% 9º Chile 2,6%Spain 2,4% 10º France 2,3%Mexico 2,2% 11º United Kingdom 2,2%Chile 1,9% 12º Spain 2,1%
Russia 1,6% 13º Belgium 2,0%Paraguay 1,6% 14º Russia 1,7%China 1,4% 15º Venezuela 1,5%
1999 2004
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Brazilian exports of primary products: Brazilian exports of primary products: more is not better (Dutch disease and more is not better (Dutch disease and
monopsony).monopsony).
0.05
0.06
0.07
0.08
0.09
0.10
0.11
0.12
Jan
-89
Jan
-90
Jan
-91
Jan
-92
Jan
-93
Jan
-94
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Herfindahl-Hirschmann Concentration Index ofBrazilian exports by country of destination
more
con
cen
trati
on
less
con
cen
trati
on
Source: BBVA and Bradesco
Herfindahl-Hirschmann Concentration Index of Brazilian exports by industry, 1990-2003
0,00
0,02
0,04
0,06
0,08
0,10
0,12
0,14
0,16
0,18
0,20
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Source: WTO.
+ c
on
cen
trati
on
+ d
ivers
ific
ati
on
20
11 The cognitive effect: new emerging capitalisms.The cognitive effect: new emerging capitalisms.
The trade effect: the dark side of the boom. The trade effect: the dark side of the boom. 22
China and India as a wake up call.China and India as a wake up call.33
21
China competes intensively with China competes intensively with Mexico on a global levelMexico on a global level
Chinese trade competition with Latin America
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.0 0.1 0.2 0.3 0.4 0.5 0.6
Mexico
Brazil
Colombia
VenezuelaChile
ArgentinaPeru
Costa Rica
Chinese global trade competition
0.2
0.3
0.4
0.5
0.6
0.7
0.30 0.35 0.40 0.45 0.50 0.55 0.60
Mexico
ThailandHungary
USA Czech R.
Spain
Poland
Japan
Source: Blázquez, Rodríguez and Santiso (2006)
22
11,700 Km
• Lower transport and communication costs • Access to FTA• Just-in-time delivery
Mexico is more competitive in manufacturing more sophisticated products which require frequent communication with the client or
supplier and short reaction times.
Shipping time
24 Days
160 Km
4 Days
Mexico benefits from its geographic proximity to its major export markets:
Mexico’sMexico’s competitive advantage: competitive advantage: proximity to export marketsproximity to export markets
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World Bank
US$/TEU
CMPCH Index
LSU Index
Singapore 1 0.38 0 0.33 2 6.76 6.72 117 NA NAHong Kong 0 0.25 0 0 NA 6.38 5.46 NA NA NATaiwan 0.5 0 0 0 NA 5.18 4.49 140 163 NAJapan 0.75 0.13 0.89 1 NA 5.16 5.16 250 202 NAMalaysia 0 0.25 0 0.38 7 4.95 5.76 75 NA NASpain 0 0.06 1 0 4 4.88 6.08 200 105 NAKorea 0 0.38 0 0 NA 4.12 5.22 NA NA NAThailand 0.5 0.63 0 0.38 4 3.98 5.12 93 NA NAArgentina 0 0.13 0 1 7 3.81 4.52 NA 139 NAVietnam 0 0 0 0.5 NA 3.81 5.02 NA NA NAChile 0 0.25 0.43 1 3 3.76 6.05 202 100 NAChina 0.5 0 0 0 7 3.49 4.44 110 NA NAIndonesia 1 0.06 0 0.38 5 3.41 4.06 NA NA NAMexico 0.5 0.38 0 1 4 3.34 2.61 NA NA NAVenezuela 0 0 1 1 11 3.28 3.63 NA NA NAEl Salvador 0 0 0 1 4 2.95 2.3 NA NA 61Brazil 0.5 0.75 0 1 10 2.92 4.45 328 292 NAPeru 0.5 0 0.5 1 7 2.88 3.32 NA 142 NAIndia 0 0 0 1 NA 2.79 4.28 NA NA NAPhilippines 0.5 0 0 0.38 7 2.79 3.51 118 NA NAEcuador 0 0 0.43 1 15 2.63 3.65 NA 139 NACosta Rica 0 0 0 1 4 2.46 3.28 NA NA 68Colombia 0.5 0.13 0.5 1 7 2.26 1.88 NA NA NABolivia NA NA NA NA 9.5 1.61 4.38 NA NA NAUruguay 0 0 0 1 5 NA NA NA NA NA
NA: Not AvailableSource: Data for the first 4 columns was kindly provided by Carsten Fink, Aaditya Mattoo, and Ileana Cristina Neagu* (2002).
Container Handling ChargesCooperative Agreements
Index
Median Clearance
time (Days)
Port Efficiency Index (1-7)
Crime Index (1-7)Country
Cargo Handing
Restriction Index
Mandatory Services
Index
Price Fixed Agreements
Index
Pending reforms : the upgrade of port Pending reforms : the upgrade of port facilitiesfacilities
24
Conclusions: A Watch ListConclusions: A Watch List
Africa and Latin America: Out of the Value-Chain Game?
The share of China’s total exports produced by foreigners has risen sharply, from 32% to 60% between 2000 and 2005.
Foreign outsourcing is becoming a major driver of India’s and China’s high tech exports, both countries moving up quickly in the value added ladder.
In 2005 for example, of China’s top 100 exporters, 53 were foreign companies and all were electronics/information technology companies.
25
Thank youThank you
Based on
Jorge Blázquez, Javier Rodríguez and Javier Santiso, “Angel or Devil? Chinese Trade Impact on Latin American Emerging Markets”, OECD Development Centre, Working Paper, May 2006.