China & India Change the World - APEC

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By Andres Oppenheimer. The agreement sealed the last week between China and India to dramatically increase its economic relations will have a major impact on Latin America, and will not be something quite positive for the region.

Earlier this week, leaders of the two powers of the world's fastest-growing emerging met in Beijing to end decades of tension and increase their bilateral trade ties.

The prime minister of India, Manmohan Singh, and the prime minister of China, Wen Jiabao, announced that by 2010 bilateral trade reached U.S. $ 60.000 billion - far more than the U.S. $ 40,000 million that were expected - and that the two countries begin talks on a preferential trade agreement.

While international summits often produce big promises and then not met, there is reason to take very seriously the commitments between China and India. Since China and India signed a 'strategic partnership' in 2005, bilateral trade has soared. Although the two countries were committed that year to reach a bilateral trade of U.S. $ 20.000 billion in 2008, that figure reached as early as 2006.

"The figures exceeded the forecasts when it comes to the India-China trade," said an editorial in the newspaper "The Times of India" on Wednesday. "It is possible that China will soon become the largest trading partner of India." The growing trade ties between China and India, as well as the free trade agreement signed in 2005 between China and the 10 members of the Association of Southeast Asian Nations (ASEAN), likely to change the map of world trade. And have a great impact in many Latin American countries that are increasingly dependent on their exports to China.

The good news is that increased trade between China and India produce more economic growth in Asia, which will require increasing amount of oil, copper, iron ore, soybeans and other Latin American raw materials. That would help countries like Brazil, Argentina, Chile, Peru and Venezuela, which are the main exporters of raw materials to China in the region. In the past 5 years, Chinese purchases of commodities made in Latin America grow the region's economy to an average of 5% per annum. That has contributed to who is going through its best growth cycle in the past 40 years, according to the UN.

In addition, a growth of the Asian economy will create an even bigger market for all types of Latin American exports, say Asian diplomats. "Bringing India and China and increasing their trade will make both countries more prosperous, and open up more opportunities for Latin America," he said in a telephone interview the ambassador of India in Argentina, R. Viswanathan. "What America needs is growing markets, especially at a time when the U.S. economy is slowing. The situation is very advantageous to the region."

But many economists warn that China and India have complementary economies. China is stronger in manufacturing, while India is in information technology, and that their preferential trade agreements will make it more difficult for Latin American countries to export manufactured goods or technology to the two Asian giants. "The growth of trade between China and India will make it harder to move toward Latin America exports more sophisticated, higher value-added," I said Antoni Estevadeordal, one of the leading economists of the Inter-American Development Bank Washington, DC .

My opinion: I hope I am wrong, but I fear that the growing Asian economic integration will hinder the further export of industrial products in Latin America to Asia, and that will increase the dependence of many Latin American countries for their exports of raw materials, which in many cases produce less jobs and profits that the finished products.

The world is divided into three trading blocs, particularly with regard to exports of heavy products, whose transport is expensive: the bloc of the United States, Canada, Mexico and its neighbors, the European Community, and Asia. And the new agreements between China and India seem to indicate that this division will increase more and more.

(Comment from Oscar Granda)

It is clear that in these times we are witnessing a reordering of global geo-economic. At the gates of the Asia-Pacific Economic Cooperation (APEC) this month of November 2008 in Peru, Latin American countries must refine our strategies to cope with the strong financial crisis and attract investment to achieve that provides our growth and sustained development.