The intricacies of establishing closer commercial ties between Latin America and China

Free trade agreements (FTAs) have been a key tool in expanding economic relations between China and Latin America

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Over the last decade, China has consolidated its position as one of the main economic actors in Latin America, becoming the second most important trading partner for the region, only surpassed by the United States. According to analysis from Dialogue Earth, this rise is reflected in the figures of bilateral trade, where China has become the main destination for exports from many Latin American countries.

The boom in economic relations between China and Latin America has been largely upheld by the export of raw materials and natural resources. Products such as oil, copper, soybeans, and other agricultural products have accounted for the majority of the region’s exports to China in recent years. This dependence on exports of natural resources poses challenges for economic diversification and sustainable development in Latin America.

Free trade agreements (FTAs) have been a key tool in expanding economic relations between China and Latin America. To date, China has signed FTAs with 29 countries, both bilaterally and regionally. These agreements have generated a significant increase in bilateral trade and investments, but have also raised concerns and debates within the countries involved.

For example, in the case of Chile – one of the first countries to sign an FTA with China in 2005 – there has been substantial growth in bilateral trade. However, Chile’s economic dependence on China, where nearly 40% of its exports are directed, raises concerns about the country’s vulnerability due to a possible cooling of the Chinese economy. Despite the economic benefits, such as trade and investment growth, experts warn of the need to diversify Chile’s economy to reduce dependence on a single market.

Another case highlighted by Dialogue Earth is Peru, which has experienced a trade surplus and an increase in exports, especially in sectors such as mining and fishing. However, the massive influx of low-priced clothing has affected the textile sector, with over 90,000 small Peruvian businesses affected. In addition, Chinese investments in infrastructure and energy pose challenges in terms of environmental protection and sustainable development. Despite some benefits for small and medium-sized Peruvian enterprises due to low tariffs, greater productive capacity and clear guidance are needed to drive innovation.

On the other hand, Ecuador, the most recent Latin American country to sign an FTA with China, expects to generate jobs and increase its export supply. However, there are concerns about the impact on sensitive sectors of the economy, such as agriculture and local production, as well as environmental concerns. The absence of environmental clauses in the agreement has generated criticism and concerns, especially in a country with rich biodiversity and natural resources, such as the Mirador Mine and the ITT block of the Yasuní National Park. Analysts warn of possible environmental and social costs of the FTA, as well as the need to establish adequate protection mechanisms to prevent unfair competition and ensure that benefits are distributed equitably.

This means that while FTAs with China have provided significant economic benefits for Latin America, they also pose challenges in terms of economic dependence, diversification, environmental protection, and sustainable development. 

It is crucial for countries in the region to address these concerns and seek a balance between economic growth and the preservation of the environment and social rights. International cooperation and dialogue among all stakeholders are essential to ensure that economic relations between China and Latin America are mutually beneficial and sustainable in the long term.

Main source:

Mesa redonda: Ecuador, China y los TLC en Sudamérica  | Dialogue Earth (2024, abril 19)