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Sino-LatAm cooperation in production capacity new point of convergence for joint interests

Updated: May 21,2015 3:16 PM     Xinhua

China-Latin American ties can be described as dynamic, with upgraded cooperation in production capacity and equipment manufacturing with a view to achieve mutual benefit.

Premier Li Keqiang arrived in Brazil’s capital Brasilia on May 18 on the first leg of a four-nation tour that also includes Colombia, Peru and Chile.

In Brazil, China and Brazil have signed more than 30 agreements and a joint action plan, including trade agreements worth $27 billion.

The tour features highlighting Sino-Latin America cooperation in aviation, machinery and equipment, auto and hi-tech products, electricity, renewable energy, infrastructure beyond traditional fields such as oil and gas, mining and agriculture.

As the global economy has been undergoing a transformation, both China and Latin America are faced with the prospect of industrial restructuring and optimization to spur their respective domestic developments.

Latin America, with great natural diversity and abundant resources, has been a major exporter of raw materials and low value-added products. However, after 10 years of sustained economic growth, Latin America and the Caribbean have lost their tailwind, due to falling prices for raw materials and a drop in external demand.

With economic development challenges ahead, the continent aspires to diversify its exports, improve its infrastructure construction and upgrade its industrial formation.

“We have to change the pattern of production and promote production transformation, where other sectors that require more technology and innovation are developed, with more sophisticated human capital and better infrastructure,” said Enrique Garcia, executive president of the Development Bank of Latin America.

In this new stage, the interests of the two sides converge in new areas beyond trade, said Wu Baiyi, director of the Latin America Institute under China’s Academy of Social Sciences.

“Now cooperation in production capacity has become the new point of convergence for their (China and Latin America’s) interests,” Wu said.

The industrial transformation in Latin America is a process in which China will be able to participate with greater enthusiasm, Wu said.

Brazil attained nearly half of China’s overall investment in manufacturing in the region, through heavy machinery makers SANY and XCMG, and automakers CHERY, JAC Motors and GEELY.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), a one-percent increase in China’s gross domestic product would boost Latin America’s economic growth by 0.5 percent.

In July 2014, President Xi Jinping proposed during his Latin America tour to spur mutual development through trade, investment and financial cooperation, pledging to raise investment in the region to at least $250 billion over the next decade.

In recent years, Chinese investment in the region has steadily increased. By the end of 2014, China’s direct investment has amounted to $98.9 billion.

Carlos Malamud, a chief researcher at Spanish think tank Elcano Royal Institute, stressed the importance of China’s financial cooperation with Latin America, saying “infrastructure offers great opportunities, not just for Chinese investment, but also for its leading construction firms.”

By the end of 2014, China had signed deals in Latin America worth more than $110 billion in the areas of natural gas, pipelines, electric power generation, highways, ports, housing, telecommunications and railways. Among them, projects totaling some $67.6 billion have already been completed.

China’s cooperation is essential for Latin America “to make the leap from a traditional model of comparative advantages, and substantial reliance on commodities, to a model of dynamic and competitive comparative advantages,” Garcia said.