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Business News Costa Rica: Latin America-China trade surpasses goals
 
Wow! Trade between China and Latin America has exceeded the most optimistic forecasts, surpassing in 2007 the levels that Chinese officials had projected for 2010.

According to new Chinese government data, commerce between China and Latin America reached $102.6 billion in 2007. When Chinese President Hu Jintao visited Latin America four years ago, he made big headlines by saying that his country would try to increase trade with the region to $100 billion by 2010.

''This is very significant,'' said Evan Ellis, author of a forthcoming book on China-Latin American relations who alerted me to the new trade figures that have gone largely unnoticed since China's Commerce Ministry released its 2007 year-end figures Feb. 4.

But there was little change in the products that China traded with Latin America: China continues to buy mostly commodities such as copper, soybeans, iron ore and fish meal from Latin America, while it is selling increasingly sophisticated goods to the region.

A LOOK AT THE FIGURES

Consider some of the new Chinese trade data:

• The $102.6 billion traded with Latin American countries last year represented a 46 percent increase over the 2006 figures, largely because of higher world prices of soybeans, copper, oil and other commodities that make up the bulk of Latin American exports to China.

By comparison, China's two-way trade with the United States was $302 billion last year, and with Africa, $73 billion.

• Chile, Peru and Argentina exported to China about twice what they imported from their Asian trade partner. Their main export goods were, respectively, copper, iron and soybeans. On the other hand, Mexico and Central American countries, which export mostly manufacturing goods, suffered huge trade deficits with China.

• Surprisingly, oil-rich Venezuela did not do very well in its trade with China last year: Venezuela's exports to China rose 15 percent last year, while its imports from China soared by 67 percent. If the trend continues, Venezuela could run a trade deficit with China this year.

• Mexico's $15 billion two-way trade with China last year was lopsided in China's favor: $11.7 billion was in Chinese exports to Mexico, and only $3.2 billion in Mexico's exports to China.

Asked whether Latin American countries are making headway in their efforts to sell more sophisticated manufacturing goods to China, Ellis said that there are a few noticeable success stories, such as Costa Rica's Intel plant exports of computer chips to China.

''But, by and large, Latin America is not succeeding in selling higher-value-added goods to China,'' Ellis said.

SOYBEANS AND COPPER

Mikio Kuwayama, an economist with the United Nations' Economic Commission for Latin America and the Caribbean agrees. According to ECLAC figures, soybean products account for 80 percent of Argentina's exports to China, copper makes up nearly 80 percent of Chilean exports to China, and tin accounts for nearly 90 percent of Bolivian sales to China.

Latin American countries face high import duties in China and other Asian countries for their manufactured goods, and increased competition from China's neighbors. To overcome these hurdles, Latin American countries should seek preferential trade deals with China, like Chile recently did, Kuwayama told me.

Mexico and Central America should also use their geographical proximity to the United States to partner with Chinese firms and export cars, tools and computers to the U.S. market from manufacturing plants in their territory, he said.

My opinion: The new China-Latin America trade record may spell trouble down the road. As the U.S. and world economies are slowing down, most commodity prices will not keep growing at the present rates. Unless Latin America diversifies its exports to China, and steps up joint ventures with Chinese firms in the region, this movie may not have a happy ending.

Postscript: Good news! Democratic presidential hopeful Hillary Clinton has vowed that, if elected, she would expand the mandate of the Millennium Challenge Corporation, one of President Bush's few foreign policy achievements.

The MCC, which provides development aid to poor countries that are democratic and follow market-oriented policies, has already signed aid packages worth $5.5 billion to 16 countries around the world.

The MCC must be doing something well: when MCC chief John Danilovich visited Nicaragua last month and inaugurated a road with radical leftist President Daniel Ortega, the Nicaraguan leader ended his speech saying, ''Viva Estados Unidos,'' Danilovich recalled.

Who says foreign aid doesn't do miracles?

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