China Latin America Economic and Trade Cooperation Accelerates Progress

Although China and Latin American countries are thousands of miles apart, their friendship has a long history and economic and trade cooperation is accelerating, which is a model of mutual benefit and win-win situation. The latest data from China Customs shows that in the first four months of this year, China's import and export volume to Latin America was 1028.18 billion yuan, a year-on-year increase of 10.3%. Among them, exports to Latin America amounted to RMB 526.47 billion, an increase of 11.2%; Import from Latin America reached RMB 501.71 billion, an increase of 9.4%.
Stable growth of trade and extensive investment coverage
Jiang Shixue, a distinguished professor at Shanghai University and director of the Latin American Research Center, stated in an interview with China Trade Daily that the rapid growth of China Latin American trade is attributed to two factors. Firstly, the two sides began to recover their economies during the post pandemic period, and their import and export capabilities increased accordingly. The second is related to the trade transfer effect, which has more or less affected the trade between China and the United States, providing an opportunity for China to expand trade with other countries (including Brazil).
According to relevant experts, the impressive data on China Latin America trade since the beginning of this year is a continuation of the steady development trend of bilateral trade in recent years. Since 2012, China has maintained its position as the second largest trading partner in Latin America. During the epidemic, the economic and trade resilience of both sides further demonstrated. In 2021, the total trade volume between China and Latin America exceeded 450 billion US dollars for the first time. In 2022, the trade volume between China and Latin America approached the $500 billion mark, maintaining rapid growth for six consecutive years. Currently, China's top five trading partners in Latin America and the Caribbean are Brazil, Mexico, Chile, Peru, and Colombia.
There is a great demand for agricultural products and some processed products from Latin American countries in the Chinese market, and China's mechanical equipment, new energy products, and other products are well received in the Latin American market. "Zhou Mi, Deputy Director of the Institute of America and Oceania at the Research Institute of the Ministry of Commerce, said that data shows that since the beginning of this year, bulk products such as cars made in China have been selling well in the Latin American market, and products such as LCD panels and photovoltaics have also become popular in the Latin American market. The export scale of agricultural products such as soybeans and chicken from Latin America to China is huge, and important agricultural products such as corn have also achieved rapid growth in exports to China.
In terms of investment, Yue Yunxia, a researcher at the Latin American Institute of the Chinese Academy of Social Sciences, said that Latin America is the second largest destination for China's outbound investment and has become the fastest growing regional plate since 2010, showing two phased characteristics: on the one hand, the geographical coverage is extensive. In addition to the two offshore financial centre, Chinese enterprises' investment in Latin America involves 31 of the 33 countries in the region; On the other hand, the flow to concentration ratio is obvious. Brazil, Peru, Chile, Mexico, Argentina and Colombia are the top six destinations for Chinese investment in Latin America, accounting for nearly 87% in total, and these six countries are also the top six Latin American economies.
The infrastructure sector is a key area and priority direction for China's investment in Latin America. Eric Parrado, Chief Economist of the Inter-American Development Bank, stated that promoting infrastructure construction and upgrading is of great significance for the sustainable economic and social development of the Latin American region. Infrastructure cooperation projects such as the Argentine Kise hydropower station, the Belgrano freight railway, the Colombian capital Bogota subway, the Chilean Ponta wind farm, and the Bahia state cloud rail in Brazil have effectively promoted the improvement of local economy and people's livelihoods.
The free trade agreement plays a positive role in promoting the sustained, stable, and diversified development of trade and investment between both sides. The reporter learned that China is currently negotiating free trade agreements with multiple Latin American countries. Among them, the negotiation of a free trade agreement with Ecuador ended in February of this year. China is Ecuador's second largest trading partner, and Ecuador is China's eighth largest trading partner in Latin America. In 2022, the bilateral trade volume between China and Ecuador reached 13 billion US dollars, reaching a new historical high, with a year-on-year growth of nearly 20%. The Ministry of Commerce stated that the China Ecuador Free Trade Agreement will push bilateral economic and trade cooperation to a new level. After the negotiation, the teams of both parties will continue to complete subsequent work such as text legal review and translation, and fulfill their respective domestic procedures, striving to officially sign the free trade agreement as soon as possible.
Strengthen RMB settlement
Expand cooperation in multiple fields
With the deepening of trade and investment cooperation between China and Latin America, Latin American countries are continuously strengthening cooperation with the RMB in areas such as trade settlement and cross-border investment and financing. Since the beginning of this year, Brazil has announced an agreement with China to conduct bilateral trade transactions in its local currency instead of the US dollar; The Argentine Central Bank and the People's Bank of China have expanded their local currency swap agreement, which will provide an additional 35 billion yuan for foreign exchange operations on top of the original 130 billion yuan foreign exchange reserves. Recently, they announced that they will stop using the US dollar to pay for goods imported from China and instead use the Chinese yuan for settlement
Jiang Shixue told our reporter that China's use of RMB for trade settlement with other countries is not only related to the continuous development of RMB internationalization, but also to the increasing recognition of the harm of US dollar financial hegemony by countries around the world.
Lv Yang, an assistant researcher at the Latin American Institute of the Chinese Academy of Modern International Relations, analyzed that Argentina has been experiencing drought this year, resulting in reduced agricultural production and shrinking exports, accelerating the consumption of foreign exchange reserves. The exchange rate of the peso against the US dollar has continued to decline, and the annualized inflation rate in March reached 104%. The pressure on the US dollar's external debt has also become increasingly heavy. For Argentina, using the Chinese yuan for foreign trade can help it save on US dollar import expenses and use more of the US dollars obtained from exports to stabilize the financial market. For other Latin American countries such as Brazil, using the RMB, which has a more stable currency value and stronger trade support, as the settlement currency for foreign trade can also reduce import costs, increase export surpluses, and obtain more monetary and fiscal policy reserves to suppress inflation and boost the economy.
Experts generally say that the prospects for future cooperation between China and Latin America are bright. Although China and Latin America are far apart, they are natural partners, and both sides view each other's market as a development opportunity. China is currently promoting international production capacity cooperation, providing more impetus for deepening and strengthening economic and trade cooperation between China and Latin America.
Regarding further strengthening cooperation between China and Latin America, Jiang Shixue stated that on the one hand, China should maximize its openness to Latin American products, and of course, Latin American products should also continuously strengthen their competitiveness, because the Chinese market is a huge and competitive market, and foreign products without competitiveness will find it difficult to enter the Chinese market. On the other hand, Latin American countries need to further improve their investment environment in order to attract more Chinese investment.
Sun Yanfeng, Deputy Director of the Latin American Institute of the Chinese Academy of Modern International Relations, stated that on the basis of existing complementary cooperation, China and Latin America can further expand cooperation areas and improve the quality of cooperation in areas such as high-tech, green economy, and digital economy. In addition, in terms of global governance, it is expected that developing countries and emerging economies represented by China and Latin America will work together through platforms such as the BRICS and G20 to address global issues such as food security and energy security, injecting new vitality into global governance this year.