China and Latin America: What s Happening?

Transcription

1 China and Latin America: What s Happening? Kevin P. Gallagher Global Economic Governance Initiative Boston University April 7, 2014 Boston University Global Economic Governance Initiative

2 Outline Overview from China-LAC Economic Bulletin Focus newly updated: China-Latin America Finance Database Outlook 2014

3 Exports to China as a Shrae of All Exports LAC-China Exports: $131B (2012) China s Importance as an Export Destination, by Commodity Sector 17.5% 15.0% Total Exports Manufactured Products Primary-Based Products and Crude Petroleum 13.2% 13.3% 15.3% 12.5% 11.4% 10.0% 7.5% 5.0% 2.5% 3.7% 2.2% 1.1% 8.9% 9.1% 8.2% 8.5% 7.6% 7.1% 5.3% 5.6% 5.8% 5.8% 5.2% 4.9% 3.3% 3.4% 3.7% 3.7% 1.8% 1.3% 1.6% 1.6% 2.1% 1.7% 1.4% 1.8% 1.8% 2.1% 0.0% Note: Categories are defined using Sanjaya Lall s Technological Classification of Exports (Lall, 2000). Source: UN COMTRADE and authors calculations.

4 LAC-China Trade is Different More Primary-based than all LAC exports, all China imports 100% 90% 80% 70% 56.0% 33.7% Primary Manufactured Other 60% 50% 86.4% 40% 30% 20% 39.7% 63.4% 10% 13.3% 0% 0.2% 4.3% 2.9% LAC Exports to China All LAC Exports All China Imports Note: Categories are defined using Sanjaya Lall s Technological Classification of Exports (Lall, 2000). Source: UN COMTRADE and authors calculations.

5 LAC-China Exports Source: UN COMTRADE and authors calculations. Top Commodities, Sector Share Country share of LAC-China exports, each sector Iron ore, concentrates 22.1% Brazil (86%) Soybeans, other oilseeds 14.7% Brazil (67%), Argentina (28%) Crude petroleum 11.9% Venezuela (46%), Brazil (29%), Colombia (10%) Refined copper 10.9% Chile (92%) Copper ores, concentrates 6.9% Chile (51%), Peru (32%), Mexico (13%) Transistors and valves 5.1% Costa Rica (82%), Mexico (17%) TOTAL: 71.6 %

6 Percent of Total Greenfield Inflowsto LAC Chinese Greenfield FDI in LAC-$30-50B Share of all GFDI inflows to LAC, by sector 7.5% 5.0% Total from China: Food, Tobacco Automo ve OEM Metals Coal, Oil, Natural Gas Communica ons Other 6.3% 1.2% 5.9% 0.4% 1.0% 5.0% 5.4% 1.7% 2.9% 3.2% 2.9% 2.8% 2.6% 2.7% 3.6% 1.9% 2.5% 1.1% 1.1% 0.4% 1.7% 0.4% 1.3% 0.3% 0.3% 1.2% 0.8% 1.5% 2.2% 0.9% 1.3% 0.2% 1.3% 1.4% 0.8% 0.8% 0.4% 0.4% 0.5% 0.7% 0.0% 0.2% Source: FDI Markets and authors calculations.

7 Percent of Total Greenfield FDI Chinese GFDI in LAC, Different More primary-based than all inbound GFDI or all outbound Chinese GFDI 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 8.1% 8.5% 1.5% 30.3% 32.7% 19.9% 12.0% 4.9% 6.4% 25.0% 6.6% 8.4% 8.1% 2.7% 2.5% 23.0% 11.8% 16.3% 25.3% 24.2% 26.8% Other Communica ons Alt./Renewable Energy Automo ve OEM Food & Tobacco Coal, Oil, Natural Gas Metals 0% Chinese greenfields in LAC ($US 23.7 b) Source: FDI Markets and authors calculations. All greenfields in LAC ($US $542.8 b) All Chinese greenfields ($US $230.0 b)

8 Percent of All M&A Flows in LAC Chinese M&As in LAC, in Context 100% 90% 80% 70% 60% 50% Much more concentrated than other M&A inflows 4.1% 2.1% 3.7% 6.3% 6.7% 7.3% Other Finance Telecommunia ons Food and beverage Metal and steel U lity and energy Mining Oil and gas 32.6% 11.7% 12.9% 40% 30% 20% 69.6% 9.5% 3.2% 6.3% 9.0% 10% 0% From China Source: Deal Logic and authors calculations. 14.8% From the World

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11 Country Borrower Lender Amount ($m) Type Purpose Argentina Government CDB 2,100 Infrastructure Costa Rica Government Ex-Im 397 Infrastructure For Belgrano Cargas train line; half of the money will be used in purchase of locomotives and train cars, the other half in renewing and repairing rails and tracks. Build a highway from San José to Limón Costa Rica Government Ex-Im 101 Transportatio n Replace public transportation vehicles to use more eco-friendly fuels Ecuador Government Ex-Im 312 Energy Ecuador Government BoC 299 Energy Jamaica Government Ex-Im 292 Infrastructure Jamaica Government CDB 457 Infrastructure Mexico Pemex Ex-Im 1,000 Energy Venezuela PDVSA CDB 4,020 Energy Minas-San Francisco hydroelectric dam Cañar and Naranjal dams road and bridge rehabilitation projects North/South toll highway construction purchase of offshore drilling equipment Increase Sinovensa production in Orinoco Venezuela Government CDB 5,000 Infrastructure /Development 3rd tranche of Joint Financing Fund Venezuela Pequiven (State Petrochemical Company) Ex-Im 391 Energy Venezuela Government CDB 700 Mining LAC IDB PBoC 500 Other LAC IDB PBoC 1,500 Other Construct a port in Morón, Carabobo to export urea and ammonia Develop Las Cristinas Gold Mine; map Venezuela's ore deposits Co-funding with IDB Co-funding with IDB Nine Caribbean nations various (Framework agreement with Xi Jinping) 3,000 Infrastructure and Development 1,500 will be used in infrastructure, 1,500 will be used in other development projects

12 Chinese Financing: $100b ( ) Distribution by sector, Communica ons, 1.7 Transporta on, 12.7 Energy, 17.5 Mining, 4.2 Other Infrastructure, 24.2 Housing 4.1 Tourism, 2.5 Other Industry, 0.1 Discre onary, 12.5 Trade Financing, 1.8 Source: Gallagher et al, 2012.

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14 Chinese Finance in Africa and LAC: Chinese Finance in Africa and Latin America: Africa Latin America Total/Average Total Financing ($USb) 52,818 86, ,337 %GDP 2.8% 1.7% 2.3% Commodity-backed ($USb) 28,085 47,000 75,085 %total 53% 54% 54% ave size 906 5,222 3,064 Source: Brautigam, Deborah and Kevin P. Gallagher (2014), Bartering Globalization: A Comparative Analysis of China s Commodity-backed Loans in Africa and Latin America, (forthcoming in Global Policy journal, London School of Economics).

15 Outlook 2014 Price and demand volatility De-industrialization and/or weak job growth Environmental degradation Social conflict

16 Demand and Prices Source: Economist, March 26, 2014

17 LAC-China Exports in Context As China becomes more important, manufacturing becomes less so Note: Manufactured exports are defined using Sanjaya Lall s Technological Classification of Exports (Lall, 2000). Source: UN COMTRADE and authors calculations.

18 LatAm-China Trade & Jobs LAC-China exports are low in labor intensity and falling Source: CEPAL, WDI, UN COMTRADE, and authors calculations.

19 LatAm-China Trade & Jobs Extraction supports far fewer jobs than other sectors per million USD Jobs Supported by Each Real (2002) US$1 Million in Exports: Agriculture Extraction Manufacturing Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Peru Latin America Source: CEPAL, WDI, UN COMTRADE, and authors calculations.

20 kg CO2 equivalent per USD LAC-China Trade & GHG Emissions LAC-China exports are more GHG emissions-intensive GDP All exports Exports to China Source: Peters et Al 2011, UN Comtrade, authors calculations.

21 Index: 2002=100 LAC-China Trade & GHG Emissions Growth in LAC GHG Emissions, by Source 700 Emissions from GDP Emissions from Exports Emissions from Exports to China Source: Peters et Al 2011, UN Comtrade, authors calculations.

22 Shougang - Marcona

23 Old and New Morococha

24 Summary Chinese trade and investment is a strong new source of trade, finance, and growth for LAC Concentrated in primary commodity sectors susceptible to boom and bust cycles puts upward pressure on exchange rate pressure on domestic industry and jobs endemic to environmental degradation prone to conflict with local/indigenous communities Key challenge is for LAC to maximize the benefits of booms mitigate associated risks.

25 Managing Booms and Risks Burden is on LAC to manage booms and risk China has a role to play as well What role for regional coordination? What role for the United States?