Volume 45 Number 176,
January-March 2014
The Emergence of China and its Impact on Commercial
Relations between Argentina and Brazil
Marta Bekerman, Federico Dulcich, Nicolás Moncaut *
Date received: January 16, 2013. Date accepted: June 3, 2013
Abstract

Although the expansion of economic relations between China and Latin American countries may provide short-term opportunities, as is evident in the export of primary products and the favorable evolution of terms of trade, it also brings long-term challenges. If these are not properly addressed, they have the potential to give rise to processes that could increase external structural vulnerability. This work analyzes the effects that may have direct or indirect repercussions on the countries in the region that have the most trade with China, especially Argentina and its relationship with Brazil.

Keywords: China, Latin America, commercial specialization, primarization.
INTRODUCTION

China’s economic development is rapidly becoming one of the most significant transformations of the current century, with its growing impact on international goods and services markets (especially manufactures), alongside its strong positioning to attract foreign direct investment fdi) from other countries. In addition, and more recently, investments of Chinese origin in the rest of the world have grown.

Within this context, there are two opposing schools of thought in Latin America regarding the potential advantages and disadvantages of a strategic partnership with China.1 The first is wholly “optimistic,” and views the rise of China as an opportunity to consolidate a new international order, less dependent on the hegemony of the United States, where countries like Brazil and Argentina could easily insert themselves, given their position as producers of raw materials and a strategic market in response to growing Chinese and Asian consumption. On the contrary, the "pessimistic" outlook is concerned with the risk of dependency (and possibly regression), characterized by specialization in primary exports, which, together with growing Chinese demand, could lead to a situation similar to that of the 1930s. This has the potential to dismantle the productive systems of regional economies, affected by the competitive pressures of Chinese exports.

These two perspectives reflect the growing challenges facing emerging nations as a result of increased commercial relations with China following its entry into the wto in 2001. On the one hand, there is a market with rapidly growing commodities exports, and on the other, a market leader in exporting manufactures, in the process of advancing towards products with a higher added value. All of this is taking place in the context of highly asymmetrical trade negotiations as a result of the fact that Latin American countries have different market shares of commerce with China. In a matter of years, China has become an extremely important market for the region.

This reality has led to a strong tendency towards primarization for Latin American economies, which creates the need to reflect upon how to best respond and ensure a development model that guarantees social inclusion for these countries.

This work seeks to reflect on this reality, with a focus on the effects on commercial relations between Argentina and Brazil. After briefly analyzing the importance of China on the global stage, this work will describe the effects of trade relations with Latin America, in particular Argentina, ending with a summary and conclusions.

OVERALL FEATURES OF THE CHINESE ECONOMY

Recent Changes in the Economic Structure of China and its Specialization Pattern

Over the last three decades, the Chinese economy has grown at an average annual rate of 10 percent, with a significant increase in its gdp per capita (from 205 to 4,280 dollars in 2010). This has lifted 500 million people out of poverty, turning the nation into the principal manufacturing country and largest global exporter (World Bank, 2012: 4).

This process took place in the midst of a transition from an economic system of centralized planning to a market system, beginning with the reforms of 1978. Starting in that year, productive units were given greater autonomy in terms of implementing and developing production techniques, making investment decisions and the private appropriation of surplus. The centralized determination of the price vector also began to gradually become more flexible (Chow, 2002: 47). This transformation achieved greater efficiency and growth of productivity by generating incentives for valuation on the level of the productive unit, and allowed capital to move between different sectors.

With extremely high savings-investment rates as a base, and a strong excess of a supply of goods due to savings higher than investment and fiscal balance, China soon was exporting 27% of its product, as it quintupled the value of its exports. Throughout the process, its economic structure remained strongly industrial (46 percent of the product, higher than developed countries), although it increased the share of services, at the cost of reductions for the primary sector. Finally, it is important to note that throughout this time period, there were strong positive flows of foreign direct investment, a pillar of Chinese industrialization in coastal urban centers, as the net inflow of fdi tripled.

There have been important changes in the makeup of the specialization pattern of China over the past decade, which took place on the disaggregate level with strong industrial specialization as its base. Figure 1 provides the revealed comparative advantages index for the international insertion of China.2 Its strong specialization in consumer goods (largely accounted for by appliances, as ascertained by Rodrik, 2006: 17-22) gave rise to significant growth in capital goods and manufactured industrial inputs, which demonstrates a trend towards a specialization pattern with industrial levels of higher added value.

Figure 1. The Evolution of the Specialization Pattern of China



Source: Prepared by the authors based on Comtrade.


Policy Implementation in China

A General Analysis: Transitioning to a Market Economy and Development Policies

Conceptually, the transformation of the economic structure of China is based on the effective implementation of development policies in the framework of transitioning to a market economy. By implementing vertical policies eclac, 2004: 263), which favor certain "strategic" sectors, China managed to avoid the transition from centralized price determination to a vector of "correct prices" merely determined by the liberalization of domestic and foreign trade, biasing the relative price vector to favor the valuation and accumulation of capital for strategic sectors. This strategy was also used by Southeast Asian economies (Wade, 1989: 74-79). Believing industry to be a strategic sector, the need for increased capital accumulation involved implementing a macroeconomic policy scheme (Blanchard and Giavazzi, 2005: 11-26) that allowed for greater savings-investment rates and external competitiveness based on a real depreciated exchange rate to reverse the growing supply of industrial goods in the foreign market and "regulate" the accumulation regime (Boyer, 2011: 192-197). In addition, the strong accumulation of international reserves undertaken by Asian economies (including China) is also the result of an objective to consolidate the backing of national currencies following the financial fragility of the Asian crisis at the end of the 1990s (Eichengreen, 2009: 40).

In the midst of a transition to the previously mentioned market system, these policies have effectively reassigned resources to higher productivity sectors, especially by transferring the labor force from the primary – rural – sector, to industrial and services – urban – sectors (Hofman and Wu, 2009: 13-14). The success of these transition policies is partly due to the fact that they have been gradual and implemented through experimentation, undergoing adjustments if the expected results were not obtained. This is a contrast with the poor economic performance of other centrally planned economies with import substitution that opted for indiscriminate and accelerated opening (Lin, 2010: 7-10). In addition, the way in which these policies were implemented allowed China to transform its international specialization pattern, generating dynamic comparative advantages (French-Davis, 1991: 19) in higher added value industrial sectors, as has been pointed out. These changes to their specialization pattern are defining the deepening of commercial relations with Latin American countries, as will be analyzed below.

Productive Policies

The productive policies currently in place in China are oriented towards a transition from standardized sectors – dependent on low salary levels – to higher added value activities with greater technological content, as well as towards reducing the environmental impact of their productive processes, as described in the nation's most recent five-year plan for economic and social development for 2011-2015. This plan aims to increase the share of the services sector in the economic structure by four percentage points, and increase the amount of resources destined for research and development activities to 2.2 percent of gdp. In environmental terms, the plan seeks to reduce intermediate water consumption per unit of aggregate industrial value by 30 percent and decrease energy intensity by 16 percent.

In order to achieve these goals, the large companies controlled by the central State will be key, as well as policies regarding technology, foreign relations, foreign trade and fdi (both incoming and outgoing).

The large centrally-controlled state enterprises will be crucial to promoting other sectors by linking together elements of industry. One example of this might be providing subsidized prices for electricity, water or gas. In addition, they maintain a monopoly on the import trade of seeds, vegetable oils, oil and fertilizers, among other goods, which allows for the achievement of policy objectives such as substituting the importation of soybean oil for seeds, and favoring the industrialization of seed oil on the local scale.

Moreover, strategic sectors are defined as a function of the needs of China's economic structure and infrastructure: weaponry, energy, oil and telecommunications. On the other hand, "pillar industries" are linked to a defined profile of specialization: machinery, automobiles and information and communication technologies (ict).

Likewise, as a complement to their traditional policy of technological transfer from incoming fdi, where joint ventures with multinational companies in strategic sectors with medium and high technological content predominated (Rodrick, 2006: 17-22), China has added to its technology policy the objective of promoting endogenous research and development. This is carried out through the financing of large R&D projects, tax exemptions and the protection of intellectual property for local developments with high technological content. Policies oriented towards achieving technical standards for products and processes that depend on local intellectual property in order to reduce dependency on foreign technology are of particular importance.

Commercial Policies

China’s foreign trade policy, in addition to the classic implementation of free-trade zones, drawbacks and other policies to favor exports, has in recent years been determined by two central objectives: consolidate their multinational companies in global value chains (especially for the industrial and services sectors) and supply raw materials and low manufactured inputs (foods, metals and minerals, especially fuels) to meet their growing needs in terms of production and social transformation.

After joining the wto at the end of 2001, China had to adapt their customs structure to the requirements of the organization, by reducing tariffs and eliminating other non-tariff restrictions, among other measures.3 In this context, China developed a strong strategy to consolidate bilateral and bi-regional trade by signing free trade agreements (ftas). This allowed the nation both to open its markets to exports and outgoing fdi flows as well as to obtain sources to supply raw materials and inputs.

Similar to the commercial pattern that China has established with the rest of the developed world, the country’s regional role is strongly oriented towards the manufacturing sector, with a special emphasis on the electronics market. Although East Asia played a central role in Chinese exports up through the mid-1990s, accounting for 53 percent of exports for 1994/1999, when China joined the wto and began to increase trade with other countries (including growing participation from developed nations such as the US and those of the European Union), the regional share fell to 32 percent by 2006/2007 (abdi, 2009: 14-18).

In terms of its makeup, parts and components (mainly intermediate electronic goods) grew from 18 percent in 1994/1999 to 44 percent by 2006/2007, for goods imported by China from East Asia. For exports, China is no longer exporting final manufactures (textiles went from 18.5 percent to 10 percent of regional exports in this time period), and has moved to intermediate goods, especially machinery (which grew from 20 percent of regional exports to 46.6 percent between these two time periods). This demonstrates the development of regional value chains as intermediate stages for exports towards zones outside of the region, where China is the main platform for exportation (abdi, 2009: 14-18). The development of regional value chains has been supported by the asean-China Free Trade Agreement, made in January 2010. It includes both commercial and investment flows, highlighting sectors such as the automobile, electronics and a variety of services industries (commercial, financial and logistics).

In the following section, we will analyze the effects of the transformations resulting from these policies on Latin American countries.


EFFECTS ON ECONOMIC RELATIONS WITH LATIN AMERICA

A Theoretical Framework and the Methodology of Analysis

The transformation of the Chinese economic structure, based on the policies analyzed in previous sections, is positioning the nation as a new industrial center within the international division of labor. For Latin America, the evolution of China’s specialization pattern situates it as a supplier of industrial goods and a purchaser of primary goods. The structuralist tradition has objected to these specialization patterns of primarization for Latin American economies in the central-periphery relationship: in the long term, external restrictions on growth (especially towards closing the gap with developed countries) are imposed due to the fact that the demand for primary exportable goods (dependent upon the growth of central nations) is more inelastic with respect to revenue than the import demand for industrial goods (Prebisch, 1973: 33-34). However, the low short-term price elasticity of the supply of primary goods (due to the fact that there are productive factors that cannot be reproduced, such as land that can be cultivated, mines or oil deposits) can generate growth in prices in light of strong surplus demand driven by the increased growth of central economies, as is the case for China (eclac, 2008: 21-29). As a result, this process may generate positive results for the terms of exchange among economies focused on primary sectors in the short term, as longer term structural changes linked to the trend of deteriorating terms of exchange remain latent, based on the lower elasticity of demand with respect to the revenue of the previously mentioned primary products.

In this context, this section will focus on trade relations between China and Latin American countries, classifying the variety of effects that have been felt by the latter, both directly (bilateral trade flows with China) and indirectly (terms of exchange and competition in third-party markets, with special emphasis on analyzing the effects on relations between Argentina and Brazil).

Commercial Relations Between China and Latin America

The Evolution of Exports and Imports

Although Chinese exports to Latin America only represent 5 percent of the nation's total sales, and imports from Latin America reach merely 7 percent of the region's total purchases from the rest of the world, trade between China and Latin America grew rapidly over the past decade. As a result, China is currently one of the main trading partners of the majority of the nations in the region. A large percentage of its exports (80 percent) and imports (60 percent) are concentrated among four countries: Brazil, Chile, Argentina and Mexico. Consequently, the analysis of this work will be focused on these four cases.

In general, it should be emphasized that trade relations between China and selected countries in Latin America have been more dynamic than with the rest of the world, both in terms of exports and imports (see Figure 2). Likewise, imports from China for these countries have seen more elevated growth than exports in all cases, except Chile, which has an fta with China and whose exports are highly concentrated in copper, with a strong impact on the favorable evolution of the terms of exchange (see pp. 66 and 69). It is also important to note the case of Argentina, where imports from China have grown far above those of the other selected countries. This is largely due to a strong change in the makeup of imports, as well as a significant recovery in the demand for imports following the 2001 crisis (see p. 72).

Figure 2. Average Annual Growth of Different Commercial Flows with China by Trading Partner.
Annual Average for 2002-2011


Note: Growth rates calculated using commercial flows expressed in current dollars.
Source: Prepared by the authors based on Comtrade.

In all of the countries included, China has conquered the top spot as export destination. For both Brazil and Chile, China has become the principal export market, and it is surpassed only by Brazil for Argentina. In Mexico, with more ground to make up, China reached the third spot as destination for foreign sales, surpassed only by Canada and the US. In addition, China now represents the second-most important market of origin for imports in the four countries indicated.

Moreover, an initial analysis of bilateral trade relations reveals two different commerce patterns among the countries under investigation: Argentina, Brazil and Chile enjoyed a commercial surplus with China over the past decade, based on specialization in natural resource-intensive products, while Mexico had a trade deficit, as its specialization pattern competes with that of China, as can be seen in the following section.



Figure 3. Commercial Balance of Selected Latin American Countries and China (Billions of Dollars)

Source: Prepared by the authors based on Comtrade.

Principal Products Exported from Latin America to China

Export data for the time period 2008-2010 reveals a strong concentration among five main products, especially for Argentina, Brazil and Chile.

In Argentina, a strong increase in agricultural productivity has had a clear impact on the nation’s pattern of international insertion (Bekerman and Dulcich, 2012: 18), consequently determining its bilateral trade with China. Trade between Argentina and China is extremely biased towards soy products, and the soybean accounts for 61 percent of the value exported to China in 2008-2010, while soybean oil is at 18 percent.

In Chile, mineral exports have had the greatest impact on the evolution of its international specialization. Currently, copper represents more than half of the nation's total exports and 80 percent of its exports to China.

Brazil, which has both mineral resources and large swaths of fertile land, is a sort of hybrid of the two cases above. In terms of mining, iron is the main product it exports to China (47 percent of value exported for 2008-2010). In addition, soy is the second most-sold product to China (24 percent).

Mexico not only enjoys greater diversification, but its top exports include both primary goods (copper minerals account for 11.5 percent of value exported to China and crude oil is at 4 percent) as well as manufactures with a certain level of complexity: electronic microcircuits (11.6 percent), final automobiles (6.3 percent) and parts for telecommunication equipment (4 percent). The lower concentration in Mexico is a contrast with other countries specialized in natural resources, whose trade patterns are more concentrated, and countries that compete with Chinese production, and have more diversified patterns.

Principal Products Imported into Latin America from China

Table 2 provides the makeup of imports for the selected group of countries for the time period 2008-2010.

The four countries included import mainly manufactured industrial inputs, capital goods and consumer goods from China. In Brazil and Argentina, the category of "organic-inorganic compounds" for industrial inputs has an important share due to the weight of glyphosate, a major herbicide used in soy production. In terms of capital goods, computers and other devices related to communication provide the greatest weight, although the leaders in Brazil and Mexico are precision instruments (optics). For consumer goods, "brown line" appliances, such as air conditioners and toys, stand out. Finally, the strong contribution of motorcycles is notable within the transportation equipment category among imports of the four countries.

Capital goods imported from China deserve a more profound analysis. Between 2002 and 2011, the weight of each supplier has undergone significant change. In nearly all cases, both the European Union and the US have lost a large amount of their share to China. This pronounced displacement of trade can be seen in Table 3.

Indirect Commercial Effects: The Favorable Evolution of Terms of Exchange,
Chinese Demand and International Prices

Over the past decade, China’s share as importer of primary products has grown strongly, in order to supply its booming industrial activities and to feed a population that is joining the workforce in growing numbers. For oleaginous compounds (seeds, oils and sub-products of milling), China went from 14 percent of the global market to its current 36 percent, after joining the wto. Similarly, its share of metals and manufactures went from 12 percent to 19 percent in the same time period, and from 6 to 19 percent for fuel.

The effect of this growing demand on primary sectors with productive factors that cannot be reproduced (land, mines or deposits) has had an unequal impact on the international prices of these products. eclac (2008: 21-29) ascertains that from 2000-2007, Chinese demand affected the metals and oil market more than the food market. Its share in the global consumption of these products is growing: from 6.3 to 9.2 percent in oil, from 16.3 to 33.8 percent in products with a steel finish, from 14 to 33.3 percent in aluminum, from 12.7 to 26.9 percent in copper and from 21.6 to 31.9 percent in zinc. The growth in the Chinese share of global consumption of food was slower, but soy complexes stand out (going from 13.4 to 25.7 percent for soybean oil and from 15.6 to 20.6 percent for soybeans). These shifts in consumption and demand for imports were reflected in the international prices of these products, which evolved relatively in favor of metals, minerals, oil and food. As a counterpart, the prices of industrial manufactures (in part affected by the strong excess of supply in China), behaved in a more stable manner, and therefore saw a relative loss, in a context of international inflation.

These changes in relative international prices and their effects on the terms of exchange for countries in the region make clear that Chinese industrialization had an indirect effect on the current accounts and activity levels of these nations. Chile, a strong supplier of copper for the Chinese market with a concentrated export structure, has benefitted the most from this evolution. By contrast, the terms of exchange with Mexico have remained stable, as it has a much more diversified export structure with greater emphasis on industrial manufactures.

In Argentina, improved terms of exchange gave rise to a policy of increased withholdings on the export of certain primary products as a way of collecting the differential profit. In this sense, it is relevant that in Argentina, starting in 2002, collection on export fees, net of repayment, has never sunk below 7 percent of the national total, with an average of 9.4 percent4 between 2002 and 2011. This means that Argentina has been able to increase public spending without affecting the primary surplus, while attenuating the effect of variations in international prices on domestic prices. Likewise, the sliding scale of withholdings (decreasing the higher up the chain of manufacturing) was an incentive to industries that transform primary goods, especially agricultural goods (Bekerman and Dulcich, 2012: 35).


Figure 4. Evolution of Terms of Exchange for Selected Latin American Countries


Source: Prepared by the author based on unctad.

National and Regional Challenges for a Development Strategy

Up until now, Latin American countries have largely responded defensively. Especially among Mercosur, there seems to be a lack of recognition for the magnitude of this challenge. Although individual countries have undertaken negotiations or implemented commercial restrictions on the national scale, these responses are from what is needed to produce a coherent strategy.

On the contrary, there must be efficient coordination at both the national and regional levels, taking into account the priority objectives for Latin American countries, and identifying a common strategy for relations with China. From there it will be necessary to define, as Bekinschtein (2011) ascertains, what tools of negotiation are on the table and what are the limits for what can be given up.

In this context, some authors maintain that it is unlikely that policies to promote industry can close the competitiveness gap with Chinese production in Latin America, and therefore propose the option of instating industrial policies that would contribute to saving currency by import substitution and increasing productivity in the manufacturing of basic products (Crespo and De Lucchi, 2011: 9-11). Along the same lines, other authors have proposed creating tools to regulate foreign direct investment as a function of the priorities of industrial policy for products such as mining, agro-industry and oil, to add value in the local production chain. For example, the idea would be that Chinese companies operating locally could not export soybeans, but rather they would contribute to the export of industrialized products belonging to that chain (Ferreira, Leao et al., 2011: 347). What is becoming increasingly clear is that the growing centrality of the Chinese economy and its progressive effects on the terms of exchange and patterns of international competitiveness will bring new challenges regarding the basic conditions on which to base development strategies.

ECONOMIC ANALYSIS OF THE BILATERAL CHINA-ARGENTINA RELATIONSHIP

Overall, the Chinese share of total exports from Argentina grew from 3 percent to 8 percent from 1998-2010, a time period which saw a drop with Brazil (from 27 to 20 percent) and the US (from 10 to 6 percent), as can be seen in Table 4. In addition, the share of imports purchased from China increased from 4 to 13 percent, making China the country whose share increased the most among Argentina's major trading partners. Brazil has also grown, capturing 31 percent of the market share of Argentina, up from 23 percent at the end of the 1990s. This growth was compensated by decreases with the US (from 19 to 12 percent) and, especially, the EU (from 25 to 17 percent). With that said, we will analyze the direct and indirect commercial effects on trade relations between Argentina and China.

Direct Commercial Effects on Exports: The Creation of Export Trade and Substitution of Destinations

The Strong Impact of the Soy Chain

As can be seen in Table 4, the export structure from Argentina to China was strongly concentrated on soy complexes. Soybean and soybean oil exports together comprise 76 percent of total exports from Argentina to China.

Over the past decade, China has grown strongly as a destination for soybean exports, going from 40 percent to 79 percent of the market. This shift took place parallel to a strong decrease in the share of the EU. The Chinese share of soybean oil also increased significantly, but to a lesser degree, going from 9 percent to 26 percent of exports.5

Below soy products, other items are far off in terms of importance of exports sent to China, consisting mainly of primary and agro-industrial products.

Indirect Commercial Effects on Exports: Competition in the Brazilian Import Market

Another of the negative effects on regional trade is related to the competition that China generates for incipient exports, manufactures of industrial origin, from Argentina to Brazil. The most significant commercial shifts can be seen in Table 5.

On the global scale, between 1998 and 2011, Argentina lost more than six percentage points of its share in the Brazilian import market (from 14 to 7.5 percent), while China’s share increased slightly more than 12 percentage points (from 1.9 to 14.5 percent).

The iron and steel and textile industries are most indicative of this trend in favor of China. These sectors went from nearly irrelevant levels to an important portion of the Brazilian market. In addition, industries such as petrochemicals (rubber and plastic) and capital goods show strong advances for China as the nation moves to become one of the principal suppliers, occupying niches where Argentina failed to take a position. Only in the automobile industry has Argentina managed to maintain a significant weight.

Direct Commercial Effects on Imports: Import Substitution of Other International Suppliers

The past decade has shown strong growth for China as a supplier of inputs, capital goods and other sectors. It is interesting to note to what extent the growth of imports from China was due to displacing other international suppliers.

Overall Analysis

To determine whether or not China is generating a shift from other suppliers, we will compare China with other significant providers: Brazil, the EU and the US. To do so, the share of each of these countries as the origin of imports to Argentina on the global scale and for selected sectors was analyzed, taking the averages of the sub-periods 1998-2000 and 2008-2010. This allowed for the inclusion of the process following when China joined the wto at the end of 2001.

China's global share has grown to the detriment of other significant suppliers. The Chinese share of total imports to Argentina effectively grew from 4 percent to 13 percent, in contrast to reductions for the US (from 19 to 12 percent) and the EU (from 25 to 17 percent) (see Table 4). This positioned China as the third largest supplier to Argentina, and also the most dynamic. Brazil's share also increased (from 23 to 31 percent), thanks to the strong weight of supplying the automobile chain, where China has yet to make progress (see p. 78).

It is important to note that except for in the textile chain (where China already was somewhat specialized in labor-intensive areas), China began initially with less than 10 percent of the market in all cases considered. This means that China specialized extremely rapidly in higher value added sectors during the time period considered in this study.

The Displacement of the EU and the US

China's strong specialization in durable consumer goods and its recent emergence as a supplier of manufactured industrial inputs and capital goods on the international scale was reflected in the import market of Argentina, where, as previously indicated, more traditional partners such as the EU and the US were displaced in certain sectors associated to technology supply.

As previously analyzed, in the sectors of mechanical and electrical machinery, it is notable that the origins of importation saw decreases in all sub-sectors of these categories. For the US, the losses were strong in electronic machinery (where its market share went from 26 to 8 percent), especially for cell phones and data transmission devices (from 32 to 5 percent), televisions, radios and digital cameras (from 40 to 3 percent), where strong growth for China and an increased share for Brazil stand out, as well as other parts of these sectors (from 33 to 2 percent). In all of these sectors, market losses were almost complete, with market share levels falling to below 5 percent of imports to Argentina. Decreases were less drastic for mechanical machinery on the whole (from 25 to 14 percent), but there was serious damage to the computer sector (from 31 to 9 percent, with impressive growth for China from 9 to 64 percent market share), parts and accessories for mechanical machines (from 40 to 5 percent, against growth for China going from 11 to 67 percent) and printers (from 29 to 8 percent). In all of these sectors, the US ended up with between only 5 and 10 percent of the market.

For the EU, market share loss in electronic and mechanical machinery was similar, on the order of 10 percent, going from 25 to 16 percent in the former case and from 33 to 23 percent in the latter. Similar to the US, there was strong market share loss for cell phones and data transmission devices (from 37 to 7 percent) and for electronic machinery parts (from 30 to 3 percent). In the area of mechanical machinery, strong losses in printers were of note (from 48 to 15 percent), where both China and Brazil saw growth. It is important to note that the EU also had a low share in furniture (from 32 to 11 percent) and in certain segments of the textile chain, such as garments and clothing accessories.

The Situation in Brazil

The situation in Brazil contrasts with that of the US and the EU. Its market share in imports of electronic and mechanical machinery has grown (from 13 to 23 percent and 16 to 22 percent, respectively). It has also consolidated its presence in the automobile market, reaching 62 percent share, a sector in which China, as previously mentioned, has been unable to enter because this commerce is governed by Mercosur. There is a clear process of commercial regionalization in medium and high technology sectors, which persists beyond China's strong growth, affecting the US and the EU, mainly.

However, Brazil has also seen displacement in some specific sectors, like monitors (where the country had developed strong regional specialization, reaching 40 percent of the market in Argentina), and computers (falling from 16 to 6 percent of the market) and parts of the textile chain: knitted fabrics (from 31 to 18 percent) and knit garments and accessories (from 34 to 12 percent).

CONCLUSIONS

Since the end of the 1970s and up through the present, strong reforms in China have had repercussions on both its own economic structure as well as the international productive and financial systems. Deregulation has allowed the country to increase the autonomy of its productive units and external insertion, even as the State gained strength in implementing a development strategy through a combination of technology, sector, commercial and foreign investment policy for companies that function under its control

The growth of economic relations between China and Latin American countries has developed in a context of strong transformations to the international scenario that have altered the bipolar trade scheme that predominated during previous decades. China has effectively positioned itself as the principal manufacturing and export country in the world, displacing tradition centers of capital accumulation and technological development such as the EU and the US in supplying diverse capital goods and inputs.

Although this reality provides opportunities for countries in the Latin American region in the short term, it also supposes long-term challenges. If not properly addressed, they could lead to increasing the region’s external structural vulnerability. Some of these challenges include the primarization of exports and the economic structure, significant trade deficits in medium and high technology intense products (associated to the dependence on an external supply of capital goods and inputs), the dismantling of productive chains, decreased regional commerce and a loss of third-party market share.

It is therefore important to analyze the effects of how commercial relations have evolved recently, which, as previously indicated, takes place through both direct and indirect mechanisms. Some of the first effects include that countries in the region are redirecting exports to China, with a strong concentration and primarization of the export basket, as well as significant import substitution for the US and the EU as suppliers of capital goods and inputs.

The important role of these countries as suppliers of food, oil and other primary goods needed to sustain the growth of the Chinese economy, made these nations more dynamic as their exports grew, driven by a marked improvement in international prices for certain primary products. This last effect, which is indirect, had a positive impact on the terms of exchange for Latin American economies, but also led to relative prices that could tend to perpetuate an economic structure focused on the primary sector.

Analyzing the impact of China as a competitor in third-party markets, relations between Argentina and Brazil reveal that Brazil suffered from Chinese competition in a few specific sectors such as textiles and information technology hardware, but managed to increase its share of imports to Argentina thanks to the performance of the automobile sector, which remains a form of commerce managed by the regulations of these two countries. At the same time, China appeared as a competitor in specific sectors of the Brazilian industrial import market where Argentina had previously consolidated a certain share level, such as for steel and iron products, textiles and plastic manufactures.

This reality means that the importance the Chinese economy is gaining based on its development strategy could end up profoundly affecting the specialization patterns of Latin American countries and limiting the future performance of Mercosur as a platform for productive transformation and expanding dynamic comparative advantages, both within and outside of the region.

It therefore remains open to debate as to how to respond proactively with a strategy to the new reality that economies in the region are facing. It is time to rethink implementing economic policy in a coordinated fashion (with a focus on vertical policies) to make use of the advantages derived from greater international prices and consolidate economic structures with a growing share of higher added value sectors and sectors with greater technology content. This will achieve greater growth rates in the medium term, reduce macroeconomic volatility and raise real salaries to improve quality of life for the population.

BIBLIOGRAPHY

abdi (2009), “Intra-Regional trade in East Asia: The decoupling fallacy, crisis, and policy challenges”, abdi, working Paper, num. 177, Tokio, Asian Development Bank Institute, December (consulted March 2012), available at http://www.adbi.org/files/2009.12.11.wp177.intra.regional.trade.east.asia.pdf.

Banco Mundial (2012), “China 2030. Building a modern, harmonious, and creative, high-income society”, Washington DC (consulted March 2012), available at http://www.worldbank.org/content/dam/Worldbank/document/China-2030-complete.pdf.

Bekerman, Marta, and Federico Dulcich (2012), “Transformaciones recientes en el patrón de especialización de la economía argentina”, working document, cenes, num. 22, Buenos Aires.

Bekinschtein, José (2011), “América Latina y China: del Consenso de Washington al precepto de Pekín”, in Escenarios alternativos, Fundación Centro de Estudios para el Cambio Estructural.

Blanchard, Oliver, and Francesco Giavazzi (2005), “Rebalancing growth in China: A three-handed approach”, working paper 05-32, Massachusetts Institute of Technology, Department of Economics, November 25 (consulted March 2012), available at http://economics.mit.edu/ files/1764.

Boyer, Robert (2011), “The chinese growth regime and the world economy”, in Hiroyasu Uemura and Akinori Isogai (eds.), Diversity and transformations of asian capitalisms, cap. 10, Routledge, New York, Robert Boyer, pp. 184-205.

Chow, Gregory (2002), China’s economic transformation, Blackwell Publishing.

Crespo, Eduardo, and Juan De Lucchi, (2011), “Impacto de la industrialización china en las estrategias de desarrollo”, in Argentina Heterodoxa, Year 1, num. 1.

eclac [cepal] (2008), “Las relaciones económicas y comerciales entre América Latina y Asia-Pacífico: el vínculo con China”, Segunda Cumbre Empresarial China–América Latina, Harbin, China, October (consulted March 2012), available at http://www.eclac.org/comercio/publicaciones/ xml/3/34233/RELACIONES_ECONOMICAS_AMERICA_LATINA_ ASIA_PACIFICO.pdf.

________ (2004), “Políticas para fortalecer la estructura productiva”, in Desarrollo productivo en economías abiertas, June, chapter 8, pp. 261-284.

Eichengreen, Barry (2009), “La parábola de los ciegos y el elefante”, Ensayos Económicos, nums. 53/54, Banco Central de la República Argentina, January-June, pp. 23-57.

Ferreira Leão, Rodrigo; Eduardo Costa Pinto, and Acioly Luciana (2011), A China na nova configuracao global, ipea, Brasil.

French Davis, Ricardo (1991), “Ventajas comparativas dinámicas: un planteo neoestructuralista”, Cuadernos de la cepal, num. 63, Santiago de Chile.

Hofman, Bert, and Jinglian Wu (2009), “Explaining China’s development and reforms”, Commission on Growth and Development, The International Bank for Reconstruction and Development, working paper, num. 50, Washington, DC (consulted March 2012), available at http://www.econis. eu/PPNSET?PPN=612524892.

Lin, Justin (2010), “China miracle demystified”, Econometric Society World Congress, Shanghai, August (consulted March 2012), available at http://siteresources.worldbank.org/DEC/Resources/ChinaMiracleDemystified-Shanghai.pdf.

Prebisch, Raúl (1973), “Problemas teóricos y prácticos del crecimiento económico”, serie conmemorativa del xxv aniversario de la cepal, Santiago de Chile, February.

Rodrik, Dani (2006), “What’s so special about china’s exports?”, nber working paper series, num. 11 947, Cambridge, January (consulted March 2012), available at http://211.253.40.86/mille/service/ERS/10000/ IMG/000000009592/w11947.pdf.

Wade, Robert (1989), “What can economics learn from East Asian success?” Annals of the American Academy of Political and Social Science, vol. 505, The Pacific Region: Challenges to Policy and Theory, september, pp. 68-79.

*Faculty of Economic Sciences at the University of Buenos Aires, Argentina, marbekerman@gmail.com, federicomd2001@yahoo.com.ar and nmoncaut@gmail.com, respectively.

1It is important to point out that the phenomenon of Chinese economic growth has produced a large quantity of research. Due to space constraints, this work is limited to certain specific literature linked to the theoretical framework used and the most relevant determining factors for our object of study.

2 The details of the methodology regarding the index of comparative advantages, as well as a discussion on its conceptual foundations, can be found in Bekerman and Dulcich, 2012: 85-96).

3 However, it maintains a set of non-tariff barriers, including technical, sanitary and environmental rules, as well as import and export licenses that have been questioned by the wto.

4 National Office of Research and Fiscal Analysis of the Ministry of Economy and Public Finance. Available at: http://www.mecon.gov.ar/sip/basehom/rectrib.htm

5 The share of the US and Brazil in soy complex exports is insignificant, because they are competitive producers in this chain on the international scale. Consequently, the emergence of China as an export destination has not affected them.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Nov 13th, 2017.
The opinions expressed by authors do not necessarily reflect those of the editor of the publication.
Permission to reproduce all or part of the published texts is granted provided the source is cited in full including the web address.
Credits | Contact

The online journal Problemas del Desarrollo. Revista Latinoamericana de Economía corresponds to the printed edition of the same title with ISSN 0301-7036