Sino-Latin American Economic Relations, edited by K. C. Fung and Alicia García-Herrero. Routledge, 2012, 290 pp.
In recent years a handful of books and articles have analyzed relations between China and Latin America. The sensational and poorly researched among these stoke growing concern over China’s meteoric rise on the world stage and the implications for US national security. In contrast, the main conclusion of the more-scholarly efforts is that political and strategic relations are—and will likely remain—relatively modest in most cases, even while trade and investment expand rapidly. China has developed into one of the world’s largest workshops and possesses a capacious appetite for raw materials. Latin America, of course, remains richly endowed with natural resources. Economic integration between the two regions will continue to grow quite naturally, far exceeding the pace of strategic and political ties, given the presence of other large, fast-growing Asian powers—not to mention traditional US and European interests. At this relatively early juncture, perhaps the most rigorous and valuable contribution to the literature on Chinese–Latin American relations is an edited volume by Alicia Garcia-Herrero and K. C. Fung, Sino-Latin American Economic Relations.
Almost all of the authors included hold doctorates in economics and work at leading international financial institutions, think tanks, or universities. Fung is an academic economist from the University of California at Santa Cruz, and Garcia-Herrero is chief economist for emerging markets at Banco Bilbao Vizcaya Argentaria (BBVA), a global Spanish bank with extensive operations in Latin America. Collectively, the authors pen a rigorous empirical portrait of extant economic relations between Latin America and China. They analyze patterns of economic integration in considerable depth and also make useful policy recommendations.
This valuable, albeit disjointed, volume separates fact from myth with respect to the burgeoning economic integration between the two regions. It assembles several excellent short papers on a range of important economic issues, particularly trade and foreign direct investment between China and Latin America. But be warned: this is work by earnest, plodding, and meticulous economists, so there is nothing sensational or exciting in the text that is not backed by statistics. Not surprisingly, therefore, one can gain a valuable education on the state of economic relations between the two regions simply by studying the charts and tables. As a bonus, chapters 2 and 3 provide helpful analysis of Latin America’s trade and investment ties with India, which remain considerably thinner than those with China.
The essays in Sino-Latin American Economic Relations are well-edited empirical papers. Even without a background in statistics, one can readily glean the main findings. The volume covers four key areas: up-to-date analyses on trade, foreign direct investment, and capital flows; economic policy lessons; economic cooperation and integration; and two focused studies on economic relations between Mexico and Brazil, Latin America’s two largest economies, and China.
The book has three main takeaways. Not surprisingly, the main one is that the regions have much to gain by continuing to focus on comparative advantage, particularly when Brazil and Mexico are set aside, since these economies compete directly in many industries on the trade and investment fronts. Chapters 8 and 9 are dedicated to analyzing Chinese relations with these two countries and merit close scrutiny. In short, there continues to be ample opportunity for both regions to deepen trade and investment ties.
The essays collectively underscore a second major point, though this is not developed systematically and merits more research. Namely, the data show that there are two Latin Americas: Mexico and industrial Brazil, whose economies compete directly with China and are also well integrated into regional and global production networks, and the rest of Latin America, including rural Brazil, that better complements China economically by churning out raw materials and related products. Relations between Mexico and China will never deepen because Mexico has hitched its wagon to the United States—politically, through increased cooperation on drugs, violence, and immigration—as well as economically, thanks to NAFTA. Relations with the other Latin America giant, Brazil, are more complementary given the scale and scope of its treasure trove of raw materials. But not all will go smoothly with Brazil either because, like Mexico, it is an industrial powerhouse that will compete for its share of foreign direct investment and trade.
Third, commercial patterns are distorted as a consequence of ill-guided government policies to protect and promote trade and investment. This could needlessly vitiate integration in the future, perhaps via political channels in resentful Brazil and Mexico who may perceive a predatory China. Both regions mismanage exchange rates and provide too many indirect subsidies. China’s errant policies in this regard are well known, but exchange rate blunders by Brazil and Mexico in the opposite direction are less obvious. The authors generally acknowledge that the state must play an active and constructive role in fostering deepened and more-balanced economic integration between the two regions, particularly in Latin America, which desperately needs more investment in human capital and infrastructure. Latin America also faces a daunting challenge of managing its monetary policy to minimize the adverse effects of “Dutch disease,” which would disadvantage its industry relative to that of China and other developing countries. The authors, in short, are conscious about the role of the state and are not laissez faire cheerleaders.
Given its price tag, Sino-Latin American Economic Relations will likely only be purchased by specialists and institutions. For the rest, it will remain a convenient reservoir of valuable data and workmanlike empirical analysis in one convenient location. Soon, though, it will be complemented if not supplanted by more up-to-date and more-coherent work on this most important subject.
Gabriel Aguilera, PhD
Assistant Professor of International Security Studies
Air War College