beyondbrics

There’s no doubt that China’s growth has created a market ripe for Latin America exports, particularly natural resources. But have Chinese manufacturers – using those same imported raw materials – hurt the sales of their LatAm rivals? The evidence has mostly been anecdotal. Until now.

In the most recent edition of Americas Quarterly, Osvaldo Rosales and colleagues take an empirical approach. Their conclusions are clear: Chinese competition has hit LatAm manufacturers hard – at home and abroad.

Rosales’ team selected industries that export to the US, the EU and the four countries they used to represent Latin America: Argentina, Brazil, Colombia and Mexico. They then compared the sales of LatAm and Chinese producers in these markets between 2005 and 2010.

What did they discover? In the US, Chinese competition eroded LatAm market share by as much as a quarter. Mexico was overwhelmingly hardest hit, accounting for 93 per cent of the lost sales.

Taking together exports to the the US and the four LatAm countries’ exports to each other, Rosales finds that by 2010, more than a fifth of their combined industrial exports were threatened by competition from China.

In the EU, which is currently a less important market, disruption was also evident but lower, at 4 per cent.

At home, there’s a similar trend. In certain sectors in Colombia, Chinese imports jumped 28 per cent per year between 2005 and 2010. In Brazil, imports from China of clothing and industrial machinery grew at 30 per cent – twice the rate of those from other countries.

That’s just a quick summary – there’s plenty of data to digest in the full article, summarised by neat graphs.

What does this all mean for Latin American industry? Rosales concludes:

Efforts to articulate public policies are increasingly necessary to define national strategies, involving both private and public actors—like similar efforts developed in East Asian countries—to create the conditions necessary to meet the challenge posed by China. If these coordinated efforts are not deployed, the future of the industries in question could be seriously compromised.

Related reading:
China eyes LatAm agribusiness, beyondbrics
China-LatAm: moving up a gear, beyondbrics
Quantifying China’s presence in LatAm, beyondbrics