Unidad

Unit 4/ 1Learning
/ Escenario
environment
2 7
Lectura Fundamental
Essential reading

Asian and
Etapas de un
Latin
plan
American
de comunicación
relations
estratégica

Index

1 Trade relations between Asia and Latin America

2 Main regional groups and Free Trade Agreements between Asia and Latin America

3 Main strategies to access the Asian market

Key words: Asia, Latin America, alliances, economy, trade relations, cooperation.
1. Trade relations between Asia and Latin America
In the new global economy, Latin America and Asia’s economic relations and their fast increase have
become a central issue, which can be explained by a combination of several events and basic details.
On the Asian side, the emergence of the region in economic terms has had a considerable impact
on all the nations around the globe, and on the Latin American side, the continuous appearance of
platforms interested in boosting the region’s relations with other territories, not only on the economic
aspect but in political matters too, has brought a wide range of opportunities.

One thing that must be noted is that economic relations between Asia and Latin American countries
are not new at all. Actually, trade with Asia can be acknowledged as the main reason why Latin
America was “discovered” in the 15th century, since major European economies at the time, when
trying to create new trading routes, found themselves uncovering a whole new world of resources and
populations in the western side of the world.

Although this connection can be tracked so far in history, a real strong relationship only emerged
after the end of the Second World War, when Japan arose from the ashes to become one of the key
players in the investments on Latin American and the Caribbean. The main means that promoted
the trade between Japan and the Latin American region was natural resources, which later became
the driver for the relations with Hong Kong, Taipei, China, South Korea and Singapore, due to their
scarcity in natural reserves.

Although this moment in history, the late 1980s, is usually stressed as an essential point in the
relationship between Asia and Latin America, there is still a more important event that turned the
situation of the two regions, which was the emergence of the People’s Republic of China and, less
significant however important, the rise and consolidation of India. The increasing demand for raw
materials of these two countries which Latin America provided, coupled with the western region’s
progression incentivized the strong consolidation of commercial relations between the regions.
Hence, Latin America’s economic importance for Asia relied mostly in the changes of the market
forces that produced the complementarity of the regions.

A very useful account of how relations have strengthened between Asia and Latin America are three
aspects that have prevailed in the integration process: cooperation, foreign direct investment and
commercial relations. Although this three pillars have been extensively tangled over time and as a
result, they have created uncountable advantages for both regions: the commercial relations have
prevailed as the pillar that reinforces the incentives of improvement of the other two.

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The following figure helps you to understand the increasing importance of the trade relations between
these two regions, which accounted for no more that 1% in the 1920s, in contrast with the 4% share
of the year 2010.

Figure 1. Percentage of Asia and Latin America’s shares of each other’s trade.
Source: UN COMTRADE data (2012).

This relation, although it has not been exactly progressive as seen in the shares of the trade between the two
regions, it was indeed reinvigorated since the end of the world’s economic crisis of 2009, promoting the
opportunities for the sub-region into a more stable environment for the following years.

The assessment of this bond between regions can also be performed from the viewpoint of the
actors involved. As it would be expected, Latin American countries that played a major role in the
establishment of the relationship were the ones that produced raw materials, and the Asian countries
were the ones that balanced this correlation by importing the raw materials and transforming them
into goods. A group of countries that showed incredible performance were Chile, Mexico and Brazil,
they contributed most of the Latin America’s share in the trade with Asia. On the other hand, exports
from countries like Argentina, Peru and Venezuela to Asia decreased.

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A very debatable aspect of this whole topic is its future. As it can be traced, Latin America has always been at
the periphery of its relations with North America. However, the dynamism of Asia, specially of countries like
China, has proved that the West can expand its horizons and undertake new foreign policies that promote
the relations with other continents. China, due to its size and population, its economic dynamism and the
ability of its leaders, has emerged this past decade as the most serious competitor for global supremacy
against the United States of America. This Asian country is generating its own ideas which without a doubt
will have great influence in the world for the next years.

China is been developing a system of its own. It is trying to build a new model of globalization to
counter the "flat world" model and it has proposed instead the concept of a "walled world", which
allows the country to protect its own sovereignty, nonetheless strengthening its influence in trading
terms. Three of the changes that government implemented in the laws that ruled international trade
in China, in order to accomplish the objective of positioning itself as a greater competitor in the
international market from 2004 onwards were the following:

1. People could start participating from international trade, an activity that was mainly restricted
to companies controlled by the government.

2. Companies with foreign investment were no longer limited to importing raw materials for
their own use and they were now allowed to commercialize them.

3. A certain percentage of goods such as oil, grains, chemical fertilizers and cotton was free
from government restrictions.

These new laws regarding the commercial relations of China with the rest of the world contributed
to the historical rise of the region, and specially of the Chinese country in Latin America as it can be
deducted in the following chart, where China occupies a major share in Latin American exports of
goods to Asia-pacific.

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Figure 2. Latin American exports of goods to Asia pacific.
Source: Own elaboration, adapted from Scotiabank

2. Main regional groups and Free Trade Agreements between Asia and
Latin America
After the big financial crisis of 2009, some regions of the world such as Latin America and Asia were
able to recover quickly and began to grow in a steady way the following years. This growth was led not
only by internal policies, but also by the successful approach of integration that both regions pursued
with each other. A concrete result of this has been the increasing number of Free Trade Agreements
(FTAs) that have gone into effect between the different countries in the two regions, getting to a
surprising number of more than 18.

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During the 1990s there were many regional economic cooperation groups involving Latin American
countries, such as MERCOSUR, the nowadays non-existing NAFTA, and some other intraregional
agreements that promoted bilateral relations. Such case was not seen in Asia, since this region did
not applied FTAs for a long time, instead the countries of the region expanded through integration
without agreements, except for some institutions created mainly for purposes different to only
trading, but also promoting security and enhancing social well-being. Some of these regional groups
in Asia were the Asia Pacific Economic Cooperation Forum (APEC) formed by 21 economies, which
is a coordination mechanism with governmental character; the Asia-Pacific Economic Cooperation;
and the Association of Southeast Asian Nations (ASEAN).

Ten countries belonged to the ASEAN, which seeks to establish a common market in the future, and
promotes trade relations with other regions of the world.

The following chart shows the trade flow between Latin America and Asia from 1990 to 2010.

Figure 3. Trade flow between Latin America and Asia.

Most of the FTAs between Asia and Latin American have proved to be drivers of the fast liberalization
of trade between the regions, and these tools have not only established a set of obligations for
countries involved, but are also the ones that determine the growth or decline of imports and exports
for both regions.

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3. Main strategies to access the Asian market
The impressive development of the economy of the Asia region has contributed to rise the standard
of living of the population, which has meant appreciable changes in food, clothing, housing, and
generally in consumer habits. Therefore, it can be said that Latin America has chosen wisely its trade
partner, however there are still some topics that need to be considered in order to cultivate further
good relations. One of the most important issues in the appropriate development of the trading
process between both Asia and Latin America is the poor transportation and the infrastructure
impediments that prevent further ties between the continents. There have been signs of how the lack
of harmonization of procedures sometimes inhibits market access and consequently demotivates the
competitiveness of the regions.

There are, as it could be expected, some conditions that need to be considered in order to approach
certain markets. For the specific case of Asia, these consideration could be summarized as follows:

»» It is common to find great opportunities in the market, however reaching success is a very
complex matter.

»» Companies or businessmen require a clear strategy in order to enter the market.

»» It is highly important to have the due diligence when approaching the Asian economies.

»» The number of competitors is high, and it increases over time.

»» Legal matters are usually of critical control.

Nevertheless, as there are conditions, there are also tactics to meet these conditions and be
successful in achieving the objective. The following strategies will provide an account of important
issues that could accelerate the entrance of new actors into the Asian market:

Interpersonal relations have always been an extremely important matter for business around the
world, but for Asia specifically they provide a higher weight when making decisions.

Businessmen or companies need to show a long-term plan and products, or services must be
designed to fit the Asian market.

Partners need to be carefully chosen and the production processes requires a clear division.

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 Did you know that...?
Latin American companies need the protection against illegal matters, since it is
quite common in Asia to violate property laws.

Finally, a congruent and deeper convergence between the two regions can be seen if trade continues
to take the form of economic cooperation. Different agreements and interregional pacts have
shown to be of great use when it comes to provide new models of growth. Furthermore, if actors are
interested in being part of this ongoing relation cover the range of issues mentioned as an access
strategy into the market, it is actually possible to succeed in the better alignment of the two markets.

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References
Asian Development Bank (2012) Shaping the Future of the Asia and the Pacific–Latin America and the
Caribbean Relationship. Japan: Asian Development Bank.

ECLAC. (2010). Latin America and the Caribbean in the World Economy 2009– 2010. Santiago,
Chile: ECLAC.

Estevadeordal, A., & Kawai, M. (2012). Asia–Latin America Financial Cooperation. Japan: BID.

FEALAC. (2002). Final Report: 2nd Economy and Society Working Group of Forum for East Asia–Latin
America Cooperation Meeting. Tokyo, Japan: FEALAC.

Mesquita, M., Volpe, C. & Blyde, J. (2008). Unclogging the Arteries: The Impact of Transport
Costs on Latin America and Caribbean Trade. Washington DC, the United States: IDB and Harvard
University Press.

Nunes de Oliveira, A. J., Onuki J. & Oliveira, E. (2006). Coalizões Sul–Sul e Multilateralismo: Índia,
Brasil, e África do Sul. Contexto Internacio- nal 28(2), 465-504.

United Nations. (2010). Opportunities for Convergence and Regional Cooperation. Santiago, Chile:
United Nations Publications.

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Figure references
International Monetary Fund’s Direction of Trade Statistics. (2012). Trade flow between
LAC and Asia [image]. Retrieved from https://www.everycrsreport.com/files/20181203_
R45420_37b1dc85a723fb28a0cc32ec9e9016a00433c955.html

UN COMTRADE data. (2012). Asia Latin America’s shares of each other’s trade in percentage.
[Image] Retrieved from Asian Development Bank, Inter-American Development Bank, and Asian
Development Bank Institute. Japan.

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 TECHNICAL INFORMATION

Module: Cultura y Economía Regional de Asia

Author: Juliana Correa

Pedagogical Advisor: Adriana Alexandra Bolaños Contreras

This material belongs to Politécnico Grancolombiano

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