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Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
Changing global dynamics
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Changing global dynamics

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What is it in for Latin American …

What is it in for Latin American
and Chinese relations?

Published in: Business, Technology
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  • 1. Changing global dynamicsWhat is it in for Latin American and Chinese relations? Alicia Garcia Herrero Chief Economist for Emerging Markets BBVA CAF-ILAS Annual Conference, Beijing May 8, 2012
  • 2. Many venues of change relevant1. The emerging countries’ kingdom Enormous weight of emerging countries in the global economy in the next ten years Page 2
  • 3. The emerging countries’ kingdom• Emerging Asia contribute close to 58% to global growth in next 10 years• China is the highest contributor with almost 30% of global growth• Latin America more relevant than Europe Contribution to World economic growth by region between 2011-2021 (%) Source: BBVA Research and IMF WEO Western Europe Eastern Europe Asia (ex.Japan) 6.0 North America 10.5 5.8 57.9 5.0 1.8 Japan Latin America 4.1 Middle East Africa 7.8 1.0 Australia + New Zealand Page 3
  • 4. Many venues of change relevant2. Economic relevance for many countries in the emerging world but fewer creditors! Emerging economies still absorbing capital with a very big exception: China! Page 4
  • 5. China becoming key source of investmentChina will further increase its influence on other EM since it will need to diversify its positiveIIP away from reserve assets to FDI and away from the developed world to the emergingworld. Key sectors might be infrastructure and manufacturing in the future International Investment Position 2010 (% of GDP) Source: BBVA Research and IMF 65 55 45 35 25 15 5 -5 -15 -25 China Japan Germany Page 5 FDI Portfolio Derivatives Other Reserves Total
  • 6. Many venues of change relevant3. Continuous urbanization implies a sustained change in demand for (some) commodities Infrastructure needs strong and, thereby, the price of commodities (energy and metals) Page 6
  • 7. Urbanization still underway in the most important region for global growth: AsiaLargest group of emerging markets: Urbanization rate Second largest group: Urbanization rate(%, people living in urban area) (%, people living in urban area)Source: BBVA Research, WB and Haver Source: BBVA Research, WB and Haver1.0 1.00.9 0.90.8 0.80.7 0.70.6 0.60.5 0.50.4 0.40.3 0.30.2 0.20.1 0.10.0 0.0 Pakistan Colombia Thailand Nigeria Poland Malaysia Peru Philippines Vietnam Bangladesh G6 Average Argentina South Africa Turkey China India Mexico Russia Indonesia Egypt Brazil Korea G6 Average 1990 2009 1990 2009 Page 7
  • 8. Many venues of change relevant4. New middle class massively in emerging world Specially in China followed at large distance by Brazil Page 8
  • 9. New middle class: enormous opportunity to serve new consumption needsSize of middle income class population Share of global middle class consumption (2000-2050)(millions of people) (millions)Source: BBVA Research Source: OECD 2010 (“The emerging middle class in developing countries”) 300 100% 90% Others 250 2010 2020 80% 200 70% 150 EU 60% Other Asia 100 50% 50 40% US India 0 30% France Korea Russia UK USA Taiwan Turkey Brazil Italy Germany China Japan Indonesia India Mexico Canada 20% Japan 10% China 0% 2000 2010 2020 2030 2040 2050 Page 9
  • 10. Many venues of change relevant5. Perception of commodity abundance changing? An attempt to answer this question can be found in recent joint work by Alicia García-Herrero and Mario Nigrinis (BBVA) in collaboration with Matt Ferchen (Tsinghua U.) and KC Fung (U. of California) Page 10
  • 11. Export diversification largely reduced but reverse trend Exports: Top 5 goods cumulative share Source: COMTRADE and BBVA Research 100 100 100 100 90 90 90 90 80 80 80 80 70 70 70 70 60 60 60 60 50 50 50 50 40 40 40 40 LATAM South America 30 30 30 30 Argentina Brazil Chile Colombia Mexico Peru Venezuela 20 20 20 20 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2008 2010 1962 1965 1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010In the case of South America there has been a reversal which began 10 years ago,coinciding with the emergence of China as a world powerhouse Page 11
  • 12. Diversification away from commodities even morereduced recently Commodity Exports: Share of total exports (%) Source: COMTRADE and BBVA Research 100 100 100% 100% 90 90 90% 90% 80 80 80% 80% 70 70 70% 70% 60 60 60% 60% 50 50 50% 50% 40 40 40% 40% 30 30 30% 30% 20 20 20% 20% 10 10 10% Argentina Brazil Chile Colombia 10% LATAM South America Mexico Peru Venezuela 0 0 0% 0% 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2008 2010 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Commodities have always taken an important share of LATAM exports. After NAFTA,Mexican economy structure changed Page 12
  • 13. Relative export diversification worsening since 2008 LATAM’s excessive commodity exports: LATAM commodity exports share vs World average Source: COMTRADE and BBVA Research 80% 80% 70% 70% NAFTA helped changing the structure of Mexican 60% 60% economy 50% 50% It was only since 2008 that the share of South American economies commodity exports rose more than the 40% 40% world average. This may imply the following: 30% 30% 20% 20% 10% 10% 0% 0% -10% -10% Argentina Brazil Chile Colombia Mexico Peru Venezuela -20% -20% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Compared with the rest of the World, South American economies have always beenintensive in commodity exports Page 13
  • 14. US still most important partner for Latin America as awhole but… US, EU and China: Total imports from LATAM 7 in USD Billions Source: COMTRADE and BBVA Research 350 350 550 550 Commodities Non commodities 500 500 300 300 CN EU US 450 450 250 250 400 400 350 350 200 200 300 300 250 250 150 150 200 200 100 100 150 150 100 100 50 50 50 50 0 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010The rise of China is dramatic and in 2010 almost caught up with EU (EZ+UK) as the regionsecond largest partner. Commodities are about half of the total exports Page 14
  • 15. China about to catch up for South America andcommodities much more important US, EU and China: Total imports from South America in USD Billions Source: COMTRADE and BBVA Research 120 120 300 300 CN EU US Commodities Non commodities 100 100 250 250 80 80 200 200 60 60 150 150 40 40 100 100 20 20 50 50 0 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Although the US is still the top export destination, the difference with EU and China is notas large. Commodities dominate export flows. China’s demand was a buffer in 2009 Page 15
  • 16. Intraregional trade could save the day? Growing fast also and relatively focused on manufactured goods Intraregional trade and Sino imports: in USD Billions Source: COMTRADE and BBVA Research LATAM 7 South America 120 120120 120 Commodities Non Commodities China Commodities Non Commodities China100 100 100 10080 80 80 8060 60 60 6040 40 40 4020 20 20 20 0 0 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Page 16
  • 17. Conclusions Exports concentration • There seems to be a growing consensus that excessive concentration of exports may be detrimental for economic development, in particular when concentration is in commodities as a source of concern What has • Historically LATAM exports have been concentrated in commodities although a process of diversification did indeed take place until the end of the last century happened in LATAM? • That trend has changed starting 2008 and quite rapidly Is China • Our results show some evidence that China is indeed behind the renewed concentration on exports on commodities responsible? Dependency • Our case of study show that for commodities like soy bean and non ferrous metals, South American of Chinese economies are more reliant on Chinese demand than other exporters. For oil and iron ore other countries are more dependent than South American ones demand Page 17
  • 18. Changing global dynamicsWhat is it in for Latin American and Chinese relations? Alicia Garcia Herrero Chief Economist for Emerging Markets BBVA CAF-ILAS Annual Conference, Beijing May 8, 2012

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