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Trade aspects of China’s presence in Latin America and the Caribbean

Briefing for the European Parliament

Werner Raza / Hannes Grohs

Brussels, Dezember 2022

Over the last 20 years, China has become the second largest trading partner of Latin America & the Caribbean (LAC). Between 2000 and 2020, China-LAC trade grew 26-fold from USD 12 billion to USD 310 billion. China is also among the top sources of foreign direct investment and finance for the LAC region. The impact of China in LAC is closely related to the Latin American boom in commodities extraction, and infrastructure construction. While traditional commodities continue to be important, trade in new sectors (such as minerals that are crucial for renewable energy – e.g. lithium) as well as in services, is growing rapidly. Although LAC profited from expanded economic interchange with China due to positive terms of trade effects, the long-term implications of the asymmetrical dependence of LAC countries on China remain in doubt. LAC countries have not been able to upgrade in many global value chains that rely on inputs from the region, with its technological capabilities stagnating. China has also successfully used soft power instruments to expand its influence in LAC. In reaction to these new realities, the EU should offer LAC a strategic partnership based on fair and sustainable trade and on intensified technological and political cooperation. Raw-material partnerships based on human rights and environmental sustainability should be supported. Finally, the two regions could join forces to promote a new multilateralism.

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