China-Latin America: a two-way affair

IE Focus | By María del Pilar Galeote, Professor at IE Law School

China’s growing presence in Latin America is a reality, but is only half the story. Now it´s time for Latin America to do the same in China.It is a proven fact that China´s presence in Latin America is on the increase. Analyses have been made of the advantages and opportunities brought about by the situation, but disadvantages and threats it may hold for Latin American economies in the long run have also been revealed: Latin America has the opportunity to become a large-scale supplier of raw materials and, in particular, an area that demands processed products from China. That is why the route between China and Latin America needs to become a two-way affair. Like many Western countries, Latin America needs to increase its presence there.

There are many strategic reasons for encouraging entrepreneurs to invest in China. First of all, there is a significant competitive advantage in terms of costs. Low labour costs, as shown by the hourly pay of a worker in the manufacturing industry, even if current studies show that labour costs will increase in China over the coming years. If that were the only attraction of the Chinese market, decisions about investing in the country would not always be taken because the same competitive advantage also exists in other countries. However, there are other strategic reasons that justify the decision, such as the Chinese market’s huge potential at the present time. It is a market with a growing middle class that is increasing the level of demand in a large number of sectors.