Economic Linkages between Asia and Latin America Opportunities, Challenges and Policies

Economic Linkages between Asia and Latin America Opportunities, Challenges and Policies March 3, 216 Min Zhu Deputy Managing Director

Outline I. Trade and Financial Linkages II. Future Opportunities & Potential 2

Outline I. Trade and Financial Linkages II. Future Opportunities & Potential 3

2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 Trade Ties between Asia and Latin America 3 Latin America: Exports of Goods to Asia (Billions of U.S. dollars) 3 Asia: Exports of Goods to Latin America ( Billions of U.S. dollars) 25 25 2 2 15 To China 15 From China 1 1 5 Asia excl. China 5 Asia excl. China Sources: IMF, Direction of Trade Statistics; and IMF staff calculations. 4

China s Consumption of Major Commodities Exported by Latin America (In percent of total world consumption) 6 2 213 5 4 3 2 1 Petroleum Copper Iron Ore Source: IMF staff calculations. 5

29 21 211 212 213 214 29 21 211 212 213 214 Financial linkages through FDI have also become significant 8 Latin America: FDI from Asia (Billions of U.S. dollars) 5 Asia: FDI from Latin America (Billions of U.S. dollars) 7 6 From: Asia (excl. China and Japan) 4 5 3 To: Asia (excl. China and Japan) 4 3 From: Japan 2 2 1 From: China 1 To: China Sources: IMF, Coordinated Direct Investment Survey; and IMF staff calculations. 6

Outline I. Trade and Financial Linkages II. Future Opportunities & Potential 7

Real GDP Growth (In percent; year-on-year growth) 14 Asia Emerging Asia 1/ Latin America and the Caribbean 12 1 8 6 4 2-2 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 Source: IMF, World Economic Outlook.

Demographic Differences Old-Age Dependency Ratio (In percent of working-age population; average in each region) 2 Asia Latin America 15 1 5 2 213 Sources: World Bank, World Development Indicators; and IMF staff calculations. Note: Asia includes: China, Japan, Korea, India and Indonesia; Latin America includes Brazil, Chile, Colombia, Mexico and Peru. 9

Intra- and Inter- Regional Exports 1 Origin: Latin America and the Caribbean Origin: Asia (In percent; 214) (In percent; 214) 8 6 4 2 Latin To: America Latin America and the and Caribbean the Caribbean To: Asia Asia To: Other Region Sources: IMF, Direction of Trade Statistics; and IMF staff calculations. 1

7 6 5 4 3 2 1 Quality of Infrastructure in Latin America (Index, 7 = best; 27 15) Country-specific rivals in exports markets LAC6 '7 '15 '7 '15 '7 '15 '7 '15 '7 '15 '7 '15 ARG BRA CHL COL PER MEX Source: IMF Staff estimates with World Economic Forum and UNCOMTRADE data. Trade rivals sample defined as the top 5 exporters of each of the top 5 goods exported by the respective country. 11

2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 Difference in Saving-Investment Balances Current Account Balance (Billions of U.S. dollars) 8 6 4 2-2 -4 Asia Latin America and the Caribbean Sources: IMF, World Economic Outlook database; and IMF staff calculations. 12

China: Outward FDI by Region (Billions of U.S. dollars; end-214) (In percent of GDP; end-214) 6. Middle East and Africa: 128$B Latin America: 1$B Europe: 159$B Asia: 21$B North America: 156$B 5. 4. 3. 2. 1.. 4.9 Asia 1.4 North America 1. Europe 2.4 Latin America 4.4 Middle East and Africa Sources: National authorities; China Global Investment Tracker (AEI and Heritage Foundation); and IMF staff estimates. Note: Figures in red indicate the average size of ODI in each region as a percent of recipient country s 214 GDP. 13

25 26 27 28 29 21 211 212 213 214 215 China: Official Loans to Latin America Loans per Year (Total of 125$B; 25-215) Loans by Sector (Total of 125$B; 25-215) 4 35 3 25 Mining: 1.7$B Other: 12.4$B 2 15 1 5 Infrastructu re: 4.3$B Energy: 7.2$B Source: The Inter-American Dialogue. 14

Free Trade Agreements 3 25 2 15 1 Number of Agreements between Asia and Latin America 9 22 at least 25 5 2 24 27 213 22 (Expected) Source: East Asia Forum. 15

Facilitating further integration Resist protectionism at home. Use trade and investment agreements to deepen integration. Prefer multilateral approaches. Regional agreements also have a key role, and should be open and transparent. Outside trade and investment agreements, infrastructure cooperation can contribute to a win-win relationship. Enhanced regulatory cooperation can facilitate trade and FDI, and encourage small and medium-sized enterprises to get involved in trade. 16

IMF Contributions Analysis and capacity-building that promote regional cooperation and exchanges. Enhanced dialogue on regional cooperation, policies, and information Organized a predecessor conference at the 215 Annual Meetings in Lima - Bridging the Pacific: Harnessing The Benefits Of Rising Trade And Financial Integration Between Asia And Latin America. Participated in the IISS Cartagena Dialogue: The Trans-Pacific Summit in 214. Support for the APEC work through Finance Ministers Process, by providing inputs on the outlook and risks, as well as on more technical issues (e.g., disaster risk financing; infrastructure; investment financing). 17

Thank You 18