Latin America must modernize to benefit from ties with China: report

Latin America must diversify, modify and innovate its productive structure to benefit from ties with China, according to a report titled "Latin American Economic Outlook 2016, towards a New Partnership with China."

The joint report was compiled and presented in Cartagena, Colombia, by the Latin American Development Bank (CAF), the Economic Commission for Latin America and the Caribbean (ECLAC), and the Center for Development at the Organization for Economic Cooperation and Development (OECD), Mexico's state news agency Notimex said.

The report "contributes elements for political discussion on the strengthening of ties between China and Latin America, with the aim of building a partnership for development that is mutually beneficial."

"Latin America must diversify and modernize its productive structure based on development policies of innovative production," the report said.

In contrast to China, which "has one of the world's most diversified trade baskets and has developed comparative advantages in nearly 60 industries, Latin America has shown very few advances."

According to the authors of the study, by 2030 the average growth rate of "metal and mineral exports could fall from last decade's 16 percent to 4 percent, the same as fuel exports, while food products could fall from 12 percent to 3 percent."

At the same time, the "reconfiguration of Chinese consumption will open new opportunities for Latin American exports, especially regarding certain types of foodstuffs, as well as for the tourism and services sectors."

However, the report warned, Latin America's participation "in global value chains is substantially lower than other regions."

To counter the problem, the authors said, some countries in the region could move to modernize their agricultural sectors, as well as services sector, paying particular attention to knowledge- and technology-intensive services.

Latin America, they stressed, needs to invest in innovation, quality and training to correct deficiencies in infrastructure and benefit from global value chains. They noted that investment in innovation in the region falls below other OECD countries.

China's development is both a new factor for the region and central to the region's development, generating new challenges and opportunities, the authors said.

Trade between China and Latin America, they stressed, has seen unprecedented growth in the past 15 years.

Currently, the study said, "China's lower demand for raw materials, along with the fall in prices, is affecting Latin American exporters of raw materials," though at varying rates, "which depend, in part, on the nature of their bilateral ties with China."

To that end, the authors urged regional countries to address "the structural weaknesses of growth based on raw materials."

In the meantime, they said, "China will continue to play a key role in (Latin America's) development path." Endi