The Fish or the Fishing Rod: Latin America’s Opportunity to move up the Value Chain
By: Otto F. von Feigenblatt November 1, 2011
Latin America’s increasingly important relationship with China has resulted in trade surpluses for most South American countries and in trade deficits for the rest. Nevertheless the most important characteristic of the relationship is the nature of the goods being traded and the effect this is having on the Chinese and Latin American economies. China tends to import raw materials and low value added products from Latin America, while Latin America imports consumer products such as garments and electronic devices from China. Latin America now has a choice between continuing to export low value added products resulting in continued dependence and vulnerability to fluctuations in the world market or following the Chinese and Japanese example of investing considerable resources in research and development so as to gradually move up the value chain. Latin America can learn from the experiences of China, Japan, and the Asian Tigers so as to avoid a looming development trap.