Saturday, February 13, 2016

China's problems could hit Latin America hard

During the last few years, China was a mixed blessing for Latin America (see here and my own views here). On the one hand, China's demand for commodities was behind the Latin America's boom. China also offered an alternative development model for the region and financial support.  On the other hand, it helped to consolidate primary specialisation and to accelerate deindustrailasation even in Brazil

Worryingly, China's crisis can move all these various impacts in the "wrong" direction:

a. The pending devaluation of the Chinese renminbi could further erode Latin American competitiveness at a time when competing through prices is particularly important in the region.

b. Exports to China will not expand and commodity prices will remain low.

c. China is still lending to Latin America, but it is likely to think harder about how much to lend and in what conditions in the future.

d. The crisis could strengthen neoliberal's hand in Latin America by questioning the Chinese alternative.

Am I missing something?  Is there anything positive for the region coming out of this?  

No comments: