1. China: Opportunities and challenges for Latin America Luis Miguel Castilla Chief Economist Corporación Andina de Fomento Punta del Este, March 30 2006

2. China: key player in global markets Export growth 1980=100 Share in World FDI, net inflows (2003) Tariff levels and Chinese exports Share in World Exports Source: CAF, Direction of Trade Database, IMF, Global Development Indicators, Yang (2003) 0% 2% 4% 6% 8% 1980's1990's2000's China Latin America & Caribbean East Asia & Pacific

3. Growing trade and FDI links between China and Latin America Chinese FDI in Latin AmericaLatin American Exports to China, sectors (2003) Source: Commtrade, UN, CAF, Direction of Trade Database, IMF, World Investment Report, UNDP Fuente: Latin America´s share in Chinese total tradeChina’s share in Latin American total trade

4. Specialisation Index- China (2004) Specialisation Index- Latin America (2004) Complementary comparative advantages Comparative advantages China vs. Latin America Source: Commtrade, UN, CAF

5. 1.China as a competitor 2.China as an opportunity 3.Major obstacles limiting Latin American trade with China

6. China as a competitor

7. Competition in domestic markets Latin American Imports from China, by item (2003) Labor Costs (average 1999-2002, total industry) Anti-dumping measures imposed by Latin America to China Latin American Trade Balance with China Source: CAF, Direction of Trade Database, IMF, WTO, UN

8. China as an opportunity

9. Higher primary good prices and export volumes Source: CAF, Commtrade, UN Average annual growth of imports by region 2000-2003 Latin American Exports to China by price and volume 1995-2003

10. Greatest opportunity for Latin America: Natural resource exports Source: CAF, Commtrade, UN Principal Chinese Imports and their suppliers

11. Future scenarios: winners and losers Source: CAF, EIU

12. Major obstacles faced by Latin American winning sectors : Infrastructure and logistics Competitiveness Business environment Trade barriers

13. Infrastructure and logistics Port infrastructure quality (2005) (1 = underdeveloped, 7 = as developed as the world’s best) Custom clearance (2005) Irregular payments in exports and imports (2005) (1 = common, 7 = never occurs) Source: WEF 2005-2006, Enterprise Surveys World Bank

14. Competitiveness Source: WEF 2005-2006 Growth Competitiveness Index 2005-2006 (rank in a total of 117 countries)

15. Bureaucracy and Corruption (2005) Business climate Starting a business – Duration (2005) Investor Protection Index (2005) higher values = better investor protection Source: Doing Busines and Enterprise Surveys World Bank

16. Trade Barriers Chinese sanitary and fitosanitary measures notified to the WTO Average tariff and tariff peaks Source: CAF, WTO and OECD (2003)

17. Latin American strategy towards China: For sensitive sectors, generating greater value added and product differentiation Overcoming barriers: - Investment in infrastructure - Trade facilitation (customs) - Business climate Eliminating trading barriers that limit bilateral trade FDI attraction and technological upgrade In summary...

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