A merger between the Asian and Latin American economies could help them withstand the impact of a worst-case scenario in which the world’s advanced economies become mired in a decade-long period of weakness, senior policymakers from both regions said on Saturday.
Choongsu Kim, the governor of Bank of Korea, said it would take “10 years” for advanced economies to recover fully from the eurozone shock and the wider slowdown in advanced countries but that Latin America and Asia together can be a “driver” of new growth.
Asia “has not been successful in decoupling” from advanced economies and neither has Latin America, Choongsu said. But together the two regions - which now account for 37% of global GDP and which have provided more than a half of global growth in the past few years - could form a new growth pole, he said.
Zheng Xiaosong, China’s assistant minister of finance, agreed that the impact of the advanced economy recession would “persist for a long time” but suggested that a fusion of the technological resources of Asia and the natural resource wealth of Latin America could produce a new global dynamic.
However, this dream of a new global pole of consumption and investment will not come into being without increased regional cooperation across a wide range of countries and sectors, Masahiro Kawai, dean of the Asian Development Bank Institute which co-sponsored the seminar, said.
He cited the need for new intra-regional free trade arrangements, building of supply chains, financial cooperation and generally improved connectivity between Asia and Latin America. “And we need to look beyond the BRICs to the smaller countries of both regions,” Kawai added.
Efforts are underway to build these links, Asian Development Bank president Haruhiko Kuroda said, pointing to accelerated cooperation between the ADB and the Inter-American Development Bank (IDB). These are designed to expand “South-South” cooperation between the two regions and beyond, he said.
IDB president Luis Alberto Moreno said that there was great scope for expanding economic cooperation between Latin America and Asia across a very wide range of sectors, ranging from agriculture to development of small- and medium-sized enterprises as well as in diplomatic and cultural areas.
But, according to Japan’s parliamentary senior vice minister of finance Tsutomo Okubu, there is still a “long way to go in” to build bridges between the two regions, as mutual trade and investment was still low and sector-biased.
Earlier this year, Moreno took part in the annual ADB meeting in Manila, the first time the top Latin American bank executive attended the Asian bank’s annual meeting.
Trade between Asia and Latin America has been growing by 20% annually on average since 2000, reaching about $442 billion last year.
Free trade agreements between the two regions have increased since 2004 and there are currently more than 10 under negotiation or approaching implementation.
Most Asian investment has gone into bigger countries, like Brazil and Mexico.