China will “eat Latin America’s lunch” if the region does not act to boost levels of education and end its dependence on commodity exports, experts warned yesterday. China’s rapid growth has sent demand for Latin America’s raw materials soaring, while Chinese firms have invested in local energy companies and infrastructure projects. However, Latin American producers cannot rely on China as an ever-growing market for their commodities in the medium term, Don Hanna, global head of emerging markets research at Citigroup told Emerging Markets.
China’s share of global trade will slow sharply as domestic demand becomes a more important driver of its growth, and commodity imports will slow as the country uses raw materials more efficiently, Hanna said. Meanwhile, domestic political pressure for food self-sufficiency will drive productivity improvements in China’s own agricultural sector, he added.
China’s emergence raises the spectre of a Latin America “pushed against the wall,” supplying nothing but commodities to China. The region needs enlightened political leadership to end the “absurd policy of not investing in their own people,” said Riordan Roett, director of the western hemisphere programme at Johns Hopkins University in Washington D.C.
He cited World Economic Forum competitiveness statistics that rank Latin America far below Asia. Even Chile, the one country in the region that ranks reasonably well performed poorly on key education indicators such as science and mathematics.
Hanna argued that governments across Latin America should take advantage of fiscal stability to invest in education, and to improve productivity and competitiveness. Whether recent debt re-payments and international market approval will “continue to translate” into the real economy is down to governments, he said.
Taking the example of Argentina, Roett said that if the country failed to make substantial investment in science and technology, its current account and fiscal surpluses will “mean nothing” in a decade.
The choice for the region’s governments is to educate their workforce to compete in the global economy, or to have China “eat Latin America´s lunch,” Roett said. “You have to invest in people, because people are the source of productivity.... You cannot compete with an uneducated illiterate workforce”.