STRONG GROWTH: DHL is seeing strong growth in Asian shipments to Latin America. Here DHL's hub in Hong Kong. (Photo: DHL)         Font Size ..... Small Normal Big Very Big

BY JOACHIM BAMRUD

With the U.S. economy continuing to show weak results, Latin America is increasingly betting on Asia.  Latin American exporters have found eager markets in countries like China, Japan and India, while Asian companies, in turn, are boosting their exports to Latin America.

"The growth of Asia will drive the business with Latin America," says R. Viswanathan, India's ambassador to Argentina, Uruguay and Paraguay and widely considered India's leading expert on Latin America. “Both governments and business have started looking at the potential for complementarities between the two regions.”

While international prices on commodities, the key Latin American export to Asia, are expected to fall or level out, two-way trade between the regions should keep growing thanks to a combination of factors, experts say. They include growing demand for other products in various Asian markets, more demand for Asian products in Latin America and an increasing number of bilateral free trade agreements across the Pacific.

"Trade will grow despite short-term commodity price fluctuations because demand in Asia remains high for Latin America’s resources," says Michael Diaz, managing partner at U.S.-based law firm Diaz Reus, which serves many clients involved in Asian-Latin American business. 

INDIAN POTENTIAL

Viswanathan agrees. "It will continue to grow, but might be at a lesser rate than in the last few years," he says. "While there are expectations of slight fall in commodity prices in the short term, in the long run the large and growing markets of India will help the exports of Latin America to steadily grow.”

One example of the huge potential: Argentine wine exports to India. “The vice president of Argentina, who is from Mendoza, told me ‘If each Indian from the 300 million middle class takes a glass of Mendoza wine, his province needs nothing more’,” says Viswanathan.

With economies slowing down in Latin America there will be additional incentive to sell to Asia, points out William Ratliff, a research fellow at the Hoover Institution at Stanford University and a leading expert on China-Latin American relations. "Asian economies generally are stronger and there are lots of increasingly prosperous people who want more goods of all sorts, which are available from Latin America," he says. "Also, Asian governments generally are presiding over economies that reduce the numbers of poor, raising many from poverty to the lower middle class by World Bank terms, and they will also welcome products from Latin America."

LATIN DEMAND

However, some experts believe Asian-Latin American trade will be driven by Asian exports to Latin America rather than imports from the region. "After six consecutive years of commodity-led export growth in Latin America coupled with expanded consumer credit, the appetite for imported products remains strong and Asian product will continue to flood into Latin America, including cars made in China, to satisfy that consumer demand," says John Price, managing director of business intelligence, Latin America, Kroll InfoAmericas, USA. "Asian companies will continue to invest in Latin America, first and foremost in key resource production but also in infrastructure and related services including logistics, engineering and other areas."

Trade between Latin America and its top six trade partners in Asia reached $224.2 billion last year, an increase of 29.7 percent, according to a Latin Business Chronicle analysis. That's almost as much as Latin America's trade with the 27-member European Union.  Three Asian nations alone — China, Japan and Korea — saw larger trade with Latin America than Germany, the EU's top trade partner for Latin America.  The other three — India, Singapore and Taiwan — posted a combined trade with Latin America larger than Spain, the second-largest EU trading partner for the region.

The growth is also impressive compared with the United States, the top trade partner for Latin America.  Total U.S.-Latin American trade grew by 6.2 percent last year, or nearly five times less than the growth between Latin America and its leading Asia partners. Latin American exports to five of the six nations grew by 32.6 percent to $95.1 billion (details on the sixth nation, Taiwan, were not available). That compares with 4.2 percent growth in exports to the United States last year. Meanwhile, exports from the five Asian nations to Latin America jumped by 28.2 percent to $124.1 billion. That's more than three times faster than the 9.2 percent growth in U.S. exports to Latin America last year.

CHINA, JAPAN LEAD

China leads Asian-Latin American trade, both in size and growth. Its commerce with Latin America last year reached $102.6 billion, an increase of 46.2 percent. Japan, the region's second-largest trade partner in Asia, boosted its trade by 16.1 percent to $59.2 billion. Korea, the third-largest trade partner, saw a 22.6 percent increase to $36.9 billion. Meanwhile, Indian trade with Latin America grew by 24.4 percent to $11.2 billion, while Singapore's trade increased by 13.4 percent to $9.3 billion. And Taiwan boosted its trade with Latin America by 16.3 percent to $5.0 billion.

The trend continues this year. Taiwan, for example, is reporting a dramatic increase. Its trade with Latin America reached $6.7 billion in the first half of the year, an increase of 46 percent compared to the same period last year, according to a Latin Business Chronicle analysis of data from Taiwan's Bureau of Foreign Trade.  The figure is larger than its total trade last year.

One of the beneficiaries of the growing Asia-Latin trade is German-American express giant DHL. It has seen Asian shipments to Latin America traffic grow by 14 percent during the first eight months this year. Shipments to Brazil alone jumped 28 percent. Other growth markets include Mexico (15 percent growth), Colombia 920 percent) and Central America (13 percent).  Central American nations like El Salvador, Costa Rica and Honduras also lead the way in terms of growth in two-way trade, DHL says.

MORE COMPETITIVE

While Asia and Latin America previously saw each other as rivals, they now increasingly see each other as complementary partners, Viswanathan argues. For example, South America contributes to India’s food and energy security while Indian IT companies contribute to Latin American human resource development, he says. About 50 percent of India’s exports to Latin America are inputs for industry -- chemicals, drug raw materials, fabrics, yarn, machines, etc. “These lesser expensive inputs make Latin American manufacturing more competitive,” Viswanathan says.

Latin America’s trade with Asia will be spurred by access to large consumer market with trillions of dollars in liquidity as Asia in turn seeks to diversify its investments in assets based in other stronger currencies, Diaz says.

“Asian markets do not levy tariffs on Latin America’s food, metals, and other commodities [and] South American food producers now realize that most future demand will come from Asia and are anxious to establish business links,” Price says.

JAPAN AND CHILE

Japan, for example, is the largest market for Chilean salmon. The country’s exports of salmon and trout to Japan reached 104, 702 metric tones during the first half of the year. That was more than twice the amount sold to the United States. Meanwhile, exports to Asia (excluding Japan) reached 21,891 metric tons, which were more than the exports to the EU, according to data from industry group SalmonChile.

Latin America’s handful of global-level value-added manufacturing or service companies also look to Asian markets as the center of future growth after the United States declines, according to Price.