{
  "title": "From Windfall to Windmill: Harnessing Asia’s Dynamism for Latin America",
  "publication": "IMF Blog, July 22, 2015",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2015/07/22/from-windfall-to-windmill-harnessing-asias-dynamism-for-latin-america",
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  "summary": "Latin America’s recent economic fortunes reflect closer economic ties with Asia, particularly China.",
  "sections": [
    {
      "heading": "Overview and context",
      "content": "- Latin America’s recent economic fortunes reflect closer economic ties with Asia, particularly China.\n- China has become a crucial source of demand for Latin American commodities over the past two decades, delivering significant gains but also contributing to vulnerability as Chinese investment slows.\n- The central proposition: Asia could serve as a sustained engine of growth for Latin America—“like a windmill”—if deeper, long-term, mutually beneficial links are developed."
    },
    {
      "heading": "Closer economic ties: recent developments and financial linkages",
      "content": "- Trade:\n  - Gross trade flows between Latin America and Asia have grown tenfold since 2000.\n  - Trade linkages have spurred initiatives including bilateral trade agreements, the Trans-Pacific Partnership, and new multilateral development banks.\n  - The rise of China is an important driver but does not fully explain intensified links; Korea, India, and Japan have increased their roles as trading partners for several Latin American countries.\n- Finance and investment:\n  - Japanese foreign direct investment into Latin America exceeded $110 billion between 2005 and 2014.\n  - Chinese foreign direct investment to the region increased from a total of $6 billion during 1990–2009 to an average of $10 billion per year between 2010 and 2012."
    },
    {
      "heading": "Large untapped opportunities and structural patterns",
      "content": "- Commodity dependence and composition of trade:\n  - Latin America’s exports remain dominated by raw materials, while imports from Asia are primarily manufactured goods.\n  - Despite some progress in higher-value added exports, Latin America’s economic structures remain relatively undiversified.\n- Limited knowledge spillovers and supply-chain integration:\n  - Knowledge spillovers and innovation effects from trade have been limited.\n  - Undiversified export baskets and limited economic complexity have constrained the emergence of intraregional supply chains, with Mexico a notable exception due to integration into the North American manufacturing complex.\n- Contrasts within Asia:\n  - Trade patterns within Asia changed dramatically over the past 20 years, with China as a linchpin for cross-border trade, technology upgrading, and global supply chains.\n  - Some Asian sub-regions remain relatively disconnected from regional trade integration; domestic hurdles such as weak business environments contribute to uneven outcomes."
    },
    {
      "heading": "Realizing the potential: barriers and policy priorities",
      "content": "- Key domestic constraints to deeper integration and productivity:\n  - Weak education systems.\n  - Infrastructure gaps.\n  - Difficult business environments.\n  - Various trade barriers.\n- Strategic priorities and realism:\n  - Growth reality check:\n    - Lower commodity prices, tighter external financial conditions, and reduced macroeconomic policy space make achieving robust growth more challenging than over the previous decade.\n    - Prospects hinge on decisive efforts to address long-standing structural weaknesses that have held back investment and productivity.\n  - Realistic objectives for trade integration:\n    - Trade integration tends to have positive effects on productivity and knowledge transfer but is not a magic wand.\n    - Efforts to boost intraregional trade and stronger links with Asia must be underpinned by domestic reforms that promote entrepreneurial initiative, innovation, and diversification.\n  - Political economy considerations:\n    - Broad political backing is crucial because greater trade integration can have divergent effects across society.\n    - Managing distributional implications and ensuring shared gains in prosperity are critical to sustain political support for openness.\n- Practical actions highlighted:\n  - Reduce obstacles to trade, including high transport costs.\n  - Implement domestic reform agendas to improve conditions for investment, innovation, and structural diversification."
    },
    {
      "heading": "Conclusion and outlook",
      "content": "- Latin America can transform its relationship with Asia from episodic windfall gains into a sustained source of growth and dynamism—“like a windmill”—but this requires:\n  - Clear and realistic objectives.\n  - A long-term strategy.\n  - Attention to political and social implications of deeper integration.\n- The current weak growth outlook and the prospect of China’s structural investment slowdown make it especially important to begin seizing these opportunities.\n\nAndre Meier and Fabiano Rodrigues Bastos, July 22, 2015\n\n---\n\n Content in this bundle\n\n- O dinamismo asiático e a América Latina: Do efeito ocasional ao impulso duradouro\n  - O dinamismo asiático e a América Latina: Do efeito ocasional ao impulso duradouro (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - O dinamismo asiático e a América Latina: Do efeito ocasional ao impulso duradouro (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- is weighing considerably\n- Undiversified export baskets and limited economic complexity\n- Domestic hurdles, including weak business environments\n- Annual Meetings this October\n\nSource: https://www.imf.org/en/blogs/articles/2015/07/22/from-windfall-to-windmill-harnessing-asias-dynamism-for-latin-america"
    }
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    "Authors: Andre Meier, Fabiano Rodrigues Bastos",
    "Published: July 22, 2015",
    "Latin America’s recent economic fortunes reflect closer economic ties with Asia, particularly China.",
    "China has become a crucial source of demand for Latin American commodities over the past two decades, delivering significant gains but also contributing to vulnerability as Chinese investment slows.",
    "The central proposition: Asia could serve as a sustained engine of growth for Latin America—“like a windmill”—if deeper, long-term, mutually beneficial links are developed.",
    "Trade:",
    "Finance and investment:",
    "Commodity dependence and composition of trade:",
    "Limited knowledge spillovers and supply-chain integration:",
    "Contrasts within Asia:",
    "Key domestic constraints to deeper integration and productivity:",
    "Strategic priorities and realism:",
    "Practical actions highlighted:",
    "Latin America can transform its relationship with Asia from episodic windfall gains into a sustained source of growth and dynamism—“like a windmill”—but this requires:",
    "The current weak growth outlook and the prospect of China’s structural investment slowdown make it especially important to begin seizing these opportunities.",
    "**O dinamismo asiático e a América Latina: Do efeito ocasional ao impulso duradouro**",
    "[is weighing considerably](http://blogs.imf.org/2014/11/11/mind-the-dragon-latin-americas-exposure-to-china/)",
    "[Undiversified export baskets and limited economic complexity](http://blogs.imf.org/2015/06/09/raising-long-run-growth-in-latin-america-and-the-caribbean-a-complexity-issue/)",
    "[Domestic hurdles, including weak business environments](http://www.imf.org/external/pubs/ft/reo/2015/apd/eng/areo0415.htm)",
    "[Annual Meetings this October](https://www.imf.org/external/am/2015/index.htm)"
  ],
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