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What China can teach Latin America

Mar 01, 2010 by Eva Paus in root

Secretary of State Clinton's five-country tour of Latin America (Uruguay, Brazil, Chile, Costa Rica, Guatemala) is happening in a context of declining U.S. economic dominance in the region. It is China's economic star that is on the rise in the subcontinent. China  has already become the largest trading partner of Brazil and Chile, and it is rapidly moving up towards that position in a number of the other countries.

Some of the smaller Latin American countries have aggressively pursued a free trade agreeement with China in the expectation that privileged access to the huge Chinese market would boost the growth of their economies. The latest country is Costa Rica which finished negotiations of a free trade agreement with China last month. In a recent op-ed piece in El Financiero, the main business paper in Costa Rica, I argue that free trade is the wrong solution for the economic problems of Costa Rica (and other Latin American countries). Instead, they should embrace the lessons that the development success of China and other Asian Tigers  offer:  a strategic and unwavering commitment to builidng the country's domestic technological capabilities. Expanded education, increased expenditures on R&D, strategic support for domestic companies to enable them to become internationally competitive, policies to maximize the spillover benefits from foreign investment in the country: Those have to be at the top of the policy agenda, not free trade agreements.

Secretary Clinton is not likely to advocate any such change in the focus of Latin America's development strategy; after all, it is the United States that has been pushing for (and signing) free trade agreements with many Latin American countries, starting with Mexico (and NAFTA) in 1994.

 

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