Chinaand&Lan&America:& · 102$ 108$ 112$ 118$ 124$ 129$ 127$ 133$ 139$ 143$ 108$ 118$ 126$ 128$ 134$ 137$ 127$ 140$ 146$ 150$ 162$ 206$ 223$ 252$ 344$ 412$ 453$ 547$ 597$ 650$ 100$

China  and  La)n  America:  Implica)ons  for  Sustainable  Development  

Kevin  Gallagher  and  Rebecca  Ray  Boston  University  

March  25,  2014  

Boston  University  

Global  Economic  Governance  Ini:a:ve  

Outline  

•  Background  •  Project  Descrip)on  •  Preliminary  Project  Results  

LAC-­‐China  Economic  Ac)vity    Major  Benefits  

•  Increased  trade—  –  large  and  growing  with  price  impacts  

•  Increased  FDI  from  China  –  large  and  growing  

•  Major  source  of  finance  

2.2%$3.3%$ 3.4%$ 3.7%$ 3.7%$

5.2%$ 4.9%$

7.1%$8.2%$ 8.5%$

9.1%$

1.1%$1.8%$ 1.3%$ 1.6%$ 1.6%$ 1.7%$ 1.4%$

2.1%$ 1.8%$ 1.8%$ 2.1%$

3.7%$

5.3%$ 5.6%$ 5.8%$ 5.8%$

8.9%$

7.6%$

11.4%$

13.2%$ 13.3%$

15.3%$

0.0%$

2.5%$

5.0%$

7.5%$

10.0%$

12.5%$

15.0%$

17.5%$

2002$ 2003$ 2004$ 2005$ 2006$ 2007$ 2008$ 2009$ 2010$ 2011$ 2012$

Expo

rts(to(Ch

ina(as(a(Shrae(of(A

ll(Expo

rts(

Total$Exports$Manufactured$Products$PrimaryCBased$Products$and$Crude$Petroleum$

LAC-­‐China  Exports:  $131B  (2012)  China’s  Importance  as  an  Export  Des4na4on,  by  Commodity  Sector  

Note:  Categories  are  defined  using  Sanjaya  Lall’s  “Technological  Classifica)on  of  Exports”  (Lall,  2000).    Source:  UN  COMTRADE  and  authors’  calcula)ons.  

LAC-­‐China  Exports  Top  Commodi4es,  2008-­‐2012  

Source:  UN  COMTRADE  and  authors’  calcula)ons.  

Sector   Share   Country  share  of  LAC-­‐China  exports,  each  sector  

Iron  ore,  concentrates   22.1%   Brazil  (86%)  

Soybeans,  other  oilseeds   14.7%   Brazil  (67%),  Argen)na  (28%)  

Crude  petroleum   11.9%   Venezuela  (46%),  Brazil  (29%),  Colombia  (10%)  

Refined  copper   10.9%   Chile  (92%)  

Copper  ores,  concentrates   6.9%   Chile  (51%),  Peru  (32%),  Mexico  (13%)  

Transistors  and  valves   5.1%   Costa  Rica  (82%),  Mexico  (17%)  

TOTAL:   71.6%  

Chinese  Greenfield  FDI  in  LAC-­‐$30-­‐50B  Share  of  all  GFDI  inflows  to  LAC,  by  sector  

Source:  FDI  Markets  and  authors’  calcula)ons.  

1.3%%0.8%%

2.2%%

0.8%%0.4%% 0.5%% 0.7%%

0.2%% 1.3%%

0.2%%

0.4%% 1.3%%

0.4%%0.9%%

1.2%%

1.5%%

1.1%%

2.9%%

3.6%%

0.3%%1.4%%

1.2%%

1.0%%

1.1%% 0.4%%

0.3%%

1.9%%

0.4%%

3.2%%

1.7%%

1.7%%

2.9%%

0.8%%

2.6%%

6.3%%5.9%%

2.8%% 2.7%%

5.0%%5.4%%

0.0%%

2.5%%

5.0%%

7.5%%

2003% 2004% 2005% 2006% 2007% 2008% 2009% 2010% 2011% 2012%

Percen

t%of%T

otal%Green

field%In

flowsto%LA

C%

Total%from%China:%Food,%Tobacco%Automo:ve%OEM%Metals%Coal,%Oil,%Natural%Gas%Communica:ons%Other%

Energy,(17.5(

Mining,(4.2(

Tourism,(2.5(

Other(Industry,(0.1(Housing(4.1(

Trade(Financing,(1.8(

DiscreBonary,(12.5(

Other(Infrastructure,(24.2(

CommunicaBons,(1.7(

TransportaBon,(12.7(

Chinese  Financing:  $100b  (2003-­‐2013)  Distribu4on  by  sector,  2008-­‐2013  

Source:  Gallagher  et  al,  2012  .  

Working  Group  on  Development  and  Environment    

•  To  what  extent  is  Chinese  trade,  investment  and  finance  a  driver  of  environment  and  social  change  in  La)n  America?  

•  To  what  extent  are  Chinese  actors  in  LAC  different  in  their  environmental  and  social  behavior  than  other  foreign  and  domes)c  firms?  

•  What  policies  can  LAC  governments  engage  at  the  na)onal,  bi-­‐lateral,  and  regional  levels  to  mi)gate  the  costs  of  commodity-­‐led  growth.  

Country  Studies  

Trade  and  finance  

•  Brazil-­‐-­‐soy  •  Colombia—coal  •  Bolivia—)n,  lithium?  •  Argen)na—oil,  shale?  

Investment,  trade,  finance  

•  Peru—copper,  iron  •  Ecuador—oil,  hydro  •  Mexico—manufacturing,  oil?  

Preliminary  Findings  

•  Chinese  trade  and  investment  is  a  strong  new  source  of  trade,  finance,  and  growth  for  LAC  

•  Concentrated  in  primary  commodity  sectors  – suscep)ble  to  boom  and  bust  cycles  – endemic  to  environmental  degrada)on  –  (ohen)  geographically  located  in  indigenous  areas  

•  Key  challenge  is  for  LAC  to  maximize  the  benefits  of  booms  mi)gate  associated  risks.  

LAC-­‐China  Trade  is  Different  More  Primary-­‐based  than  all  LAC  exports,  all  China  imports  

Note:  Categories  are  defined  using  Sanjaya  Lall’s  “Technological  Classifica)on  of  Exports”  (Lall,  2000).    Source:  UN  COMTRADE  and  authors’  calcula)ons.  

0.2%% 4.3%% 2.9%%13.3%%

39.7%%

63.4%%

86.4%%

56.0%%

33.7%%

0%%

10%%

20%%

30%%

40%%

50%%

60%%

70%%

80%%

90%%

100%%

LAC$Exports$to$China$ All$LAC$Exports$ All$China$Imports$

Primary%Manufactured%Other%

1.152%

1.67%

1.89%

0%

0.5%

1%

1.5%

2%

GDP% All%exports% Exports%to%China%

kg#CO2#eq

uivalent#per#USD

#

LAC-­‐China  Trade  &  GHG  Emissions  LAC-­‐China  exports  are  more  GHG  emissions-­‐intensive    

Source:  Peters  et  Al  2011,  UN  Comtrade,  authors’  calcula)ons.  

102$ 108$ 112$ 118$ 124$ 129$ 127$ 133$ 139$ 143$108$

118$ 126$ 128$ 134$ 137$ 127$ 140$ 146$ 150$162$

206$ 223$252$

344$

412$453$

547$

597$

650$

100$

200$

300$

400$

500$

600$

700$

2002$ 2003$ 2004$ 2005$ 2006$ 2007$ 2008$ 2009$ 2010$ 2011$ 2012$

Inde

x:'2002=100'

Emissions$from$GDP$

Emissions$from$Exports$

Emissions$from$Exports$to$China$

LAC-­‐China  Trade  &  GHG  Emissions  Growth  in  LAC  GHG  Emissions,  by  Source  

Source:  Peters  et  Al  2011,  UN  Comtrade,  authors’  calcula)ons.  

LAC-­‐China  Trade  &  GHG  Emissions  Export  Sectors,  by  GHG  Intensity  

Source:  Peters  et  Al  2011,  UN  Comtrade,  authors’  calcula)ons.  

         All  Exports          .        Exports  to  China    .      Exports  to  R.o.W.  .  

2002   2012   2002   2012   2002   2012  

Ranching  (10.3)   1.8%   4.1%   4.4%   5.3%   1.8%   4.0%  

Fossil  Fuel  refining  /dist.  (3.6)   4.7%   4.0%   0.4%   2.9%   4.8%   4.1%  

Farming,  forestry,  fishing  (2.0)   14.9%   22.3%   33.9%   27.4%   14.5%   21.9%  

Metal/mineral  mining  (1.9)   11.0%   14.2%   30.5%   35.7%   10.6%   12.5%  

Fossil  fueil  extrac)on  (1.5)   14.2%   14.6%   0.1%   14.4%   14.5%   14.6%  

Manufacturing  (0.8)   52.1%   39.3%   30.3%   14.0%   52.5%   41.3%  

Not  specified   1.2%   1.5%   0.5%   0.3%   1.3%   1.6%  

Most  GHG  -­‐  intensive   32.5%   44.6%   69.1%   71.3%   31.7%   42.5%  

13.8%&7.6%&

14.0%&0.1%&

18.0%&

20.6%&

23.5%&

20.5%&

10.2%&

6.2%&

10.3%&

31.8%&

36.4%&

31.6%&

18.0%&8.0%&

18.4%&

All&GFDI& GFDI&from&China& GFDI&from&R.o.W.&

Percen

t'of'T

otal,'200

3120

12'

Sector'(CO2/USD):'

Commerce,&bus&svcs&(0.4)&

ConstrucHon&(0.5)&

Public&administraHon&(0.8)&

Manufacturing&(0.8)&

Fossil&Fuel&Extr.&(1.5)&

Metal/mineral&mining&(1.9)&

Farming,&fishing,&forestry&(2.0)&

Transport&(2.8)&

Fossil&fuel&refining/distr.&(3.6)&

Ranching&(10.3)&

China-­‐LAC  GFDI  &  GHG  Emissions  By  sectors  (and  GHG  Intensity)  

Source:  Peters  et  Al  2011,  FDI  Markets,  authors’  calcula)ons.  

126.4& 126.2& 123.7& 121.4& 118.1&114.3& 112.7& 115.4& 111.9& 109.7& 108.6&

58.5& 58.9&62.5& 60.1& 59.9&

60.4& 57.3& 54.1& 53.5& 53.9& 56.4&

66.9& 68.1& 67.7& 67.3& 65.3&

57.3&52.8&

46.6& 43.7&47.4& 44.1&

0&

10&

20&

30&

40&

50&

60&

70&

80&

90&

100&

110&

120&

130&

2002& 2003& 2004& 2005& 2006& 2007& 2008& 2009& 2010& 2011& 2012&

Jobs%per%US$m%

All&economic&ac6vity&

All&exports&

Exports&to&China&

LatAm-­‐China  Trade  &  Jobs  LAC-­‐China  exports  are  low  in  labor  intensity  –  and  falling  

Source:  CEPAL,  WDI,  UN  COMTRADE,  and  authors’  calcula)ons.  

LatAm-­‐China  Trade  &  Jobs  Extrac4on  supports  far  fewer  jobs  than  other  sectors  per  million  USD  

Source:  CEPAL,  WDI,  UN  COMTRADE,  and  authors’  calcula)ons.  

Jobs  Supported  by  Each  Real  (2002)  US$1  Million  in  Exports:  

 Agriculture    Extrac)on   Manufacturing  Argen)na    30.3    9.8    66.8  Bolivia    153.2    89.2    366.5  Brazil    76.1    0.0    146.6  Chile    57.5    30.0    59.7  Colombia    48.6    33.9    142.4  Ecuador    48.8    21.8    110.9  Mexico    70.6    1.5    54.2  Peru    80.3    36.7    113.7                    La:n  America    60.1    11.6    71.8  

LatAm-­‐China  Trade  &  Jobs  Extrac4on  supports  far  fewer  jobs  than  other  sectors  per  million  USD  

Source:  CEPAL,  WDI,  UN  COMTRADE,  and  authors’  calcula)ons.  

Jobs  Supported  by  Each  Real  (2002)  US$1  Million  in  Exports:  

 Agriculture    Extrac)on   Manufacturing  Argen)na    30.3    9.8    66.8  Bolivia    153.2    89.2    366.5  Brazil    76.1    0.0    146.6  Chile    57.5    30.0    59.7  Colombia    48.6    33.9    142.4  Ecuador    48.8    21.8    110.9  Mexico    70.6    1.5    54.2  Peru    80.3    36.7    113.7                    La:n  America    60.1    11.6    71.8  

LatAm-­‐China  Trade  &  Jobs  Source  of  new  export-­‐related  jobs,  2002-­‐2012,  by  sector  and  export  market  

Source:  CEPAL,  WDI,  UN  COMTRADE,  and  authors’  calcula)ons.  

World   China   Rest  of  World  

Millions  of  Jobs:              Agriculture    0.96    0.33    0.64  Mining,  Extrac)on    0.63    0.19    0.44  Manufacturing    5.18    0.29    4.88  Other    -­‐0.02    0.00    -­‐0.02  Total:    6.75    0.81    5.95      Percent  of  New  Export-­‐Related  Jobs:          Agriculture    14.3%    4.8%    9.5%  Mining,  Extrac)on    9.3%    2.7%    6.6%  Manufacturing    76.7%    4.4%    72.3%  Other    -­‐0.3%    0.0%    -­‐0.3%  Total:    100.0%    11.9%    88.1%  

Are  Chinese  firms  different?  

•  Invest  in  different  basket  of  commodi)es  •  Different  and  more  favorable  sources  of  finance  

•  Finance  has  weaker  social  and  environmental  norms  

•  May  be  faster  learners  than  their  counterparts  in  the  past…  

Shougang  -­‐  Marcona  

Old  and  New  Morococha  

Burden  to  balance  risk  and  reward:  LAC  States  

•  LAC  na:ons  have  significant  leverage  –  loca)on  specific  assets  –  China’s  concern  about  its  brand  and  image.  – Not  as  much  for  na)ons  without  alterna)ves.  

•  LAC  are  struggling  with  the  balance  between  growth,  social  concerns,  and  environment.  –  CSOs  can  ohen  help  iden)fy  risk  and  pressure  governments  and  firms  by  agenda  seong  and  holding  actors  accountable.  

–  Commodity  booms  also  empower  ‘extrac)vist’  interest  groups    that  can  pressure  government  to  ignore  risks—busts  harder  to  regulate.  

Chinese  firms/state    has  a  role  too    

 •  China  also  has  a  role  to  play  in  mee)ng  global  norms  for  sustainability.  

•  Chinese  state  is  developing  guidelines  for  firms  and  finance.  

•  China  is  already  engaging  in  many  JVs  to  ‘learn’  on  logis)cs  and  perhaps  environmental  and  social  issues  can  be  an  area  for  coopera)on  as  well.  

•  Despite  weaker  regula)ons  and  ins)tu)onal  capacity  in  mainland  China,  with  proper  incenBves  Chinese  firms  prove  they  can  climb  the  learning  curve  quickly  to  meet  norms.  

•  States  and  CSOs  need  to  set  the  incen)ves  right  and  hold  the  private  sector  accountable.  

Plurilateral  forums?  

•  Many  countries  are  developing  strong  bi-­‐lateral  rela)onships  with  China  and  these  issues  need  to  ‘rise’  to  that  level.  

•  China  has  begun  to  engage  with  the  BID,  CELAC,  CEPAL  and  other  sub-­‐regional  forums  such  as  Mercosur.    Are  these  ‘entry  points’  for  policy  dialogue?  

•  Transna)onal  CSO  advocacy  networks  

Peru  as  Laboratory  

Peru  is  ahead  •  EITI  •  EIAs  with  community  •  ILO  169  •  CSO  accountability  and  

transna)onal  networks  •  Chinalco  model?  •  UP  Centro  Estudios  Peru-­‐

China    

Peru  is  Behind  •  Managing  booms  and  busts  

–  Stabiliza)on  funds,  SWF?  

•  Incen)vizing  complimentary  economic  ac)vity  to  mining  –  Development  banking?  –  Trade  agreements  

•  Building  human  capital  –  China  experts,  coopera)on  with  Chinese  firms  and  government  on  educa)on  

THANK  YOU