Chinese penetration of the LATAM market - Thesis Example

Free trade agreements and bilateral pacts characterize the trade pattern in a new global economy characterized by increased connectivity and interaction among the market’s diverse stakeholders. This integration of the markets has immensely benefited some countries while adversely affecting others.The adoption of the free trade regimes by some of the developing countries in the past few decades has resulted in an unprecedented growth in these countries. It has also led to a decline of the former dependence of these countries on the advanced countries and on international institutions like the IMF and the WTO.

A notable example of tremendous growth experienced by a country in the context of liberalization is that of China. The tremendous production capacity at the most advantageous costs has led the country on a fast paced growth trajectory that has attracted the attention of many of the developing countries while threatening the market dominance of  a number of economic superpowers. For years China had remain closed to the outside world. Many of the advanced countries had expressed their desire for free trade with China as it promiseda huge market for their domestic goods.

In the last two decades China adopted the policy of liberalization and soon became one of the biggest exporters of the manufactured goods. This tremendous growth has provoked a mixed reaction. For the developing countries China provided opportunity and hope of development. The tremendous demand for raw materials by the Chinese industries helped the export of raw materials in these countries. On the other hand, the domestic products of these countries had to compete with Chinese goods whose cost was kept artificially low by an undervalued Renminbi.

As a result Chinese growth had dual impact on the developing countries including those in Asia, Africa, and Latin America. In the recent times, China had also made efforts to balance its trade with the different countries. Recently the Chinese government had declared a closer trade relation with the Latin American countries with a goal of resource extraction, especially oil. Some Latin American countries have significant reserves of oil, especially Mexico, Venezuela and Brazil. Therefore these countries can play an important role in the development of the emerging countries like China and India (3).

Chinese interests are also focused on Latin American agricultural products and mined resources as well as chemical and infrastructure related goods. Despite this primary product extraction, China continues to run a trade surplus with the Latin American countries.