Friday, May 11, 2012

China's strong economic rise has produced mixed results for Latin America - Fitch

The spectacular economic rise of China during the last several years has generally had a positive impact on Latin America, but it has also produced negative effects for some countries, ratings agency Fitch said in a special report on the this issue.

China's transformation into an economic powerhouse has benefitted the region in terms of increased bilateral trade, more foreign direct investment and deeper financial ties, Fitch said.

The country's voracious appetite for natural resources has also pushed up prices on many of the commodities that Latin American countries export, which in turn has contributed to higher economic growth and stronger public finances.

In the region, Brazil, Chile and Peru have reached the highest degree of integration with China, and this has had a positive effect on their sovereign ratings, Fitch said, adding that Bolivia and Colombia have also benefitted in the same way, but to a lesser degree.

THE DOWNSIDES

The main negative impact from China's economic rise has been on countries that import commodities and produce manufactured goods. Mexico is one such example, as well as Central America and the Caribbean, Fitch said.

The agency also noted that even commodities-exporting countries benefitting from China's strong demand have generally failed to translate this into productivity gains, institutional reforms and greater diversification of their economies.