The Latin American limits of the "limitless" agricultural trade with Asia

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When we talk about trade between Asia and Latin America, the conversation almost always starts with agricultural commodities. China’s agriculture imports have tripled over the last decade, and are now a main driver of many bilateral relationship. Uruguay's exports to China are 70% agriculture, and Argentina’s are over 85% agriculture, and Latin America as a whole is the main source for key foodstuffs like soy (55% of China’s imports) or speciality items like avocados (all of China’s avocado imports last year came from Latin America).

It would seem that agriculture exports from Latin America to China is a fully mature product segment. But there is still a long ways to go in the relationship, as we’ve seen from the moves of Latin American ministers over the past two weeks. Keyed around SIAL China, the country’s largest food fair, Brazilian Agriculture Minister Blairo Maggi, Argentine Agroindustry Minister Luis Miguel Etchevehere, Colombian Agriculture Minister Juan Guillermo Zuluaga, and Uruguayan Farming, Fishing & Agriculture Minister Enzo Benech all traveled to China, Japan, and/or South Korea to promote their foodstuffs. 

And they were successful. Brazil announced it will begin exporting rice, dairy products, flour for the production of animal feed and fertilised eggs to China, and pork to South Korea. Argentina announced it will begin exporting blueberries, lentils, peas and barley to South Korea and Thailand; as well as beef to China and Japan by the middle of this year. Colombia has made progress on opening the Chinese market to its beef and avocados, and is ramping up exports of those goods to South Korea. Uruguay also opened up the Chinese market to its exports of cattle on the hoof and blueberries. And ProChile — always ahead of the curve — is opening an office in Chengdu, China’s agriculture distribution hub.

“China is today the number one importer in the world of beef, and it’s a market that looks limitless in terms of quantity or quality” says head of the Argentina Beef Exporters Council Mario Ravettino, summing up the potential many exporters see.

There is still more work to be done. Brazil wants to add pigs and cattle, meat and processed meats to its exports to China, and is hosting a Chinese veterinary mission this week to inspect slaughterhouses. And Argentina is looking to move up the value chain by exporting soy flour, oil, and other processed products to China.

The biggest obstacle to increasing Latin American exports is not Chinese hesitation, but the lack of capacity in the region. Latin America has always lagged on infrastructure spending, and these days the key component of a successful export-oriented economy is supply chains. Whether its in agriculture or manufacturing, being able to connect with other markets is vital. As our friend Shannon O’Neil says:

Excluded from the most dynamic parts of international manufacturing chains, Latin American companies and workers are less likely to gain access to new technologies, to develop new skills and to move up the value-added ladder to higher-margin products and better-paying jobs.  This isolation leaves the region less able to compete vis-a-vis other parts of the world in the making of things — not least because of the rise of other more successful regional hubs — and less able to attract global consumers to its homegrown brands.

While Argentine beef may soon be as well known in China and Japan as it is in the rest of the world, without focusing on infrastructure and homegrown supply chains, the potential of trade to boost Latin America will definitely have a limit.

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