PBEC ROUND TABLE DIALOG SERIES: GBA & LATAM Linkages – China Support for Latin American States during the pandemic
On 26 August 2020, as part of the round table discussion series organized by the Pacific Basin Economic Council (PBEC), our partner, Mr Thomas Wong, shared with the participants how China has supported the Latin American countries during the pandemic. Other speakers of the round table included Professor Andrew Chan from the Chinese University of Hong Kong, Susana Muñoz from GBA Latam Trade and Investment Advisors, Sergio Luna from Citibanamex, Mr Robert Koepp from Geoconomix and Mr César Silva from NYCE.
Professor Andrew Chan shared with the audience that the Greater Bay Area is a way to integrate individual strength with different advantages and specialization with the geographical advantage of Hong Kong and Macau. However, despite strong support from governments relating to connectivity and freedom, the problem still exists.
The 11 cities in the Greater Bay Area have their unique advantages such as Guangzhou as a trading hub; Hong Kong as an international financial center; Shenzhen specializing in technology manufacturing and innovation. Each city has its vision, mission and value (VMV). However, no city can perform the role of a leader to integrate all specializations and talents. Therefore, we should focus more on corporate strategies and general management for better integration between cities.
From Susana Muñoz’s perspective, most of the Latin American economies have a trade deficit with China by exporting raw materials and foods. The way to expand trade with China will be extending product catalogues like products related to the digital economy, financial services and research development, which suit the needs of GBA as the area specifies in developing these industries. Moreover, the GBA possesses world-class infrastructure for the development of e-commerce like free trade zones, cross-border solutions and logistic centres. Therefore, cooperating with the GBA region can be a good solution to reduce the trade deficit in Latin America.
On the investment side, both regions should focus more on connectivity and strength. Also, the supply chain of Latin America should be more resilient and less vulnerable. Therefore, investment agreements can be key to achieve the above objectives.
As an opportunity for the Latin American economies and in particular, for private companies, Mr Thomas Wong shared that during the pandemic, many companies in Latin America have turned their business to online platforms. They would like to explore China’s market through Hong Kong. Therefore, it is a good way to invest in the GBA for firms from Latin America that would like to enter China’s market by trading with the GBA.
Sergio Luna from Citibanamex shared the major economic effects of the pandemic in the Latin countries which have posed a strong impact on economic activities. He expected that the economies of Latin America will shrink for about 8% this year and that in Mexico will be 11.2%. For Mexico, the GDP in the second quarter of 2020 has dropped around 17%. The economy hit the bottom in June, and now it has rebounded due to the effort of the export sector. Mexico has expanded its trade treaties with different countries and become a particularly important manufacturing base for electronics, with export of US$ 16 billion worth of manufacturing goods every year.
From the perspective of Robert Koepp, countries cannot rely too much on the supply chain in China. Supply chain diversification is needed for a more stable supply for the world. The Belt–Road Initiative can aid the process of relocation of factories to other countries like Vietnam and Indonesia where infrastructures are limited.
In terms of technological connection between Latin America and the Greater Bay Area, companies like NYCE assist Asian manufacturers to gain access to Latin American countries like Mexico, Colombia, and Panama for business development. The e-commerce has experienced a huge regulatory change last year. The change in regulations requires certification of products before exporting to Latin America for the safety of the products. As Latin American countries are starting to strengthen export regulations and adopt international standards, NYCE helps the manufacturers to understand the regulations to smooth the process of export.
Written by Luz Martinez, Latin Department, CW CPA