This article was originally published in Americas Quarterly on March 24, 2020.
Despite measures taken by Latin American and Caribbean (LAC) governments to contain the spread of coronavirus, the region will be forced to grapple with the effects of the virus for the foreseeable future. Facing low commodity prices, a possible long-term contraction in tourism and tightening global financial conditions, many leaders in the region will look for assistance from a range of trade and investment partners, international financial institutions and other sources.
In that search, China may loom large. After all, it was Chinese trade and investment that spared many LAC countries from the worst effects of the global financial crisis, with Chinese demand for the region’s raw materials nearly doubling from 2009-2011. More recently, China has acted as a sort of lender of last resort for countries in the region with limited access to global financial markets.
But while China may be of some help to LAC economies post-coronavirus crisis, the extent and form of its support will likely vary considerably from China’s post-2008 engagement. Though critical to the region’s economic well being, it is unlikely that China-LAC trade relations will have the same buoying effect on the region’s economies as they did after the financial crisis.
One reason for that is actually China’s growing influence in the region. After the global financial crisis, China served as an alternative to the U.S. and other markets that had lost their appetite for LAC products. But after a decade of booming trade, China’s markets are now the primary destination for the region’s raw materials. China imported 78 percent of Brazil’s soybeans and 41 percent of Chile’s copper ore in 2018, as just two examples.
That means China now has little room to significantly increase its supply from the region, even if its own economy rebounds. If anything, the coronavirus pandemic has exposed LAC’s extensive reliance on China as a destination for raw materials exports.