China-CELAC deal could bolster infrastructure development in Latin America

A number of Latin American and Caribbean countries have strengthened their ties with China after signing a far-reaching economic and political agreement.

In December, the Community of Latin American and Caribbean States (CELAC), a bloc of 33 countries including regional heavyweights such as Argentina, Colombia and Mexico, signed the China-China Joint Action Plan CELAC for cooperation in key areas 2022-24.

The seven-point agreement outlines plans for increased engagement and cooperation between governments, private companies and financial institutions in a number of areas, including infrastructure development, the economy and political and security issues. .

While China has invested heavily in the region over the past decades, the deal is expected to herald deepening cooperation in a region traditionally strongly tied to the United States.

The agreement is also indicative of CELAC’s growing ties with the world: the agreement with China builds on previous agreements with the United States, Canada, ASEAN, EU, Turkey, Japan and Russia.

Investment in infrastructure

A key pillar of the joint action plan concerns infrastructure.

This is a critical issue for Latin America and the Caribbean, with the Inter-American Development Bank (IDB) predicting that the region will need to invest 3.1% of its GDP in infrastructure every year in order to meet its targets. sustainable development by 2030.

Of this amount, the bank says that 59% of the amount should be invested in new infrastructure, with the rest allocated to the maintenance and replacement of existing assets.

To that end, the China-CELAC agreement set out plans for greater cooperation on the former’s Belt and Road Initiative, which could see more investment in China’s state-backed infrastructure in the region.

In addition to this, the agreement also included the goal of holding a China-CELAC Transport Cooperation Forum “as soon as possible”.

Improved transport infrastructure is crucial for the economic development of Latin America and the Caribbean. About half of the 3.1% of annual GDP in infrastructure investment required in the region – according to the IDB – is strictly in the transport sector, be it roads, airports or other types of transport. public transport.

The pandemic has laid bare some of the shortcomings of the region’s transport networks, with many parts of the continent experiencing food, medical or key equipment shortages at various stages. Improved transport links would not only strengthen the resilience of the region’s internal supply chains, but also improve the business environment for local businesses.

In addition to strictly public participation, the joint action plan also aims to incentivize more private sector investment in Latin America and fits in with a number of current global economic developments.

“The disruption to global supply chains created by the pandemic has created a stronger impetus to locate industrial sites closer to key destination markets,” Bruno Martinez, CEO of Mexican industrial park developer Alveo, told OBG. Capital. “Coupled with rising wages in Asia, this backdrop has put Mexico in the spotlight for Asian investors looking to diversify their production bases and bring them closer to the United States.

Increase economic cooperation

As well as facilitating infrastructure investment, the China-CELAC deal also aims to enhance what it describes as “pragmatic economic cooperation”.

Focusing on nine priority areas – trade and investment, finance, agriculture and food, science and technology innovation, industry and information technology, aviation and aerospace, energy and resources, tourism, and customs and taxes – the agreement aims to improve cooperation and collaboration between the various parties.

While the effects of this can be felt across a wide range of industries, one area that would benefit greatly is high-tech manufacturing and what are known as Fourth Industrial Revolution (4IR) technologies.

4IR, also known as Industry 4.0, refers to technologies such as artificial intelligence, analytics, Internet of Things, cloud computing and robotics that are considered essential to manufacturing new generation, as well as to advances in other sectors.

Through increased cooperation with innovative Chinese companies and government agencies, CELAC companies and governments could benefit from improved technology, skills and know-how.

A number of countries, including Argentina, Chile and Mexico, have highlighted the importance of developing 4IR capabilities, which are considered essential for future economic growth and the ongoing recovery from the Covid-19 pandemic. 19.

By Oxford Business Group

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