[Viewpoint] Look to Latin AmericaMany had expected the global financial turmoil caused by the demise in U.S. mortgage-backed assets to take a heavy toll on Latin American economies.
Yet the repercussions have varied among economies in the region depending on which markets they relied on to sell their products. Those with a greater stake in Asia displayed resilience, suggesting more in the region are likely to follow suit in the Asia-bound march.
Mexico and Brazil offer the best example. According to the International Monetary Fund, the Mexican economy is expected to shrink by 7.3 percent this year, while the contraction rate is estimated at a modest 0.7 percent for Brazil.
The extent of their exposure to the American economy made the difference. Mexico relied heavily on U.S. consumers with its exports to the neighboring market taking up 80.2 percent of its total overseas shipment last year. In contrast, the U.S. market accounted for just 14.4 percent of Brazil’s total exports. Its exports share in other areas - Europe, Asia and Latin American markets - were well balanced at over 20 percent each.
Other countries showed similar results. Chile and Peru were less affected by the global crisis, saved by their diversified trade structure, compared with Venezuela and Colombia that were underpinned to the American economy.
The outperforming economies trading with various countries are likely to grow 4.4 percent on average next year versus a meager 1.8 percent growth estimated for the Latin American economies dependent on the U.S. market. For Chile and Peru, the Asian market has already become their biggest buyers. Asia beat the United States and is catching up on Europe as Brazil’s top export market. The global crisis has taught the Latin Americans the significance of the Asian market. The UN economic commission on Latin America also advised that China and other Asian countries are the remaining hope to fuel the region’s economic development.
It appears evident that more Latin American countries are likely to veer toward Asia, resulting in greater Asian influence in the region. The Latin American market, at the same time, serves as a boon for Korean exporters.
While incurring a total trade deficit of $13.2 billion last year, Korea racked up a huge surplus of $19.5 billion in trade with Latin American countries. Latin America with its rich natural resources and consumer market can become our primary supplier and buyer.
We should act fast to cement our foothold in the region as many of the countries are poised to revise their trade strategy.
As these countries increase their inroads into the Asian market, they will likely start to groan about Korea’s enormous trade surplus, which could lead eventually to trade friction. But we can use the momentum to accelerate negotiations for free trade agreements with more Latin American countries. We must make a head start to position ourselves more advantageously than other Asian competitors in the region amid growing attention to Asia.
We can borrow wisdom from Joseph Nye, a professor at Harvard University, and apply his teaching on “soft power,” an ability to get what you want through attention rather than coercion. We should exercise soft power to make greater inroads and at the same time capitalize on their rich natural resources.
We have a particular strength in the region - technological progress and a growth model that emerging countries envy. I was assured that our soft power lies in our development experience during my seminar tour to nine Latin American countries over the last couple of months.
Latin Americans are flocking toward Asia. Diplomacy will play a significant role. Forums among business leaders and governments of Latin America will soon be held in Seoul. We should get ready and set our soft power in motion.
*The writer is a professor at the Hankuk University of Foreign Studies Graduate School of International Area Studies. Translation by the JoongAng Daily staff.
by Kim Won-ho