Asia’s rising frontier with Latin America

In a world where Europe and the United States are struggling, both East Asia and Latin America are outperforming the pack, even if they, too, face challenges.

And yet, more than 12 years since it started, the Forum for East Asia-Latin America Cooperation (FEALAC) has not grabbed headline attention — not in the way, say, the BRICs (Brazil, Russia, India and China) have. Still, the relationship has grown.

Notwithstanding the considerable distances, inter-regional trade has grown at an average of 20.5 per cent over the past decade, projecting to reach US$500 billion (S$626.9 billion) this year. The full range of goods crosses the oceans, from manufactures to agricultural products, with resources especially important.

Global conditions are pushing the two regions closer. With the developed markets of the West still soft, the search is on for new markets and South-South cooperation. As the meeting’s host this month, Indonesian Foreign Minister Marty Natalegawa said FEALAC can assist in “the next major shift in the world’s geo-politics and geo-economy”.

Yet, this cannot happen overnight — and if left to market forces, relations would be dominated by the larger or more developed countries. China, for instance, accounts for nearly 50 per cent of East Asia’s trade with Latin America. Japan, too, has substantial ties.

Among the Latin Americans, Brazil attracts the most interest despite a recent slowdown. Mexico, too, is considerable in its own right and provides access to the US market through the North American free trade area.

But smaller economies on each side tend to be less noticed. Yet, Peru and Colombia rack up impressive growth rates, after making political changes and policy reforms. The recently-formed Pacific Alliance brings them together with Chile, Mexico and Costa Rica, accounting for US$445 billion in exports.

On the Asian side, the Association of South-east Asian Nations (ASEAN) — whose collective population of 650 million is more than all of Latin America — deserves more attention. As they integrate as an ASEAN community, their competitiveness will further improve, and the group could do more to link with the Pacific Alliance.

Individual countries, too, can further their ties. An estimated 100 Singaporean companies are present in Latin America, including Keppel, Sembcorp, Olam and Wilmar. Latin American companies venturing into Singapore include petrochemical company Braskem and mining giant Vale.

Thailand has a free trade agreement with Peru and has seen its exports to Latin America more than double in recent years. The efforts of different countries and sub-groups can serve as building blocks for FEALAC to become the premier forum for the inter-regional relationship and broaden the connections for all 36 participating countries. This is where governments can make a difference.

There remain gaps in business connectivity — information, infrastructure, logistics and trade facilitation. Progressively, the aim must be to fill these gaps, so that even the smaller and medium-sized enterprises, and not only the larger corporations, can access the inter-regional opportunities.

LINK UP THE PEOPLES

A broader foundation for engagement is also needed. This is difficult given the lack of historical interaction between the two regions.

Nevertheless, networks between universities and cultural institutions, and using the media and tourism, can foster better understanding and increase people-to-people contact. Building for the future, efforts are needed to interest the youth of both regions and help them develop intercultural skills.

These were among the recommendations put forward in Bali by a Vision Group appointed by the FEALAC ministers. Some ideas aim to jump-start a new stage in relations with iconic projects — such as a regular business forum and a network among universities. The longer-term goal is to deepen and broaden the inter-regional relationship, so that it can take its place alongside ties with the US and Europe.

Cliches about revolutions and drug smuggling may persist when Asians think about Latin America, and vice versa. The realities of trade and changes in global politics are, however, pushing both sides to rethink old assumptions.

The opportunities are real and substantial — more than when FEALAC began. But for these to be realised, Asians and Latin Americans must increasingly give attention to each other as a new frontier for engagement.

ABOUT THE AUTHOR:

Simon Tay is Chairman of the Singapore Institute of International Affairs. He served as his country’s representative on a Vision Group for FEALAC and was the overall editor of the final report submitted to the Ministers at their meeting in Indonesia.