To TPP or not to TPP? The big trade question for Latin America

Winds of change tend to feel quite chilly and are seldom welcomed in Latin America. Very often, especially when they come from outside, such sensations are justified.

Winds of change tend to feel quite chilly and are seldom welcomed in Latin America. Very often, especially when they come from outside, such sensations are justified.

Considering the lack of any strong economic and political unity amongst the Latin-bloc countries, when dealing with more 'settled' powers, there's a feeling they usually get hoodwinked.

So it is little wonder that the 'in-production' Trans-Pacific Partnership (TPP) isn't exciting the masses in these parts. Do note, too, that of all the Latin American nations only Chile, Mexico and Peru are actively involved in the ongoing discussions, with Colombia having expressed an interest to participate.

Nonetheless, the TPP will no doubt affect more than just the 11 countries currently negotiating it, as the trade agreement will accelerate the consolidation of world exchanges with Pacific nations. As a leading trade-creation corridor, it is expected to promote technology enrichment in production processes and enhance demand for technical skills, which should trigger a process of job enrichment.

When viewed as such, the TPP can be seen as something of an opportunity for countries here, especially in their trade relations with China.

Firstly, the region needs to realise that with the Asian powerhouse's excessive demand for Latin commodities waning, it will no longer be able to sustain itself and keep inflation under control by relying on a range of cheap Chinese imports: Trade surpluses are declining, fast.

China is showing more selectiveness in commodity purchases and is looking to import more sophisticated manufacturing inputs and intermediate goods as it strives to build a middle class.

The state of play may be changing, but this doesn't mean it has to be detrimental for Latin America, something states such as Brazil, Colombia, Costa Rica and Mexico, seem to understand.

In these countries, competitive niches have been identified in products for a growing Chinese consumer market and that can be best produced in Latin America; upscale furniture, apparel design and clothing accessories.

Developments and improvements in all types of infrastructure are taking place that will improve efficiency and productivity.

More strikingly, change is happening in the area of adoption and development of internal business practices. Previously, many Latin American companies concentrated on practices that would enhance productivity or protect the environment. But more recently the focus has shifted to value creation, enrichment of the value chain and systems that are in accordance with foreign clients.

With such developments, trade relations between China and Latin America can flourish in a new environment. The TPP offers a way for this to happen in a regulated, orderly integration process.

Those winds of change may not be so bad after all.


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