Last week, China South America was fortunate enough to meet and interview, via a skype, Dr. Kevin P. Gallagher, author the new book The Dragon in the Room: China and the Future of Latin American Industrialization (with Roberto Porzecanski).
Dr. Gallagher is a Professor at Boston University in International Relations and is faculty coordinator for Boston University’s Global Development Policy Program. Furthermore, In 2009 he served on the investment subcommittee of the US Department of State’s of the Advisory Committee on International Economic Policy. Professor Gallagher writes regular columns on global economic and development policy for The Guardian, Financial Times, and POLITICO. He co-chairs the Triple Crisis blog.
In the roughly 30 minutes we talked, we discussed
What motivated you? Dr. Gallagher to write the Sino-Latin American dynamic and motivated him to write The Dragon in the Room: China and the Future of Latin American Industrialization
Mr. Gallagher’s inspiration emerged from the 3 years he spent living in Guadalajara, also known as Mexico’s Silicon Valley. During his time in Mexico, it became very clear there was a “new kid on the block.” When speaking with Mexican professionals, the US market and future significance for the Mexican economy had to Mr. Gallagher’s surprise taken a back seat to the emergence of China.
It was around this time in 2005, Dr. Gallagher began to investigate what the rise of China meant for both Mexico, and the greater Latin America region. Would China’s high speed growth and fast rising competitiveness undermine Latin America’s capacity to develop their own competitive industries, or would China’s rise breed new possibilities and growth in Latin American countries? This formed foundation for his book, which you can click here to purchase a copy of.
Next we discussed the general importance of the growth of Sino-Latin American relations and trade.
Similar to the perspectives often presented here at ChinaSouthAmerica.com, Dr. Gallagher feels the rise of China and its penetration in Latin America comes with a significant amount of uncertainty for the region, offering both opportunities and dangers. The opportunities are clearer for some countries than others.
For major commodity producers down in South America; Venezuela, Peru, Chile and Argentina the rewards are being felt tangibly, and NOW. China has presented itself as a new market for their raw materials exports, and Chinese demand has helped push the prices of raw materials to record highs. However, the danger is that history may well repeat itself if the income generated from selling raw materials to China are not re-deployed efficiently and strategically to create sustainable, globally competitive industries.
The panorama for Mexico and Brazil, Latin America’s economic giants share some similarities because both countries have well a relatively broad range of developed, competitive industrial sectors. In this case, China is a challenger to their own industries. The positive and negatives effects of being forced to compete with their Chinese counterparts is debatable, but thus it seems Mexican and Brazilian companies have managed to meet the challenge and it seems Chinese competition will in the long-run catalyze innovation and economies of scale.
On the other hand, there are also major differences for Mexico and Brazil when considering China. The major difference, and one that is impossible to overlook, is undoubtedly Mexico’s proximity to the United States. Mexico competes almost directly with China’s manufacturing sector. The major factor which will dictate how the future unfolds concerns how well Mexico can capitalize off the geographic competitive advantage of being at the door step of the world’s largest consumer market. It will be important to monitor:
- Rising wages in China vs. Mexico.
- Raw material costs
- The total costs of producing increasingly sophisticated manufactured goods in both countries vs. total time it takes to produce and deliver the goods to the end buyers.
What’s next? Right now the majority of interaction between China and Latin America is occurring at a two levels—government to government, and major company to company. What are your perspectives on the future of growth of a third level of exchange—that being personal ones between Chinese and Latin Americans down on the ground in both China and Latin America? What types of opportunities does the future hold for the next generation that is able to form these links?
Like your author of ChinaSouthAmerica.com, Dr. Gallagher believes this to be the “million dollar question,” and one that is not easy to answer. We will sadly have to wait for his next book which will focus on this question, and which your author hopes to help Mr. Gallagher answer when the time comes.
To conclude, I asked Dr. Gallagher about if he had any thoughts to share on the specific countries of Peru, Chile, Brazil, Argentina, Venezuela, Colombia– the countries which your author most closely follows.
“These are a very diverse set of countries, and I wouldn’t dare generalize across the entire set of them. The one thing I can say about each of these is that in terms of copper (Peru and Chile), Iron (Brazil), soy (Brazil and Argentina), and crude oil (Brazil, Colombia, Venezuela) this particular set of Latin American nations and the respective commodities is very strategic for China. China will continue to purchase imports of these commodities and to invest heavily in them. These country’s governments should be strategic in return. In order to get the broadest set of benefits from this new market player in China, Latin Americans have to see to it that they can also provide stable supplies over time, create jobs for their people, and manage their exchange rates so that commodities exports don’t crowd out more productive and employment creating activity. If these nations see China as an opportunity, by bargaining hard with the Chinese and put in place parallel policies in terms of jobs, industrialization, and environmental policy, China may turn out to be a boon.“
As I am currently writing this post from China, where this book is not yet available, I unfortunately have not yet been able to get my hands on a copy of this book. In the 30 minutes I spoke with Dr. Gallagher he exhibited great insight on all that is the growth of Sino-Latin American relations and economic exchange. I look forward to reading the book for myself after I get my hands on a copy in January when I travel to the US and South America. If you the reader seek a rich and comprehensive analysis on the growth of China and Latin America’s relations, ChinaSouthAmerica highly recommends you pick up your own copy of The Dragon in the Room: China and the Future of Latin American Industrialization.
CLICK HERE to buy your own copy (hardcover) from Amazon.com of The Dragon in the Room: China and the Future of Latin American Industrialization
or, CLICK HERE for the soft cover edition