The China-CELAC agreement can strengthen infrastructure development in Latin America
The China-CELAC agreement can strengthen infrastructure development in Latin America

The China-CELAC agreement can strengthen infrastructure development in Latin America

A number of Latin American and Caribbean countries have strengthened their ties with China after signing a comprehensive 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 Joint Action Plan for Cooperation between China and CELAC for key areas 2022-2024.

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

While China has invested significantly in the region in recent decades, the agreement is expected to herald a deepening of cooperation in a region that has traditionally been strongly linked to the United States.

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

Infrastructure investments

A key pillar of the Joint Action Plan concerns infrastructure.

This is a crucial issue for Latin America and the Caribbean, where the Inter-American Development Bank (IADB) predicts that the region will need to invest 3.1% of its GDP in infrastructure annually to achieve its sustainable development goals by 2030.

Of this, the bank says that 59% of the amount was to be invested in new infrastructure, while the rest is set aside for maintenance and replacement of existing assets.

To this end, the China-CELAC agreement has outlined plans for greater cooperation with regard to the former’s Belt and Road Initiative, which could lead to more state-supported Chinese infrastructure investments in the region.

In addition to this, the agreement also included the goal of holding a forum on China-CELAC transport cooperation “as soon as possible”.

Improving transportation infrastructure is crucial to 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 IADB – relates exclusively to the transport sector, whether in the form of roads, airports or other forms of public transport.

The pandemic exposed some of the shortcomings of the region’s transport network, where many parts of the continent experienced either a shortage of food, medical or key equipment at various stages. Improving transport links will not only build resilience in the region’s internal supply chains, but also improve the business environment for local businesses.

Apart from strict public involvement, the Joint Action Plan also looks to encourage greater investment in the private sector in Latin America and is in line with a number of current global economic developments.

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

Increased economic cooperation

In addition to facilitating infrastructure investment, the China-CELAC agreement also seeks to improve what it describes as “pragmatic economic cooperation”.

With a focus on nine focus areas – trade and investment, finance, agriculture and food, science and technological innovation, industry and information technology, aerospace, energy and resources, tourism and customs and taxes – the agreement aims to improve cooperation and cooperation between different parties .

Although the effects of this could be felt across a wide range of sectors, one area that would benefit significantly from 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, which are seen as the key to next-generation manufacturing, as well as advances in other sectors.

Through greater collaboration with innovative Chinese companies and government agencies, both CELAC companies and governments can benefit from an improvement in technology, skills and know-how.

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

By Oxford Business Group

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