Economic cooperation and ties between
Japan and Latin America and the Caribbean
Latin America and the Caribbean have enough potential and
attraction to further strengthen their economic ties and
cooperation with Japan.
Over the past five years, Japanese exports to the region
increased more than those to any other destination in the
world. From 2005 to 2009, Japanese exports to Latin
America and the Caribbean rose 34.8%. Japanese imports
from the region also rose significantly (26.3%) during the
same period, surpassed only by goods from the Russian
Federation (41.5%).
The highest proportion of Japan’s foreign direct investment
outside Asia is placed in Latin America and the Caribbean
and it is concentrated in natural resources, especially in
Brazil and Mexico. The small amount of Japanese
investment in the region’s manufacturing sector is also
concentrated in Brazil.
Public-private partnerships
Aware that Latin America and the Caribbean are increasing
their economic presence in the world, Japan’s government
and private sector are forging a public-private partnership to
make the most of opportunities in the region.
Several Japanese companies view the region as a strategic
base for global operations, and Japan’s government is
making efforts to provide businesses with the support they
need to facilitate them, using its tools of consultancy and
assistance.
Japan’s general trading companies (sogo shosha) have planned
a record-high global investment of more than US$27.5
billion in natural and energy resources as well as in
infrastructure and food security for fiscal year 2010 (April
2010-March 2011). Latin America and the Caribbean have
to make efforts to attract that capital.
JAPAN: EXPORTS AND IMPORTS,
2005 AND 2009 (thousands of dollars)
Exports
Latin America and
the Caribbean
Asia
Russian
Federation,
Community of
Independent States
Middle East
Africa
North American
Free Trade
Agreement
(NAFTA)
Europe
Imports
Latin America and
the Caribbean
2005
2009
Increase
(Percentage)
23,321,895
31,440,129
34.8
289,661,295
314,406,163
8.5
5,191,226
4,129,140
-20.5
16,575,402
21,650,329
30.6
8,252,747
9,498,438
15.1
152,472,205
109,911,402
-27.9
93,951,571
81,459,616
-13.3
2005
2009
Increase
(Percentage)
14,773,904
18,653,431
26.3
230,383,254
246,431,358
7.0
6,824,864
9,659,226
41.5
87,667,108
92,850,019
5.9
9,933,739
9,106,629
-8.3
North American
Free Trade
Agreement
(NAFTA)
77,358,346
72,529,708
-6.2
Europe
65,973,963
67,731,502
2.7
Asia
Russian
Federation,
Community of
Independent States
Middle East
Africa
Source: Database of the Japan External Trade Organization
(JETRO), www.jetro.go.jp
Japan’s public-private partnership has its eyes set on the
agricultural and livestock sector in Latin America and the
Caribbean, and Japan has already established guidelines to
promote its investments at a bilateral level.
Agricultural trade in the region requires policies for
assistance, investment and innovation in the current
international context of food security and Japan is following
a strategy that could provide many benefits. Investment in
the agricultural and livestock sector would attract more
official development assistance (ODA) from Japan and
foment technology transfers to the region. Japan would use
its ODA to build the infrastructure needed for production
and distribution, such as highways and ports.
Economic partnership agreements
Economic partnership agreements and bilateral investment
treaties would contribute to encourage Japanese business
and investment in the region. In addition to the
liberalization and facilitation of trade and investment, the
economic partnership agreements with Japan include
additional measures to strengthen economic ties, such as the
harmonization of regimes and international cooperation.
Japan signed its first “full” economic partnership agreement
in its history with Mexico and for the first time included
specific chapters on bilateral cooperation and improving the
business environment. Japan has also signed an agreement
with Chile and is currently negotiating one with Peru, while
countries such as Colombia also hope to sign an economic
partnership agreement with that country. The Japanese
private sector, in turn, would like the government to
negotiate trade agreements with several more countries in
the region to improve the business environment.
Japanese cooperation
Cooperation is one of the pillars of Japan’s economic
foreign policy. Japan has become Latin America and the
Caribbean’s main Asian donor.
During the past decade, Japan has been the main ODA
donor in 27 of the 33 countries in the region, concentrating
in the areas of sustainable development, environmental
protection and climate change, poverty reduction and
triangular and macroregional cooperation (South-South
cooperation with Argentina, Brazil, Chile and Mexico). Latin
American and the Caribbean nations need Japanese ODA
not only for their economic and social development, but
also to foment innovation and scientific and technological
development in the aim of improving their insertion in the
global economy.
However, due to fiscal limitations, Japanese ODA to the
region has fallen down persistently, from US$814 million in
1999 to less than a third of that amount in 2008, although it
has increased aid for trade to other regions in the world.
New opportunities
Beyond natural and energy resources, Japan’s attention in
Latin America and the Caribbean over the next few years
will focus on infrastructure and food security. Although
demand is growing for infrastructure in the region, financial
resources are lacking for its construction, and Japanese
companies have already expanded their business in that
sector. Although the main focus of Japan’s private sector in
emerging markets is Asia, in the short term Latin America
and the Caribbean is the region that most competes with
Asian economies for investment and business opportunities
with Japan in the area of infrastructure. In fact, in mid 2009,
the main infrastructure projects carried out by the sogo shosha
in emerging economies were distributed in the two regions.
Japan is going to adopt a new industrial policy with
infrastructure exports as one of its main pillars, given its
economy’s dependence on two export sectors: automobiles
and electronics. This means that Latin America and the
Caribbean will be able to import infrastructure systems and
equipment in better conditions, including more active
economic assistance.