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)
(Percentage)
Latin America and the Caribbean / 23,321,895 / 31,440,129 / 34.8
Asia / 289,661,295 / 314,406,163 / 8.5
Russian Federation, Community of Independent States / 5,191,226 / 4,129,140 / -20.5
Middle East / 16,575,402 / 21,650,329 / 30.6
Africa / 8,252,747 / 9,498,438 / 15.1
North American Free Trade Agreement (NAFTA) / 152,472,205 / 109,911,402 / -27.9
Europe / 93,951,571 / 81,459,616 / -13.3
Imports / 2005 / 2009 / Increase
(Percentage)
Latin America and the Caribbean / 14,773,904 / 18,653,431 / 26.3
Asia / 230,383,254 / 246,431,358 / 7.0
Russian Federation, Community of Independent States / 6,824,864 / 9,659,226 / 41.5
Middle East / 87,667,108 / 92,850,019 / 5.9
Africa / 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
Source: Database of the Japan External Trade Organization(JETRO),
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.