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Infrastructure paves way for BRI in Latin America

2019-11-13 12:44:23 China Daily

China is helping build an ocean-to-ocean railway through Argentina to reduce regional transportation cost and expand trade

The demand of East Asia and Southeast Asia, especially China, for natural resources from Latin America will continue to grow. From 2021 to 2030, the average annual growth rate of China's import of agricultural products, minerals and crude oil from Latin America is projected to be 2.0 percent, 2.8 percent and 2.7 percent, respectively.

Infrastructure is a big part of this growth story. The construction of major infrastructure facilities in Latin America, such as the ocean-to-ocean railway, will not only reduce regional transportation cost and enlarge the scale of trade, but also promote the docking of markets and industries. According to the Latin America Development Bank, logistics costs in Latin American and Caribbean countries range from 18 percent to 35 percent of the final value of the products, compared with 8 percent in Organization for Economic Cooperation and Development countries.

However, if all countries in the LAC region improved their infrastructure to the average level of that in other middle-income countries, regional growth in Latin America could increase by up to 2 percent a year. Therefore, connectivity is one of the five sectoral pivots for the Community of Latin American and Caribbean States (CELAC).

So to increase exports to China, Latin American countries should strengthen cooperation in infrastructure construction. The First Ministerial Meeting of the China-CELAC Forum, held in Beijing in January 2015, approved the China-Latin American and Caribbean Countries Cooperation Plan (2015-19). Part IV(infrastructure and transportation) of the cooperation plan says China and Latin American countries would promote infrastructure development.

During his state visit to Peru in November 2016, Chinese President Xi Jinping stressed that the Belt and Road Initiative is an open plan and that China is looking forward to bringing it to Latin America.

On May 15, 2017, at the Belt and Road Forum for International Cooperation, Argentine President Mauricio Macri said that the possibility of South America converging with the Belt and Road Initiative "is an opportunity we do not want to miss". And while saying this, President Macri referred to President Xi's initiative to create "an architecture of open, inclusive and balanced global economic cooperation that benefits everyone and contributes to boost our own objectives of poverty reduction and creation of economic opportunities through the development of logistics, energy and productive infrastructure".