Should Latin America Fear China?

Abstract

This paper compares growth conditions in China and Latin America to assess fears that China will displace Latin in the coming decades. China's strengths include the size of the economy, macroeconomic stability, abundant low-cost labor, the rapid expansion of physical infrastructure, and the ability to innovate. China's weaknesses, stemming from insufficient separation between market and State, include poor corporate governance, a fragile financial system and misallocation of savings. Both regions share important weaknesses: the rule of law is weak and corruption endemic, education is poor and very poorly distributed, and innovation is discouraged by barriers to entry and limited competition.

Keywords: China, Latin America, economic growth, investment climate

JEL Classification: E66, O57, P52