The Atlanta Journal-Constitution
U.S., Latin America boost economic ties
Stronger dollar gives U.S. a political opening in region.
WASHINGTON — In Mexico City, an auto parts company expects to ride a resurgent U.S. auto industry to $1 billion in annual revenue by 2016.
In Bogota, Colombia, a company that makes plastic water valves is hoping an expansion into the United States will supercharge its exports.
In Brazil, firms that make ceramic tiles predict they’ll beat last year’s robust sales abroad, thanks to a strong U.S. dollar that gives them a price advantage in the United States.
Across Latin America, companies increasingly are looking north for business. The prospect of tighter commercial ties across the Americas has handed the U.S. a chance to reclaim some of the regional economic and political clout it lost to a surging China over the past decade. President Barack Obama will be given a big opportunity to re-engage more vigorously with the new regional landscape at the Summit of the Americas Friday and Saturday in Panama City.
As its economy slows, China needs less Venezuelan oil, Chilean copper and other Latin American commodities. Meanwhile, the U.S. economy is nearly back to full strength after a long, slow comeback from the Great Recession of 2007-2009.
Currency swings are also pulling Latin American companies north. The U.S. dollar is up 41 percent against the Brazilian real, 34 percent against the Colombian peso and 15 percent against the Mexican peso since June 30. A strong dollar makes Latin American products cheaper in the United States, giving the region’s exporters a competitive edge.
What’s more, Obama’s diplomatic opening to Cuba removed a major source of tension between the U.S. and the region.
To be sure, no one expects China to disappear from Latin America. It will remain as a major trading partner and financier. Chinese state-owned banks last year loaned $22 billion to Latin America, more than traditional lenders the World Bank and the Inter-American Development Bank combined. And many Latin American countries remain wary of the United States, which has a history of interfering in regional politics.
China has rapidly gained economic influence in Latin America. In 2000, it absorbed barely 1 percent of the goods Latin America exported. By 2013, China’s share had risen past 10 percent. Over the same period, the U.S. share dropped from 58 percent in 2000 to less than 40 percent, according to United Nations figures analyzed by the Brookings Institution.
Chinese demand for raw materials such as oil, copper and iron ore set off a commodities boom in Latin America. But it was a mixed blessing. As commodities surged out of the region, cheap Chinese products — toys, clothing, shoes — flooded in, putting pressure on local manufacturers.
Increasingly, Latin American firms express high hopes for the U.S. market.
Gary Spulak, president of the U.S. subsidiary of the Brazilian aerospace giant Embraer, predicts that the U.S. will account for more than 50 percent of global demand for aircraft over the next 10 years.
Brazilian tile manufacturers enjoyed 9 percent export growth last year and expect even faster growth this year.
“The devaluation of the real against the dollar makes us more competitive,” says Antonio Kieling, president of the Brazilian Ceramic Tile Manufacturers Industry Association.