From the Chinese-made Virgin of Guadalupe statues hawked in Mexico City to the bulk carriers loaded with South American copper steaming...

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From the Chinese-made Virgin of Guadalupe statues hawked in Mexico City to the bulk carriers loaded with South American copper steaming toward the Chinese port of Quingdao, the ties that bind Latin economies to the rest of the world no longer run just north-south.

China’s burgeoning appetite for raw materials and quest for export markets has sparked a boom in south-south trade, as the world’s fastest-growing developing country courts its Latin American counterparts, engendering both anticipation and alarm.

While China is hungry for Latin America’s raw materials, it also has the potential to eat into Latin countries’ markets for their own products in the industrialized world.

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“We feel very vulnerable,” said Roberto Giannetti da Fonseca, director of the foreign-trade department of the powerful Federation of Industries in Brazil’s São Paulo state.

In the past five years, China’s trade with Latin America has grown at an annual rate of 42 percent, reaching nearly $22 billion last year.

Chile and Peru now sell $1 out of every $10 in exports — mostly copper — to China. And roughly 8 percent of exports from Cuba and Argentina are headed to China, according to a report last month from the Economic Commission for Latin America and the Caribbean.

Latin Americans are also expecting a flood of Chinese investments. Billions of dollars are promised, and in recent years more than half of China’s foreign investments have been directed at Latin America to acquire natural resources.

Now more than ever Latin Americans are reminded of Napoleon’s 19th-century observation that, when awakened, the sleeping giant China “will shake the entire world.”

With its rock-bottom labor costs, numerous government subsidies and other advantages, low-cost Chinese toys, clothing and appliances are not only supplanting domestic-made goods in Latin America but also edging out Mexican and Central American factories in sales to the lucrative U.S. market.

But if China is proving to be the bane of the region’s manufacturers, it has been a boon to South-American mining companies, petroleum interests, soybean farmers and other producers of raw materials.

Spurred on by higher prices for their commodities and growing Asian markets, Latin America and the Caribbean are importing more from China — a move that could redirect Latin American trade patterns.

Higher exports also have helped the region service its foreign debt and prevented new financial turbulence.

Anticipation over the new Sino-Latin American ties reached a peak last November when Chinese President Hu Jintao toured Brazil, Argentina, Chile and Cuba and reportedly pledged that his country would invest $100 billion in the region over the next decade.

South American presidents hailed the developing relations, which come as China has edged out the United States as the world’s largest consumer of copper, nickel, aluminum and iron ore.

Investments so far are a mere trickle. Chinese investment last year, for example, was just $889 million out of a total of $54 billion in investments that flowed into Latin America.

Effort in its infancy

While experts note that the effort is still in its infancy, they question whether providing critical commodities to sustain China’s growth is a step forward or will prove to be another dead-end strategy in a region trying to shake off massive poverty and build up its own infrastructure.

“The Chinese are becoming another world power, a manufacturing power,” said James Petras, professor emeritus at the State University of New York at Binghamton. “Latin Americans are falling further behind. Instead of investing in manufacturing production, they are going back to an early model that preceded their industrialization.”

Before Latin America embarked on industrial development in the 20th century, it provided raw materials that fueled the economies of Europe and later the United States.

Petras noted that relying on exports of raw materials has other drawbacks: Commodity prices are highly volatile, and investments in mining and oil generate only a handful of jobs compared to the employment created by investing in factories.

Albert Keidel, China Program senior associate at the Carnegie Endowment for International Peace in Washington, D.C., and a former Treasury official in the Bush administration, said there is nothing to prevent Latin American countries from concentrating on both manufacturing and exporting commodities — but that export success is often counterproductive as a development strategy.

“It tends to make a country feel that it doesn’t have to industrialize because it’s getting money from its raw-material exports,” Keidel said.

Although China is still much poorer as a whole than Latin America, with annual per capita income of $1,200 compared with $3,000, the Asian giant is attracting more attention from international investors and growing at a faster clip.

“What do they [Latin American countries] do in the face of a strutting China?” Keidel asked.

“Study China.”

Investment lessons

The lessons would be investment in education and health services, development of high-tech industries and heavy investment in infrastructure, such as highways, ports and telecommunications networks.

Meanwhile, sales to China have reversed decades of low export performance in countries such as Argentina.

“Argentina is basically a food and agriculture country,” said José Ignácio de Mendiguren, an Argentine industrialist who pushed trade with China during his brief stint as minister of production in 2002. China is going to become the principal buyer of food production in the world. What do you want Argentina to do?”

But others argue that relegating the region to a raw-materials purveyor will ultimately cost Latin America jobs and shutter its factories.

As China became America’s favored factory floor, Mexico, for example, lost some 300,000 assembly plant jobs in 2002 and 2003 — despite its status as free-trade partner of the United States in the North American Free Trade Agreement.

As Hu pledged Chinese investment in South American companies, roads and ports, Brazil, Argentina, Chile and Peru all bestowed market-economy status on China, which makes it even more difficult for the countries to counter the flood of Chinese imports by imposing trade rules.

And Chile, which is among the Latin economies most open to foreign trade, took a further step and is negotiating a free-trade agreement with China. President Ricardo Lagos has said it will be completed before he steps down from office early next year.

Chilean salmon farmers and wine makers hope to take advantage of a future free-trade accord by exporting to China. But the manufacturing sector opposes the trade talks.

“We are not totally in agreement about negotiating with China because it does not adopt the rules of the rest of the world,” said Alejandra Molina, manager of foreign trade at the Metal and Metallurgy Association in Chile. “They don’t have to comply with the laws, and we do.”