Employment Creation and Community Development
One of the several ways in which the impact of green field or brown field foreign direct invest (FDI) can be measured is in terms of employment creation. For instance, back in 2002, Latin America sustained 126 jobs for each US$1 million active within the economy. This amount later decreased to 109 jobs for each US$1 million during 2012. Like in any region of the world, this downward trend in Latin America is mainly due to an ever-changing nature of the economy and to increased mechanization across industries. However, it is important to differentiate between industries because they do not all yield or sustain the same level of employment activity. Sectors like petroleum extraction are less labor intensive than apparel manufacturing or organic agriculture. Therefore, the impact of economic activities such as trade and FDI can be quantified based on their impact on national or regional employment.
Employment Creation and Community Development
During the last decade, Chinese economic activity throughout Latin America increased substantially. Simultaneously, the predominant sectors for investment and the privileged industries for export towards China have become more clearly defined. Even though China’s imports from Latin America have multiplied impressively throughout the last two decades, it is both interesting and revealing to see the change in the contents of exports that regional countries sell to the Chinese market. Between 1999 and 2003, 29% of China’s imports from Latin America were manufactured goods, while another 46% were agricultural products and 25% were commodities from extractive industries. Meanwhile, as the commercial relationship between Latin America and China intensified, the Asian Giant did not dissimulate its economic priorities. Between, 2009 and 2013, China’s imports from Latin America consisted of 12% manufactured goods, 31% agricultural products, and 57% commodities from extractive industries. This commercial trend stands in stark contrast to the region’s general picture in terms of trade given that, between 2009 and 2013, Latin American exports as a whole consisted of 44% manufactured goods, 20% agricultural products, and 33% commodities from extractive industries.
Therefore, China’s strategic economic interests in Latin America are mainly focused on the purchase of commodities, both agricultural and mineral, such as soybeans, petroleum, natural gas, and copper amongst others. The issue with this trend is that it can have an adverse environmental and economic impact of Latin American countries because it is focused on natural resources and industries that do not promote value added manufacturing. Furthermore, the industries from which China’s Latin American imports stem, particularly the extractive sector, are not labor intensive and provide fewer jobs to the regional economies. For example, in 2002, for every US$1 million worth of goods that China purchased from Latin America it supported or created approximately 67 jobs in the region, this is due to the profile of China’s average import basket discussed above. However, by 2012, for each US$1 million that China imported from Latin America it only supported or created 47 jobs in the region.
(Read more about Economic Outlook for Latin America in 2018)