Latin America should leverage China's strong buying of the region's raw materials to strengthen their own reforms and boost long-term growth prospects, the World Bank said Tuesday.

As the biggest customer for Latin America's raw materials and commodities, China is spending billions of dollars per year, but little of that is going to direct investment, which is what is needed for long-term growth, said Augusto de la Torre, the World Bank's chief economist for the region.

"A key question is, can Latin America deepen its connections to China and turn them into an important source of long-term growth," he told journalists.

Despite global economic uncertainty, de la Torres said the region will achieve a robust rate of growth of around 4.5 percent this year.

China's role as a big buyer of commodities to fuel its industrial machine has been important to this growth in recent years.

But its direct investment into Latin America between 2003 and 2009 ran only to about $4 billion a year, modest compared to the investments from the United States and Europe, a new World Bank report on the global economy shows.

Chinese investment into Latin America, in fact, has mostly gone into the tax havens of the British Virgin Islands and the Cayman Islands, according to the report.

"There is little evidence that China can play a part in boosting productivity in Latin America and the Caribbean," de la Torre said.

Unlike the flow from Japan that helped spur growth in East Asia in the 1970s, China lacks the technologies and knowledge resources to transfer that will help Latin America's economies progress, the report said.

"The ability to learn from trade with China is not improving. There is a long way to go," said de la Torre.

But the report said that Latin America does not have to depend on its trading partners to boost its ability to produce things.

De la Torre suggested the region can, however, leverage its trade with China to boost its advantages long-term.

"Latin Americans continue to focus excessively on the (current) situation and we are always talking about what could happen in the next three or six months" instead of looking at the long term, de la Torre said.

Related Links
The Economy

Tweet