Latam and Asia, the golden opportunity the markets were waiting for has arrived without delays 

The relationship between Latin America and Asia has grown notably closer in recent years to the point that perhaps no one would have imagined this level of relationship between the two regions at the beginning of the century.

This symbiosis has come about thanks to the quality of both Latin American and Asian production. On the one hand, Asia-Pacific, including China, is the leading global manufacturing exporter overall and the largest supplier of electronics, but imports more than 25% of its energy resource as well as intermediate goods. The Asian Giant also imports more than 25% of its mineral needs from countries like Brazil or Chile.

The golden opportunity 

But the dynamics have now changed significantly: energy cost differentials, rising wages in China, near-shoring supply chains, and remote work, are some of the factors driving these changes.

In the future, this moment will be seen as a crucial episode in the evolution of relations between the two regions. Although raw materials continue to be exported from Latin America to Asia, the relationship today is more balanced. In other words, it is a two-way trade flow that is bringing prosperity to both regions. For example, Asia exports microchips to Mexico for its growing automotive industry. 

The opportunities for Latam in the Asian markets lies in changing the focus of their exports towards the needs of the future: i.e. renewable energies. But also the region can push forward its agricultural strengths. 

And this is just the tip of the iceberg. Many more sectors can benefit from this new dynamic. Because of the supply chain disruptions we experienced during Covid, many companies are preferring to finish production close to the markets where the products will ultimately be sold. This minimizes logistical risk and prioritizes the security of reaching the consumer on time and, of course, at a lower cost. 

It is in this context that Mexico has a golden opportunity. In addition to having a competitive labor cost, there is an unmatched professional talent pool compared to the rest of Latin America, besides being geographically next to one of the largest markets in the world: the United States. This will also generate lower transportation costs, not to mention minimizing risks in the logistics chain.  

Global strategic allies

We are facing a new logic in global markets. And Latin America and Asia have a golden opportunity on their hands that they cannot afford to miss. Together they can become one of the leading economic poles in the production and distribution of products. A cyclical flow flows out of their countries. For example, we have different minerals coming out of Peru and Chile, car parts are manufactured in China, and they return to finish assembly in plants in Mexico. 

It is not just a simple commercial operation, it is the solidification of a model: a synergy that did not exist before and is unprecedented in the history of business relations between Asia and Latin America. That is to say, the Latin American quality raw material generates Asian semi-finished products that will finally become finished products that will reach the consumer from the Latin industrial powers. This is precisely one of the reasons why Mexico and other Asian producers have ended up raising the quality of their products. 

Why is this promising? Latam has the opportunity to be able to supply the world with competitive prices. In Latin America, the dynamics of social growth are a few rungs behind Asia, where wages and the professionalization of the population make it more expensive to produce all kinds of products there. 

There is uncertainty around the world about what will happen with inflation, war, and a likely recession. However, Asia-Latin America relations can alleviate the eventual problems that economies in these regions may have. The United Pacific Rim can do much for the future of the world. 

By Alfonso de los Ríos, CEO and Co-Founder of Nowports, the first Digital Freight Forwarder to achieve “Unicorn” status in Latin America. Alfonso was a speaker at the 2022 Horasis Asia Meeting in Kitakyushu, Fukuoka Province, Japan.