Interconnecting Asia Pacific and Latin America

Published on 03 Apr 2023

asia pacific trade agreement, China's trade with Latin American, APAC countries

Trade between Latin America and Asia, two regions on opposite corners of the globe, is vital to the global economy's health. Since 1995, the industrial expansion in China and the natural resource output in Latin America have contributed to a yearly increase in trade between the two areas of 9%.

China's exports to Latin America include minerals, agricultural goods, meat, seafood, processed foods, and drinks. In contrast, the region's primary imports include equipment, electronics, chemicals, plastics, textiles, and footwear. The two areas have more than $500 billion in yearly commerce.

Throughout recent years, investors from Asia, particularly China, have been buying up energy and telecom assets throughout Latin America. China's State Power Investment Corp bought Mexico's Zuma Energa, a renewable energy firm, in 2020, and China's State Grid Corp acquired two Chilean energy companies in 2021. 

As a whole, Chinese investment in Brazil increased by 208% to reach $5.9 billion between 2020 and 2021. In 2021, China invested 4.8% of its total overseas capital in Brazil, second only to the United States in the Americas.

Many Asian businesses, especially Chinese ones, have actively pursued international growth and have found success in markets outside of Latin America. Nonetheless, for several structural and cultural factors, Latin America is an excellent choice for Asian businesses seeking new growth market. Here are some benefits of investing in Latin America.

The Ability To Navigate Digital Transformation

There are approximately 40 different nations in the Asia-Pacific (APAC) area, and their combined populations total over two billion. While developed economies such as Japan, Singapore, and Hong Kong may be found in APAC, the region as a whole is still in its early stages of economic growth. This implies that the uptake of technologies like the internet and smartphones has been slow, patchy, and unpredictable. As a result, Asian businesses are adept at innovating creative solutions to the market inefficiencies characteristic of emerging countries like Latin America.

Numerous Instances Of Fragmentation

Localization is essential in an area with more than 40 jurisdictions; for example, Indonesia has more than 20 payment methods that are only accepted in person. To succeed in Latin America, e-commerce businesses from Asia must adopt the region's customs and practices regarding content, marketing, goods, and payment methods. Central bank programs like Pix in Brazil and SPEI in Mexico, cash vouchers like boleto bancário and OXXO Pay, and a plethora of digital wallets are just a few examples of the wide diversity of local payment systems available across Latin America. As a region with more than 30 distinct markets, Latin America presents unique challenges for APAC retailers because of its wide range of regulatory, tax, banking, and cultural norms.

High Adoption Of Smartphones And Mobile-First Strategy

Asian consumers might be considered early adopters of technology even in emerging nations if the price is right. With over 70% of the population owning a smartphone, several popular consumer businesses in Asia have shifted their focus to mobile platforms. Thus, the area boasts the most cutting-edge eCommerce industry and is the foremost gaming powerhouse worldwide. Smartphones have mostly replaced personal computers in Latin America, giving the region some similarities to that region. Both markets have benefited from the prevalence of responsive, flexible websites and applications that can function properly, even on phones with limited storage space and spotty network connections.

A mobile phone is more accessible to those with lower incomes than a desktop computer; hence certain populations may use mobile devices exclusively or mostly. Furthermore, a mobile device may be easier for groups with poor literacy skills, enabling users to connect with friends, family, and even customers through voice messages and access material on social media via videos and photographs.

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