Latin America and Asia have emerged strongly from the first decade of the 21st century. The two regions led the global recovery and are set to outpace the G3 economies in the years ahead. Driven by the combined forces of industrialisation, urbanisation and middle-class consumption, trade between the two regions grew a phenomenal 357% in the past decade.

However, Latin America and Asia are still defining the nature of their relationship. Is there scope for a strategic, enduring and complementary partnership?

• The existing structure of world economic power has changed- with the European and American economies saddled with the problems, Latin America and Asia will be playing a significant role in stimulating the world economy going forward and their success will be crucial to alleviating the current economic sclerosis.
• Asia is a natural partner to Latin America because historically Asia’s fastest growth in trade is with the Latin American region; Asia exports 80% of its manufactured goods to Latin America; and there is proliferation of Free Trade Agreements (FTAs) and Regional Trade Agreements (RTAs) between the regions (more than 100 RTAs in Asia, almost 100 within Latin America and over 66% of RTAs filed with the World Trade Organisation last year involved Asia and/or Latin America).
• Trade and investment between both regions is growing but there is room for improvement. It is also not just the quantity, but the quality of the relationship between Latin America and Asia that needs to be improved.
• Latin America cannot be complacent about its 6% per annum growth. A study shows it needs 6% per annum growth to integrate with developed nations by 2040. Poverty has been reduced but income inequality is a growing problem that needs to be addressed. Latin America also lags substantially behind Asia in savings (22% of GDP) and investments (3% of GDP). In Asia, savings averages about 40% of GDP. Infrastructure, Logistics and Information Technology are three key challenges the region faces.
• There will be important long-term implications for Latin America if the Chinese economy slows down. Therefore, Latin American governments should be looking for a long-term diversifying relationship with Asia. The region has been working with with the Asian Development Bank (ADB) to explore other Asian economies apart from China.

Latin America & the Caribbean have seen the greatest and most sustained economic growth since the 1960s, with single digit inflation and average growth of 5.5% annually. Socio-economic factors are also positive, with lower unemployment rates and millions of people moving out of poverty. This has been achieved through pragmatic macroeconomic and fiscal policies, political stability, strong external demand for commodities and the growth of domestic demand. Is “the Latin American Decade” upon us?

• In order for Latin America to sustain growth as a region, each country needs to identify their own drivers and sustain their own growth.
• Cuba seeks to generate sustained growth by promoting the inflow of human capital and technology from strategic partnerships in key sectors. Asia looks set to be a key partner in this aspect.
• Cuba is also trying to increase economic efficiency, in particular, to separate the role of the state and the private enterprises. Specifically, it sees the need to provide enterprises with the freedom to construct their own management structures.
• Panama essentially functions as a logistics platform linking and facilitating trade between Latin America and the world. The expansion of Panama Canal will further strengthen Panama’s role in intra-regional trade, and at the same time it will also benefit world trade. However, there is still a need to further improve competitiveness in the logistics and financial services sectors.
• Latin America has a strong position owing to its stable political and legal frameworks, and also the ability to expand the economy beyond traditional frontiers.  To sustain the region’s growth, countries will have to avoid the middle income trap and project itself as an attractive investment location.
• Increasing productivity is essential to avoiding the middle income trap, and foreign investments play an important role in such a goal. To attract foreign investment, Chile signed up as first South American member in OECD.

Oil & gas, agri-commodities, mining and logistics have been the traditional drivers of economic growth and development in Latin America. As these industries evolve, what new challenges and opportunities will they present, and will they continue to lead economic development?

• The commodities sector in Latin America has great potential for growth, due to the region being a cost-effective producer, due to the growing imbalance in demand and supply of food, and as new forms of food consumption are emerging such as bio-fuels.
• Fundamental demand for energy in emerging economies expected to remain strong. As fossil fuels become scarce and more expensive (coal is expected to decline as it gets embroiled in environmental issues and as companies are forced to internalize what are currently externalities), gas may become a good economic alternative for Latin America. Nuclear disasters like recently in Japan have dashed hopes of using nuclear energy and renewable energy is not yet a technically or economically feasible source.
• Latin America will continue to be commodity-based for at least the next decade. This will double the middle-class population to over 300 million by 2030 – this is equivalent to the size of the American middle-class population now. Hence there is expected to be a corresponding demand for services (tourism, television content etc).
• Lack of infrastructure is a key challenge for Latin America, and it takes political will to invest in improving infrastructure. Latin America has “demographic dividend” with 68% of its population in the age range of 20-65 years. With 79% rate of urbanization, as compared to 46% in China, there will be a huge demand of infrastructure development supporting urban living in Latin America.
• The lack of infrastructure in Latin America is an opportunity for growth, but government support is also crucial. Government support is required in the form of concessions and more investments. Currently, Mexico invests only 2.5% of GDP while Chile invests 9% and Vietnam 10%.
• Insufficient skilled labour is also another challenge the region faces. There is still a mismatch between the workforce the government trains and the demand of private sector investors. Education is still lagging, with tertiary level education generally not of sufficiently good quality or in line with market demand. The governments and private sector in the region need to work together to close this gap in local talent.

This panel seeks to demystify the steps to success in Asia:

• Can Latin American companies translate experience in their home markets to success in the emerging markets of Asia? What parallels and lessons can be drawn?
• What are the barriers to entry that companies might encounter, and how can they be overcome?

• Cultural factors are important for companies entering the Asian market. Companies need to engage in cultural adaptation, adapting their strategies for different regions. McDonald’s for example, took over 4 years to enter the Indian market. The result was menu that is tailored to the non-beef and vegetarian food culture that is prevalent.
• Mere knowledge of a particular Asian market is also not sufficient. An innovative marketing medium is also necessary. The upside is that Asian consumers are receptive to new and refreshing products. Danone, for instance, has established a foothold in China with its dairy products, despite China being a supposedly lactose-intolerant country. Thus, primary products or commodities should not spearhead Latin American companies’ forage into the Asian markets.
• Regulatory issues can also serve as an obstacle- companies may have to contend with protectionism. In such cases, companies need to adopt a more long term orientation towards rates of return, which family-owned businesses tend to be better at. It is also critical to work closely with the governments in the region to resolve such issues.
• Human capital is another key issue of consideration - the company has to ask itself is whether sending management personnel over in the new market is often feasible. If it is not feasible to send management personnel over, the next key issue for the company is how it is going to build up its management team with foreign employees and retain them.
• Latin American companies interested in Asia can hedge such risks by looking to Singapore- Singapore offers a location that is near enough to the major markets in the region, but at the same time, an opportunity to maintain a distance in order to formulate and monitor business strategies. Singapore also offers insights into Asian consumption patterns and serves as an attractive base for growing Latin American and Singapore relations. An example would be Phillips, who used Singapore’s relatively smaller market to test the reception of consumers to a new iron product before pushing it out to the China market, where it became a huge success.