MANILA, PHILIPPINES - Asian Development Bank (ADB) President Haruhiko Kuroda and Inter-American Development Bank (IDB) President Luis Moreno spoke today about ways the two development banks can strengthen trade and investment between Asia and the Pacific and Latin America and the Caribbean during ADB's 45th Annual Meeting in Manila.
"With the sluggish recovery and debt problems in advanced economies, the responsibility for enhancing and sustaining world economic growth has largely fallen on Asia and Latin America," Mr. Kuroda said.
"While Asian and Latin American economies will continue to be closely linked with these advanced economies, our two regions must increasingly work toward sustaining our own robust economic growth with structural reforms and sound macroeconomic policies. Greater 'South-South' cross-regional cooperation can also potentially contribute to this endeavor," he added.
This was the first time that IDB's top executive participated in ADB's Annual Meeting. It followed Mr. Kuroda's participation at the IADB Annual Meeting in March in Montevideo, where the two presidents formally launched Shaping the Future of Asia-Latin America and the Caribbean Relationship, a joint ADB-IDB report.
Both development bank presidents underscored the need to diversify trade and investment and broaden economic cooperation among more Asian and Latin America and the Caribbean countries.
Asia is now Latin America's second biggest trading partner, with about one-fifth share of total Latin America and Caribbean trade. Growing at an annual average of 20% since 2000, trade between Asia and Latin America and the Caribbean trade reached an estimated $442 billion in 2011.
The surge in trade is being fostered by an increase in the number of free trade agreements (FTAs) between Asia and Latin America and the Caribbean. Between 2004 and 2011 an average of two FTAs took effect every year between the regions, resulting in a total of 18 such agreements today. Additional agreements currently under negotiation or approaching implementation could take that number to 30 FTAs by 2020.
Most Asian investment has been concentrated in the largest markets, Brazil and Mexico. In order to increase investment throughout the region, governments in both Asia and Latin America need to create more favorable business environments, reduce non-tariff barriers and establish more transparent regulations, the joint report says.
While the commodity-for-manufacturing trade is expected to continue to underpin relations between Asia and Latin America, the rise in manufacturing investments from Asia in Latin America offers scope for growth and an opportunity to insert Latin America into the Asian production chain. Nevertheless, Asia's demand for natural resources from Latin America and the Caribbean is likely to continue.
Shaping the Future of Asia-Latin America and the Caribbean Relationship argues that trade between the two regions is concentrated among few countries and, on the part of Latin America and the Caribbean, on a few commodities.
The report calls for governments to lower trade costs by bringing down trade barriers and improving logistics and infrastructure to facilitate trade. Preferential trade agreements among some Asian and Latin America and the Caribbean countries have managed to address high trade barriers, helping unlock huge trade potential.