The delicate balance for jointly pursuing economic growth in Latin America and China

Abstract

This paper examines the sources of economic growth for a group of Latin American countries in relation to their export performance in China. The analytical framework is based on an extended normalized quadratic profit function. The ensuing econometric results confirm that a favorable export record with China represents a positive source of growth for Latin America. However, it also creates long-run dependability conditions in terms of reduced prices and thinner profits that weaken its growth capacity. Latin American countries must seek product diversification away from their current commodity base and aggressively climb up the value chain to remain competitive worldwide.

Managerial Relevance: identify the sources of economic growth for a group of Latin American countries in relation to their export performance in China; the weakness of this economic growth model; how to seek product diversification away from their current commodity base with emphasis on value chain.

Keywords:

• trade dynamic
• international business
• competitive equilibrium
• profit function

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Latin America is well known for its various amounts, degrees, and levels of corruption. A corruption perception index was added considering that it unnecessarily increases transaction costs and slows down market functioning. However, such an index did not yield a sufficient number of robust parameters across countries and was left out in the final iteration.