A common platform for South-South development cooperation between Asia-Pacific and Latin America and the Caribbean
Latin America and the Caribbean (LAC) and Developing Asia have rapidly become more intertwined as the two regions experience strong growth. Trade between the two regions has grown at an average annual rate of 18 per cent since 2000, reaching an estimated US$450 billion in 2012. Despite the current environment of global economic uncertainty, the prospects for deepening the relationship are strong.
Developing countries are an increasingly important source of investment, and are now the origin of more than a quarter of worldwide foreign direct investment (FDI) flows. Most recently, China has emerged as an important source of capital in LAC. However, while FDI between Asia and LAC is on the rise, flows remain concentrated among a few countries, and it has yet to keep pace with the robust increase in trade linkages.
The growing trade between the two regions requires developing architecture for lowering trade costs – there are presently 21 free trade agreements (FTAs) in force between LAC and Asian economies – as well as improving compatibility among agreements. As trans-Pacific FTAs multiply attention must be paid to the interactions between them, as their rules of origin, which limit the benefits of any one agreement to its signatories, can pose obstacles to the development of broader regional supply chains, thereby undermining the value of the network of agreements.
South–South Cooperation (SSC) presents the opportunity to share knowledge and development experiences and to engage in institutional cooperation and dialogue on best practices. In 2011, the development community highlighted the importance of SSC at the Fourth High Level Forum (HLF-4) on Aid Effectiveness in Busan, Korea, with the active participation of ADB and IDB.
The growing economic relationship between the regions has opened up opportunities to cooperate on policy issues beyond the trade and investment agenda. The countries of the two regions have expressed the determination to engage with one another to learn from each other’s experiences in developing innovative solutions to their common development challenges, and adapting them to local contexts.
The ADB and the IDB, as major sources of development finance in their respective regions, are particularly well placed to promote the exchange of development knowledge and experiences with the active participation of their respective clients. The two regional development banks have deepened their relationship in order to address Asia and LAC’s development challenges and opportunities. In 2012, the presidents of the two institutions participated in one another’s annual meetings for the first time, and the two regional development banks published a joint institutional report, Shaping the Future of the Asia and the Pacific-Latin America and the Caribbean Relationship.
The two Banks also launched a joint South-South cooperation initiative to facilitate the exchange of knowledge and best practices between their respective regions. Combining the development experiences of developing Asia and LAC through both banks is a powerful tool for realizing innovations in development policy and investments in both regions. Activities include joint capacity-building initiatives and training programs, interregional policy dialogue, expert forums and communities of practice, sharing of best practices, and professional and operational exchanges between the countries and subregions of LAC and those of developing Asia.