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A marriage of convenience

The global market economy, now embracing over 5 billion people, is ready for a marriage between Latin America and Japan, according to Makoto Utsumi, President and CEO of the Japan Credit Rating Agency, Ltd.

Speaking at the IDB Forum of the Americas, Utsumi proposed a stronger relationship and cooperation between Japan and Latin America and the Caribbean. “It is in Japan's interest to strengthen its relations with Latin America, a region that's rich in natural resources,” he noted. “And it is in Latin America's interest to have a closer relation with Japan to benefit from its strong and competitive manufacturing sector.

“We could have an ideal relation,” he smiled.

The upsurge in commodities prices, including many of the foods Latin America produces, brings about an optimistic perspective for the region in the first decades of this century, Utsumi said. “We can already see this: Latin America's trade surplus amounted to $50 billion in 2004.”

But “where there is light, there is shadow,” he cautioned. The region needs to be careful because a favorable climate can bring its own problems. “If Latin American countries don't make use of these favorable conditions to confront poverty, to implement social and political reform, and to strengthen the competitiveness of the manufacturing and service industries, the bright future will be lost.”

Demand for raw materials and commodities is going up worldwide, but it will take time for the supply side to catch up with the increase in demand, while manufactured goods are becoming cheaper, due to the massive inflow of cheap labor to the market economy.

This not only means cheaper manufacturing costs, but cutthroat competition in labor markets for all sectors of the economy, including retail. In a globalized market, developing countries and transition economies have an enormous need for investment to catch up with developed countries, Utsumi pointed out.

Higher commodity export prices help Latin American economies, but the manufacturing sector throughout the region needs to increase competitiveness to keep on thriving when commodity prices go down, Utsumi warned.

Japan, poor in natural resources but rich in monetary resources, can help the region improve competitiveness. Latin America and the Caribbean need levels of investment that domestic savings cannot meet. Japan has the financial resources to match Latin America's natural resources.

A match made in heaven? It used to be that people married for love. But we're talking economies, not people, and if there's a global market out there waiting for us, marrying money doesn't sound bad at all.