This paper analyzes two aspects of China's economic relationship with Latin America and the Caribbean (LAC). First, we examine the extent to which China's economic growth is affecting trade and investment fl ows between China and LAC. Second, we analyze the extent to which the emergence of China as a world exporter affects the ability of LAC countries to compete in world markets both in terms of exports as well as in the capacity to attract foreign investment. For each of these questions, we provide a critical assessment of a new body of work in this area, as well as offer a series of analyses that build on and confi rm some of this previous work. Furthermore, we offer implications for policy and future research. We show that there is an emerging consensus regarding China and LAC. With respect to trade and investment fl ows, China accounts for a signifi cant amount of the boost in LAC exports and foreign investment in recent years, but is exporting more than it imports. In terms of global competitiveness, LAC is not signifi cantly threatened by Chinese exports in global markets, with the exception of Mexico.
After almost 25 years of experimenting with the neo-liberal economic reforms collectively known as 'Washington Consensus' policies, Latin Americans are starting to re-assess the merits of these policies at the voting booth. Whereas one of the key policies of the 'Washington Consensus' package was the liberalization of investment regimes, many of the newly elected governments are beginning to scrutinize the role of foreign direct investment (FDI) in their countries. Indeed, some nations have gone as far as to nationalize foreign fi rms. Without endorsing or condoning the actions taken by these governments, in this paper we argue that it is quite rational and very justifi ed for governments in the region to re-evaluate the role of FDI for their development paths. Our exhaustive review of the literature on FDI in Latin America during the reform period shows that very few nations in the region actually received signifi cant amounts of FDI as a result of reform, and that when FDI did materialize, it often fell far short of generating the necessary linkages required to make FDI work for economic development.
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