Posted on

Why the region needs Korea

Antoni Estevadeordal

Why the region needs Korea

Social Share

If we were to ask an average citizen of the Americas today what he thinks when he hears the words South Korea, he or she probably would say smart phones, vehicles, electronic goods or pop superstars.

But for people of my generation, the words South Korea evoke something different. South Korea is above all the story of an economic miracle. The story of a country that went from suffering a civil war to being a world reference point for development. A country that in 1959 had a per capita income of barely US$150, and which today is well above US$26 000 and has the 14th largest economy in the world.

Trade partner

What many people probably don’t know is that South Korea, aside from being an example of economic development and productive transformation, is each day a more important trade partner for Latin America and the Caribbean.

Today, 21.3 per cent of Latin American exports to South Korea are manufactured goods, compared to 16.6 per cent of exports to Japan and 15.6 per cent to China. Six of the ten Latin American enterprises that send the most exports to Korea are manufacturers of medium to high-end technological products such as telecommunications equipment, vehicles or chemical goods.

This is good news for Latin America, a region that is increasingly looking to the Pacific for business but which has traditionally based its exports in raw materials, a model that can have volatile prices and which represents a lower added value for our economies.

Nevertheless, the importance of our region’s economic relations with South Korea is not limited to exports. South Korea is in fact an increasingly important investor in our productive tissue. The Asian country’s investments in Latin America have multiplied ten-fold since 2003 and now have an accumulated total value of more than US$10 billion.

A report recently published by the Inter-American Development Bank (IDB) showed that 80 per cent of these investments went into the production of manufactured goods. Big South Korean multinationals today employ thousands of Latin American engineers, designers, and technicians.

There are many examples like the Hyundai motor company, which in 2012 invested US$700 million to build a manufacturing plant in Piracicaba, Sao Paulo, where it produces a model especially designed for Brazil – the HB20. Kia has a vehicle assembly plant in Mexico that takes advantage of that country as a platform for logistics and exports to the United States. And a subsidiary of LG is handling collections for the Bogota mass transit system.

A Korean firm Sae-A Trading Company Limited employs 3 400 people – approximately 75 per cent of whom are women – at a garment factory at the Caracol Industrial Park in Haiti.

Global opportunities

The presence of these South Korean companies not only translates into jobs with good salaries and high value added, it also allows us to expand and improve our industrial capacity, to incorporate leading edge technologies and facilitate the incorporation of Latin American small and medium enterprises into valuable global opportunities.

South Korea joined the IDB in 2005 and has financed several IDB initiatives since then, including poverty alleviation programmes, knowledge enhancement programmes, and the development of small and medium sized enterprises in Latin America and the Caribbean.

South Korea has demonstrated its commitment to the region through the years, implementing free trade agreements with Chile in 2004 and with Peru in 2011, and concluding the negotiations for a free trade agreement Colombia.

It is an observer in the Pacific Alliance, a regional integration initiative established by Chile, Colombia, Mexico and Peru, that seeks to forge deeper economic ties with the Asia-Pacific region.

The IDB recently held its annual assembly in Busan, South Korea. I trust that hundreds of Latin American businessmen, together with ministers and presidents from the region, took advantage of their participation in this meeting to deepen a relationship that is already a model for investments and commerce, that generate benefits for all of our societies.

• Antoni Estevadeordal is the manager of the Inter-American Development Bank’s integration and trade department.