Will China’s crisis ease the pressure on Latin America’s environment?

Slowdown could provide respite for the environment but low prices and higher output are concerns

The current volatility of the Chinese economy will affect the entire planet, but it is having a considerable effect on the economies and environments of Latin America in particular since trade between China and the region has grown at an average of 23% annually since 2008.

Over 80% of Latin American exports to China consist of four products: soybeans, oil, copper and iron – the production of all of which has had significant environmental impacts. Over the past year, China sourced more than US$ 200billion worth of soybeans and minerals from Latin America.

But the recent slowdown could lead to two different scenarios playing out for Latin America’s environment according to Paulina Garzón, director of the China-Latin America sustainable Investment Initiative.

“In the first, China would invest less in the extraction of primary materials and reduce the pressure on the environment. In the other scenario, China would look to reduce its production costs and apply a downward pressure on international commodity prices.

“If the second hypothesis is correct, producer countries will have to increase levels of extraction to maintain their revenues, putting further strain on the environment,” said Garzón, who conceded that the environmental consequences for Latin America of China’s slowed growth are still difficult to predict, irrespective of whether China grows at 6% or 9%.

The culture of extractivism and export-orientation is likely continue for many years as Latin America is a fundamental part of China’s plans to feed and provide energy for its 1.3 billion inhabitants, Garzón says.

Mutual dependence

Throughout the last decade, China has needed a steady flow of commodities to fuel its rapid growth. But Latin American countries fear China’s macroeconomic outlook will considerably impact their exports. For every percentage point of China’s Gross Domestic Product (GDP) growth, Latin America experienced correlative growth of 0.7 percentage points.

“The general expectation is that bilateral trade with Latin America will grow in the coming years, albeit at a slower pace. The demand for commodities in the region remains high,” said Margaret Myers, director of the China-Latin America program at the Inter-American Dialogue.

Brazilian exports of iron ore to China account for 23% of its total supply. China is the world’s single largest buyer of iron ore and demand has increased by 60% in the past few years with Honduras, Chile, Mexico and Peru the other major Latin American exporters to China.

According to a study entitled Measuring Latin America’s export dependency on China published in August by analysts at BBVA, the countries feeling the effects China’s economic slowdown most acutely are (in order) Costa Rica, Colombia, Uruguay, Venezuela, Brazil, Panama, Peru, Chile, Guyana and Argentina.

The study also states that from 2008 to 2014, timber exports from Guyana, Belize, Suriname, Nicaragua and Panama have increased by 625%.


Having grown at about 9% per annum, China now faces a more conservative GDP growth forecast of 6%. China’s investors are nervous and Beijing’s stock exchange has accumulated losses of nearly 40% this year.

On August 11, when the People’s Bank of China (PBoC) took the decision to devalue its currency to 1994 exchange rates, pessimism increased further.

However, Fabiana D’Atri, Director of Economics of the Brazil-China Business Council (CEBC), believes that the devaluation of the yuan should be contained, so as to limit the impact on trade between the regions. Many Latin American currencies have also depreciated in relation to the dollar.

Daniel Perrotti, a researcher at the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), estimates that exports from Latin America to China could still increase by an average of 10% per year despite the slowdown.