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Project Study on Current Situation of Economic Partnerships and Challenge Toward Economic Cooperation in South America Final R No. PROJECT STUDY ON CURRENT SITUATION OF ECONOMIC PARTNERSHIPS AND CHALLENGE TOWARD ECONOMIC COOPERATION IN SOUTH AMERICA FINAL REPORT OCTOBER 2006 JAPAN INTERNATIONAL COOPERATION AGENCY INTERNATIONAL DEVELOPMENT CENTER OF JAPAN ED JR 06-118 Project Study on Current Situation of Economic Partnerships and Challenge toward Economic Cooperation in South America: Final Report LIST OF ERRATAT Page and line Original text Corrected text p. ix, ll.23-29 3) Research cooperation 3) Cooperation for policy There are many qualified formulation researchers in the South American There are many qualified countries, so they frequently have researchers in the South American exchanges with the administration countries, so they frequently have or business world. It is extremely exchanges with the administration effective to support policies through or business world. Policy support collaboration with such researchers. can be made effectively through The United Nations ECLAC collaboration with such researchers. (Economic Commission for Latin For example, “creation of export America and the Caribbean) which dynamism” is a theme to be has its base in Santiago is especially emphasized. noteworthy. “Creation of export dynamism” is a theme to be emphasized. p.5, l.25 experienced currency crises and experienced currency crises and major domestic economic disruption. major domestic economic disruption, leading to recessions in the neighboring countries such as Paraguay and Uruguay. p.44, ll.2-3 Concerning ODA too, experts of Concerning ODA too, experts of Japanese decent (for example, in the Japanese decent in such countries agricultural field) are playing as Brazil, (for example, in the agricultural field) are playing p.45, ll.6-8 A typical example of his was the A typical example of this was the rapid advancement by Japanese rapid advancement by Japanese corporations into the Brazil-Manaus corporations into the Brazil-Manaus Free Zone that was established in Free Zone that was established in 1970. 1967. p.46, Table 4-5 Note Note: South America here refers to Note: South America here refers to the 13 countries of Bolivia, Chile, the 13 countries of Argentina, Columbia, Ecuador, Falklands, Brazil, Bolivia, Chile, Colombia, Guyana, Paraguay, Peru, Surinam, Ecuador, the Falkland Islands, Uruguay and Venezuela. Guyana, Paraguay, Peru, Surinam, Uruguay and Venezuela. p.57, ll.2-3 apart from high interest rates in apart from high interest rates in excess of 15%, excess of 15% (as of June 2006), p.58, ll.13-15 the Amazon region in the north has the northern and north-eastern a lot of poverty and low education parts have a lot of poverty and low levels. As a result, the social education levels. As a result, the structure is such that poor people social structure is such that poor from the north perform menial labor people from the north and in the south; north-east perform menial labor in the south; p.61, l.17 Corporations are unable to raise Corporations are difficult to raise long-term funds long-term funds in the domestic market p.67, ll.28-31 the Celades development costing the Celades development costing in US$1 billion that was implemented total 68.4 billion Japanese Yen over during Tanaka administration, a period of 22 years (of which however, even if the local people JPY35.1 billion invested by Japan) - 1 - know about Japan’s cooperation, that was initiated in the wake of the some government officials are visit by the then prime minister unaware of it and, now that the Kakuei Tanaka. However, even if JBIC bridge corporation has the local people know about Japan’s withdrawn from the region, there is cooperation, some government no longer any evidence of Japanese officials are unaware of it. involvement. p.68, ll.25-26 utilizing experts and volunteers of utilizing experts of Japanese decent Japanese decent p.109, Footnote 62 Thirteen South American countries: 13 South American countries: p.111, Footnote 65 Argentina, Bolivia, Chile, Colombia, Argentina, Bolivia, Brazil, Chile, p.114, Footnote 68 Ecuador, the Falkland Islands, Colombia, Ecuador, the Falkland Guiana, Paraguay, Peru, Surinam, Islands, Guyana, Paraguay, Peru, Uruguay and Venezuela. Surinam, Uruguay and Venezuela. p.109, Footnote 63 The countries above excluding the The countries above excluding the p.114, Footnote 69 Falkland Islands, Guiana and Falkland Islands, Guyana and Surinam. Surinam. p.175, ll.3-5 The dictatorship of General After the dictatorship of General Stroessner was beaten in the Stroessner over 35 years was presidential election of 1989, and collapsed by a military coup in 1989, the victorious President Rodriguez General Rodriguez was elected as established a democratic President in the general election. constitution, making the beginning The president established a of democratic policies. democratic constitution, making the beginning of democratic policies. p.178, ll.18-19 implemented by government implemented by MAG-affiliated agencies (with cooperation from agencies (IAN and CRIA) CETAPAR, CAPECO and MAG-JICA too) p.185, l.12 Small Vegetables Production Small Farmers Vegetables Technology Improvement Project Production Technology Improvement Project p.199, l.32 CONFIDES COFIDE p.221, ll.6-8 The basic characteristics of poverty The basic characteristics of poverty are not absolute poverty as in some in South America are a disparity parts in Africa, but are relative problem. poverty, in other words, a disparity problem. p.223, l.31 3) Research cooperation 3) Cooperation for policy formulation p.223, ll.34-39 Consequently, it is extremely Consequently, policy support can be effective to support policies through made effectively through collaboration with such researchers. collaboration with such researchers. The United Nations ECLAC (Economic Commission for Latin America and the Caribbean) which has its base in Santiago is especially noteworthy. Since the ECLAC has long-term experience and an independently critical mind (problem consciousness) as a research institution, they have a wide network across the Central and South America. p.223, l.39 - p.224 l.1 “Creation of export dynamism” is a One example of themes emphasized theme emphasized through research through the collaboration is - 2 - cooperation. “creation of export dynamism” which means pursuit of a scenario for diversified and value-added economy, not just for economic expansion caused by increase of export. p.224, ll.5-8 Accordingly, recommendations Accordingly, recommendations should be made by each nation with should be made by each nation with respect to the incorporated respect to the incorporated promotion and creation of a new promotion and creation of a new export industry, export export industry, export infrastructure development and infrastructure development and information exchange between the information exchange between the private and public sectors through private and public sectors through joint research between South joint research between South American and Asian research American and Asian research institutions. institutions. This kind of policy support initiatives shall preferably be conducted with such institutions that have a wide network of information and personal connection across Latin America, such as the United Nations ECLAC. - 3 - Contents Summary………………………………………………………………………………………… i List of Abbreviations…………………………………………………………………………… xi Study Outline…………………………………………………………………………………. xiv Part I: The Actual State of South America and its Relationship with Japan Chapter 1 Outline of the South American Economy 1 1-1 Status of South America in the World 1 1-2 Overview of Economic Trends in Latin America from 1970 Onwards 4 1-3 Overview of Economies in South American Countries 7 Chapter 2 Trade, Investment and Industrial Structure 27 2-1 External Trade 27 2-2 Intra-Regional Trade 27 2-3 Investment 29 2-4 Industrial Structure in the Major Countries of South America 31 Chapter 3 Regional Structure and Infrastructure 33 3-1 Regional Structure 33 3-2 Regional Infrastructure 38 Chapter 4 Japan’s Relations with South America 43 4-1 Past Relationship 43 4-2 Future Relations 46 Chapter 5 Economic Development Issues as Seen by Japanese Corporations 49 5-1 Outline of the Survey 49 5-2 Overall Trends 51 5-3 Conditions and Corporate Management Issues in Each Country 55 5-4 Expectations from Corporations concerning ODA 66 Part II: History and Current Situation of Regional Economic Integration Chapter 6 Global Trends surrounding Economic Integration 71 6-1 Perspectives for Considering Cooperation in South America 71 6-2 History of Economic Integration 71 Chapter 7 Current Conditions of Economic Integration in South American Countries 79 7-1 History of Economic Integration in South America 79 7-2 Actual State of Trade Expansion under Economic Integration 92 7-3 Expansion in Direct Investment under Economic Integration 93 7-4 Changes in Industrial Competitiveness under Economic Integration 97 7-5 Deployment of the South American Economy under Economic Integration 97 7-6 Towards Creative Economic Reform 103 7-7 Essential U.S. Commitment towards South America 105 7-8 Increasingly Important Trends of Brazil and Mexico 106 7-9 China’s Deepening Relations with South America 107 Part III: Trends in Development Aid (South America Overall and Less Developed Countries in South America) Chapter 8 Trends in Aid to South America 109 8-1 Overall Trends 109 8-2 Japan 113 Chapter 9 Bolivia 121 9-1 Economic Overview 121 9-2 Industrial Promotion Policies and Systems 127 9-3 Aid Trends 137 Chapter 10 Ecuador 145 10-1 Economic
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