Rising Concentration in Asia-Latin American Value Chains Can Small Firms Turn the Tide?
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Rising concentration in Asia-Latin American value chains Can small firms turn the tide? OSVALDO ROSALES Development Economic KEIJI INOUE NANNO MULDER Editors Rising concentration in Asia-Latin American value chains Can small firms turn the tide? Osvaldo Rosales Keiji Inoue Nanno Mulder Editors Economic Commission for Latin America and the Caribbean (ECLAC) Santiago, Chile, June 2015 ECLAC Books 135 Alicia Bárcena Executive Secretary Antonio Prado Deputy Executive Secretary Osvaldo Rosales Chief, Division of International Trade and Integration Ricardo Pérez Chief, Publications and Web Services Division This book was edited by Osvaldo Rosales, Keiji Inoue and Nanno Mulder of the Economic Commission for Latin America and the Caribbean (ECLAC). It presents a selection of studies prepared in the context of a project on the potential role of small and medium-sized companies in Asia-Latin American value chains. These studies were presented at a seminar on this topic held at ECLAC headquarters in Santiago on 29 April 2015. The editors are grateful to Andrew Berry and Hyuk Ju Kwon for their assistance in the editing of the book. This book and the aforementioned project were made possible thanks to financial assistance kindly provided by the Government of the Republic of Korea. The views expressed in the book are those of the authors and do not necessarily reflect the views of the United Nations, its Member States or the sponsoring institutions. The boundaries and names shown and the designations used on the maps included in this publication do not imply official endorsement or acceptance by the United Nations. Cover design: Mario Tapia Rey United Nations publication ISBN: 978-92-1-121889-3 (print and pdf) ISBN: 978-92-1-057218-7 (ePub) Sales No.: E.15.II.G.10 LC/G.2642-P Copyright © United Nations, 2015 All rights reserved Printed at United Nations, Santiago, Chile S.15-00073 This publication should be cited as: Osvaldo Rosales, Keiji Inoue and Nanno Mulder (eds.), Rising concentration in Asia-Latin American value chains: Can small firms turn the tide?, ECLAC Books, No. 135 (LC/G.2642-P), Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC), 2015. Applications for the right to reproduce this work, either in whole or in part, are welcomed and should be sent to the Secretary of the Publications Board, United Nations Headquarters, New York, N.Y. 10017, United States. Member States and their governmental institutions may reproduce this work without prior authorization, but are requested to mention the source and inform the United Nations of such reproduction. Contents Foreword ............................................................................................................. 13 Introduction ........................................................................................................ 17 Chapter I Trade and investment between Asia and the Pacific and Latin America and the Caribbean Andrew Berry, Keiji Inoue .................................................................................... 35 Introduction ............................................................................................. 35 A. Trade by major Asian partners ..................................................... 41 B. Trade by type of goods .................................................................. 45 C. Foreign direct investment between Latin America and the Caribbean and Asia.......................................................... 48 D. Concluding remarks ...................................................................... 52 Bibliography ............................................................................................ 54 Chapter II The role of small and medium-sized enterprises in Latin American exports to Asia Antonio Martner, Nanno Mulder, Roberto Urmeneta ......................................... 55 Summary .................................................................................................. 55 Introduction ............................................................................................. 56 A. Methodology ................................................................................... 57 B. Dynamics of Latin American exporters to Asia ......................... 59 1. Latin America’s universe of exporters ................................... 59 2. Relevance of Asia for exporting firms by size ...................... 60 4 Economic Commission for Latin America and the Caribbean (ECLAC) 3. Number of products and destinations, by company size ....................................................................... 64 C. Concentration, rotation and intensive versus extensive margins of exporting firms .......................................... 66 D. Examples of small Latin American exporters to Asia ............... 71 1. Argentina: Cooperativa Agrícola Tambera de James Craik Ltda. and Masua S.A. ................................... 71 2. Costa Rica: Natural Sins, Surá Green and Sweetwell .............. 72 3. Chile: Elkan wine ...................................................................... 73 E. Conclusions and some future challenges ................................... 73 Bibliography ............................................................................................ 75 Chapter III Asian investors and their small and medium-sized suppliers in Chile Hyuk Ju Kwon ...................................................................................................... 77 Introduction ............................................................................................. 77 A. Background ..................................................................................... 79 B. Case studies ..................................................................................... 82 1. Eagon Lautaro S.A. ................................................................... 82 2. KIMICA Chile Ltda. ................................................................. 87 C. The CORFO Supplier Development Programme ...................... 90 D. Concluding remarks ...................................................................... 95 Bibliography ............................................................................................ 96 Annex III.A1 ............................................................................................ 98 Chapter IV Backward linkages of Korean multinationals to local small and medium-sized enterprises in the automobile and textile sectors in Brazil and Guatemala Jae Sung Kwak ...................................................................................................... 99 Summary .................................................................................................. 99 Introduction ........................................................................................... 100 A. Investments by the Hyundai Motor Company in Brazil ............ 101 1. Background ............................................................................. 101 2. Hyundai Motor Brazil ............................................................ 102 3. First-tier suppliers to Hyundai Motor Brazil ...................... 103 4. Local sourcing structure of Hanil ......................................... 107 5. Implications ............................................................................. 109 B. Korean investment in the Guatemalan textile and apparel sector ........................................................................ 110 1. Background ............................................................................. 110 2. Three Korean investors in Guatemala ................................. 113 3. Sourcing structure of Korean textile and apparel companies in Guatemala ....................................................... 115 Rising concentration in Asia-Latin American value chains... 5 4. Implications ............................................................................. 116 C. Conclusion ..................................................................................... 117 Bibliography .......................................................................................... 119 Annex IV.A1 ........................................................................................... 120 Annex IV.A2 ........................................................................................... 121 Chapter V Trans-Latin value chains in Asia: the role of small and medium-sized enterprises Andrés López, Daniela Ramos ............................................................................ 123 Introduction ........................................................................................... 123 A. Foreign investment flows between Asia and Latin America: the main trends .......................................... 126 B. SMEs in Argentine trans-Latin value chains ............................ 134 1. Arcor ......................................................................................... 134 2. Tenaris (Techint Group) ......................................................... 138 3. IMPSA ...................................................................................... 143 4. Grupo Bagó .............................................................................. 147 C. Conclusions and policy lessons .................................................. 150 Bibliography .......................................................................................... 152 Annex V.A1 ...........................................................................................