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Introduction to the Current Situation in South America

The economic development level and economic strength of the countries in South America are very different. Among them, Brazil and Argentina have the fastest growing economies. The combined gross domestic product of Brazil and Argentina accounts for about two-thirds of the GDP of all the countries in South America. Together with Venezuela, Colombia, Chile, and Peru, the GDP accounts for more than 90% of the continent's GDP. The modern economies of various countries are highly concentrated in a few large cities or coastal areas, and the economies of mountainous and remote areas are lagging. Mining is a traditional industry in South America, with a long history of mining precious and non-ferrous metals such as gold, silver, copper, and tin. The manufacturing sector is the fastest-growing sector in the South American economy, and sectors such as steel, automobiles, chemicals, rubber, electrical appliances, metal products, machinery, and equipment have already achieved considerable strength. The light industry is the main body of manufacturing in most countries in South America, with meat processing, sugar refining, beverages, leather, textiles, clothing, and shoemaking being more developed. South America has vast land and great potential for agricultural production. It is rich in tropical and subtropical agricultural and forestry products such as sugar cane, bananas, coffee, cocoa, rubber, cinchona, sisal, cassava, etc., and its output ranks among the top in the world.

In recent years, as a result of the trade conflict between the United States and China, Latin America, especially Mexico and Brazil, has become a market for companies to diversify into, and transfer supply chains into from China. Under the trend of regional integration and supply chain changes, Latin American countries are once again being valued by multinational companies.

In recent years, Latin American regional economic integration has been rapid, and so far four customs unions have been formed: CACM, CARICOM, ANDEAN, MERCOSUR. And large FTAs: USMCA, CAFTA-DR, PA, CPTPP.

Taiwan's foreign trade has maintained good momentum, and exports have continued to grow in double digits. Taiwan’s exports to South America have grown the most, with exports of US$226 million in the first three quarters; a year-on-year increase of 69.56%. Central and South America are two of the regions with the strongest growth in Taiwan's foreign trade exports, showing that Taiwan has great potential for economic and trade development in South American countries.

Market Analysis of Countries in South America

1. Brazil Market:
   The Federative Republic of Brazil is in the eastern part of South America, facing the Atlantic Ocean to the east and bordering all South American countries except Chile and Ecuador. It has a population of 167 million and its official language is Portuguese. Brazil is the country with the most abundant resources and the strongest economic vitality and economic strength in South America. According to Brazil's natural resources and production capacity, its main export products are iron ore, steel, pig iron, coffee beans, soybeans, footwear, soybean oil, small aircraft, etc. Brazil's main imports from abroad include automobiles and accessories, crude oil, chemical products, pharmaceutical raw materials, wheat, instrumentation, communication equipment, etc. The products are mainly from developed countries such as the United States, the European Union, Japan, and Canada.
   Two factors are restricting its economic development:
   • Heavy public external debt: It is estimated to be around 245 billion US dollars, accounting for about 53.3% of Brazil’s GDP. To make up for the huge interest expenses, the Brazilian government must expand taxes, seriously affecting the competitiveness of Brazil's domestic products in the international market.
   • External instability factors: The instability of the US dollar exchange rate and international crude oil prices has directly affected the development of Brazil's economy. In recent years, Taiwan's trade with Brazil has shown an upward trend. Brazil is very interested in Taiwan's coke, coking coal, chemical products, pharmaceutical raw materials, textile products, and low-end mechanical and electrical products, while Brazil's steel, pig iron, iron ore, pulp, paper, aluminum ingots, chemical fibers, and wood are in great demand in Taiwan. It is worth noting that in recent years, to protect the national industry, Brazil has begun to impose trade barriers on Taiwanese products. It has successively conducted anti-dumping investigations on garlic, furniture, electric fans, pencils, bicycle tires, canned mushrooms, thermos, and other commodities exported from Taiwan, levying high fees and anti-dumping duties. Currently, the main products exported by Taiwanese companies to Brazil are chemicals, furniture, office supplies, and canned food. Companies involved in anti-dumping investigations should pay great attention.
2. Argentine Market:
   Argentina is the second-largest country in Latin America after Brazil. It is bordered by the Atlantic Ocean to the east, Chile to the west by the Andes Mountains, and the north and east by Bolivia, Paraguay, Brazil, and Uruguay. Argentina is a Latin American country with rich products, a suitable climate, and fertile land. The industrial categories are relatively complete, mainly steel, electric power, automobile, petroleum, chemical, textile, machinery, food, and so on. In 2003, industrial output accounted for 32% of GDP. The development levels of the nuclear industry and the steel industry rank at the forefront of Latin America. Machine manufacturing has only a basic foundation level. The food processing industry is relatively advanced, and mainly includes meat processing, dairy products, grain processing, fruit processing, and winemaking. Argentina is one of the world's leading producers of wine, with an annual output of 1.4 billion liters. Mineral resources include oil, natural gas, coal, iron, silver, uranium, lead, tin, gypsum, sulfur, etc. Reserves that have been identified include: 411 million barrels of oil, 688.3 billion cubic meters of natural gas, 600 million tons of coal, 300 million tons of iron, and 29,400 tons of uranium. Argentina's forest area accounts for about 1/3 of the country's total area. The coastal area is rich in fishery resources and developed in agriculture and animal husbandry. 55% of the country's land area is pastures. It is one of the world's major producers and exporters of grain and meat, mainly planting wheat, corn, soybeans, sorghum, and sunflower seeds. The main commodities that Taiwan exports to Argentina are: machinery, electronic equipment, audio and video equipment, toys, organic chemical products, clothing, shoes, luggage, and other light industrial products. Mechanical and electrical products have held the number one position since 1995, followed by light industrial products and textiles. Taiwan's main imports from Argentina are wheat, soybeans, soybean oil, leather, steel, and crude oil. China is currently Argentina's fifth-largest exporter and third-largest importer.
3. Peruvian Market:
   The Republic of Peru is in the west of South America, bordered by the Pacific Ocean to the west, Brazil, and Bolivia to the east, and has a population of 25.67 million, of which 18 million are urban. Peru has a middle level of economic development compared to other South American countries, and basic industry is relatively backward. Most of the mechanical and electrical products and daily consumer goods need to be imported, and the national economy mainly depends on mining, fishing, and tourism. In recent years, Peru has gradually lifted most of the restrictions on foreign trade and implemented a free trade policy. Both natural and legal persons can engage in import and export trade without foreign exchange control. Foreign currencies can be freely exchanged and freely enter and exit the country. The main commodities exported are minerals, petroleum products, fish, and agricultural products. The imported commodities are mainly organic and electrical products, light textile products, coke, medicines, and tools for farming and agriculture. Commodity import channels are mainly the United States, Canada, the European Union, and Japan. In recent years, Taiwan's industrial and agricultural tools and light textile products have gradually entered the Peruvian market. With the improvement of Taiwan's manufacturing of mechanical, electrical, and textile products, imports from Taiwan have increased year by year.
4. Chilean Market:
   The Republic of Chile has a land area of 756,626 square kilometers, accounting for 3.6% of the total area of Latin America, ranking eighth among Latin American countries, and has a population of about 16 million. Chile's industrial base is relatively weak, and the categories of industrial production are not complete. The main industrial sectors are food processing, beverages, textiles and garments, tanning, wood processing, papermaking, petrochemicals, rubber and plastics, glass, steel, household appliances, transportation tools, metal products, building materials, and non-electrical machinery. Chile is rich in mineral, forest, and aquatic resources, and has 28% of the world's total copper reserves, ranking it first in the world. In addition, Chile is also a major producer of iodine, lithium, molybdenum, and silver, and its output accounts for 51%, 33%, 21%, and 10.4% of the world's total output, respectively. Forest resources are also considerable. Chili is rich in temperate high-quality forests, and is the second-largest exporter of forest products in South America. At present, Chile's main export commodities are electrolytic copper, copper concentrate, fish meal, pulp, wood, salmon, and fruit. Chili’s main imports are organic and electrical products, light textile products, daily consumer goods, etc. In 2020, Chile was Taiwan’s 3rd-largest trading partner in Latin America, and Taiwan was Chile's 5th-largest trading partner in Asia.

Matters Needing Attention in South American Economic and Trade Exchanges

The economies of South American countries are developing well, and the market potential is huge. The market share of some commodities monopolized by developed countries such as Europe, the United States, and Japan has been gradually replaced by countries in the Asia-Pacific region, especially in the fields of mechanical and electrical products, daily consumer goods, and textile and clothing products. Taiwan's economic and trade cooperation with South America is highly complementary and has great potential.

1. The overall processing capacity of South American countries is not strong. Except for Brazil and Argentina, which have relatively complete industrial sectors, the basic industries of other countries are relatively weak. Most mechanical and electrical products rely on imports. Taiwanese companies can focus on strengthening economic and trade cooperation with South American countries in the fields of electronic products, household appliances, machinery and refrigeration equipment, and hardware tools.
2. South America is vast and rich in resources, especially oil, iron ore, copper ore, forest, and other resources. Taiwan can strengthen cooperation with it in areas such as mining and timber harvesting.
3. The current trade methods and foreign exchange collection methods adopted by South American countries, involve taking measures to avoid trade disputes and frictions. Most merchants in South American countries trade in spot foreign exchange. If they want to expand their trade, they need to set up local offices or seek a reliable agent as a domestic commodity distribution center.
4. Pay close attention to the anti-dumping investigations of some South American countries on Chinese goods. Enterprises should pay attention to quality, brand, and service awareness to replace the traditional mutual price competition, improve the technical content and added value of export products, and avoid repeating the mistakes of low-price competition.
5. All functional departments of the government should encourage enterprises to strengthen the publicity of their products and corporate images, encourage enterprises to visit South America, hold exhibitions and participate in exhibitions, and seek the best business opportunities through continuous understanding of the South American market.