The tension between China and Taiwan has already marked a new focus of attention on the world stage, but the question that few ask is how it affects and what economic consequences this latent conflict in the Indo Pacific could have for Latin America. For Latin Americans, this clash that is very far from the region is something that is far from being a problem.
A recent analysis explains that while the region has not had an interstate war since 1995 and is far from global conflicts, there are some blind spots that could be left aside. China is currently the main export market for most Latin American countries, as well as there are also important companies that invest in the region.
On the other hand, Taiwan has a small diplomatic and economic footprint in the region, but is the world’s leading producer of semiconductors. Although direct trade with Taiwan is limited, the region’s indirect dependence on its semiconductors is significant. If the latter occurs, the global economy could be affected, and consequently Latin America as well.
On the other hand, tensions between China and the United States could lead to economic fragmentation, with negative consequences for global growth. In that sense, explains Nicolas Saldías in Americas Quarterly, the possibility of a “Cold War II” is increasing, with enormous economic costs estimated by the IMF if the world economy is divided into two blocks. Although some Latin American countries could benefit from the relocation of US production, the region as a whole is unlikely to benefit, especially in the long term.
Finally, the analysis warns that although war in Taiwan is unlikely, Latin America must prepare for the possible economic and diplomatic consequences. Governments in the region should promote exploration and production of critical minerals, as well as improve refining capacity, to diversify sources of refined minerals away from China.
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