China And Deindustrialization In Latin America

This paper analyzes the process of deindustrialization in Latin America and the impact of China on this process. After discussing the main theoretical explanations for premature deindustrialization and presenting some empirical data on the process of deindustrialization in Latin America, this paper undertakes a novel panel data analysis to provide greater clarification on the role of China in the early deindustrialization process of Latin American countries. The findings suggest that the import of manufactured goods from China does not have a significant effect on manufacturing employment and is in fact associated with an increase, not a decrease, in the share of manufacturing value added. On the other hand, exports to China are negatively associated in this sample with the share of both manufacturing employment and manufacturing value added. This supports the view that trade with China may be a part of the explanation for deindustrialization, not through competition from Chinese manufacturers but rather through the impact on the competitiveness of primary exports and exchange rate appreciation, and that that one of the most relevant factors for deindustrialization in Latin America is related to the Dutch disease.