Job well done

China's employment generation in Latin America and the Caribbean will continue to deepen through net trade, OFDI and infrastructure projects

The relationship between Latin America and the Caribbean and China has increased substantially in both complexity and depth since the beginning of the 21st century. Trade, finance, overseas foreign direct investments and infrastructure projects have increased exponentially between the LAC and China.

Since 2015, the Community of Latin American and Caribbean States-China Forum has noted hundreds of suggestions through its cooperation or action plans.

One topic that has received less attention in LAC and in China is the generation of employment in the LAC region by Chinese investments. In 2017, the Academic Network for Latin America and the Caribbean on China (Red ALC-China) and the International Labor Organization published a first contribution on the quantitative and qualitative effects of China in relation to employment in LAC and Red ALC-China will very soon update this quantitative analysis. The results are very impressive and an important contribution to the LAC-China relationship. At least four things stand out.

First, in order to quantify China's influence on employment in LAC, it is important to understand that these effects in employment are channeled through trade, OFDI and infrastructure projects; each of them generates employment in LAC; in some cases Chinese companies acquire already existing employment through OFDI.

Second, net trade — intermediate and final imports usually generate employment losses and exports gains — has become the main source of Chinese employment generation in LAC, totaling 6.8 million new jobs during 1995-2018 and accounting for 12.8 percent of total employment generation in LAC during the period.

Surprisingly, employment generation by the United States through net trade accounted for 6.7 million new jobs, slightly below China for the same period. The analysis based on input-output matrixes allows for details by country and sector; here we only wish to highlight that Brazil benefitted most (concentrating 95.8 percent of gains in employment), while Mexico's employment losses represented 96.9 percent of LAC's job losses with China; only Mexico and Costa Rica achieved negative net effects in employment through trade with China. By sector, three benefitted substantially during 1995-2018 through exports: agriculture, hunting and forestry (4.9 million jobs), wholesale and retail trade; motor vehicle repair (3.3 million), and food products, beverages and tobacco (2.4 million jobs); final imports generated employment losses in hardware and electronic and optic equipment (-0.7 million jobs), textiles, leather and footwear (-0.7 million), and other transportation equipment (-0.6 million).

Given the recent dynamics and potential of LAC-China trade, it is expected that employment generation through net trade by China will continue in the short and medium run.

Third, China's important presence in LAC through OFDI has become a second important source of employment generation until 2021, accumulating almost 600,000 jobs through mergers and acquisitions (41.06 percent of total employment through OFDI) and new investments (58.94 percent). Brazil, as the biggest country and economy, gained 28.81 percent of Chinese employment generation through OFDI in LAC until 2021, followed by Mexico (24.07 percent), and Colombia (18.48 percent).Chinese employment generation through OFDI in LAC has diversified importantly in the last decade — beyond metals, minerals and mining — and transportation, auto-parts and automobiles have become most dynamic. Private companies such as Didi have become the most relevant companies in employment generation under this chapter since 2020.

Fourth, infrastructure projects are an additional important employment generating source for Chinese companies in the LAC, accumulating more than 673,000 jobs until 2021; on average each of the 192 infrastructure projects created more than 3,500 jobs in the LAC. In this case, Mexico has become the main recipient of employment generation by Chinese infrastructure projects (with 24.38 percent of LAC's employment until 2021), followed by Brazil (23.72 percent), Argentina (10.82 percent) and Ecuador (9.45 percent).

Historically, energy infrastructure projects (gas, mining, and oil) were the main employment generators (85.16 percent of LAC's employment through infrastructure during 2005-09), but there has been a deep sectoral diversification. While the energy sector still plays a crucial role in China's infrastructure projects in LAC, China's new investment has increasingly focused on non-fossil projects. In addition, transportation (ports, airports, railway systems, highways, etc.) has grown the most since 2015-19; in 2020-21, 36 of the 57 infrastructure projects were under this heading, accounting for 86.44 percent of employment for this most recent period.

As a result, and based on a conservative estimate that employment through net trade has not increased importantly during 2019-21, China's employment generation in LAC until 2021 was 8.1 million jobs or 14.68 percent of employment generation during 1995-2023 (and as the sum of net trade, OFDI, and infrastructure). This is a massive quantitative impact in LAC by China and, from an international perspective, it has become since 2002 the most important country in LAC regarding its employment generation through net trade. Differences by countries and sectors remain, and there is a vast chapter to be examined in the future regarding the quality of generation of new employment by China.

Private companies, such as Didi through OFDI, and State-owned enterprises in infrastructure projects such as China Communications Construction Company and Power Construction Corporation of China are playing an increasingly important role in the LAC-China socioeconomic relationship.

Expectations are that the LAC-China relationship will continue to deepen, also in the field of employment generation through net trade, OFDI and infrastructure projects.

The author is a professor at National Autonomous University of Mexico and coordinator of the university's Center for Chinese-Mexican Studies. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.