Food exports to China replace commodities

The landscape of Latin American exports to China has been predictable for a number of years. Iron ore from Brazil, oil from Venezuela, copper from Chile and Peru, soybeans from Argentina and far more on top of that.

From 2000 to 2013, trade between Latin America and China grew at an average of 27 percent a year. In comparison, trade between the region and the rest of the world grew only 9 percent a year in the same time frame.

This growth was only natural, giving governments across Latin America plenty of ready cash for major infrastructure and social programs. However, it also exposed Latin American economies to structural weaknesses which were laid bare in 2015.

Oil, copper, iron ore and soybeans make up 80 percent of the region"s exports to China, which took in 40 percent of the global soybean production, 20 percent of copper and a third of all iron ore. This bred complacency and dependence, and flew in the face of the World Bank"s advice, which had preached diversification of exports.

A perfect storm in 2015 showed how costly this lack of diversification could be. The commodities super-cycle came to a juddering halt in 2014. Oil prices fell from $105 a barrel to under $50. Copper steadily slid to reach a six-year low in November 2015. Iron ore prices have collapsed from $187.18 a ton in February 2011 to just $52.74 in October 2015.

And finally, China has been shifting its economy to one of domestic consumption rather than constant manufacturing.

Faced with dropping incomes, Latin American countries have turned to another source of exports: agriculture. After all, soybeans were already in the basket of major exports to China and actually surpassed iron ore to become the largest single export. Soybeans are now Brazil, Argentina and Uruguay"s top export to China.