Korea: New Frontiers in the Asia-Latin America Relationship

Trade between Korea and Latin America and the Caribbean (LAC) experienced an unprecedented boom beginning in the early 2000s. Following the broader course of Asia-LAC relations, this trade surge was driven by strong resource complementarity between the two economies and fast growth in Asia, which led to a commodities-for-manufacturing trade pattern typical of the region’s trade with Asia. At the same time, the Korea-LAC relationship distinguishes itself from the overall Asia-LAC pattern in several important respects. First, the region’s exports to Korea have included a higher share of manufacturing products and are more diversified overall than is the case with China or Japan. In addition, the trade surge of the early 2000s was followed by a strong inflow of Korean FDI in LAC, which has overwhelmingly targeted manufacturing sectors, helping to further diversify the relationship. Finally, Korea has established an extensive network of free-trade agreements (FTAs) in the region, beginning with the first Asia-LAC FTA with Chile in 2004, alongside a robust cooperation agenda in diverse policy areas. Investment and cooperation thus helps further diversify the economic relationship beyond the commodities-for-manufacturing pattern of trade. This document reviews the evolution of Korea-LAC economic ties since the early 2000s, highlighting how the relationship stands out from the broader Asia-LAC story and identifying the key challenges to strengthen the relationship moving forward.