Although there had been interregional "political attempts" to envision a new development model, to escape from the core-periphery economic structure as shown in the New International Economic Order movement of the 1970s, the "actual" economic relations between Asia and Latin America were not really of any consequence until the late 1980s. The post-debt crisis Latin America's economic opening and the emergence of most Asian economies to the newly-industrializing status served as momentum for accelerated inter-regional trade and investments, and for deepened mutual economic interdependence. The formation of the Southern Common Market (MERCOSUR) also stood out in its appeal to the interests of Asian entrepreneurs. Its member countries' political economic stability and market potential induced Asian businesses to enter South America with a more localized mindset. The earlier Asian focus on Central America, the Caribbean and Mexico as a detour to the ultimate U.S. market now contrasted with the new concentration on local markets and meaningful investments in South America, particularly in Brazil.

Japan, Korea, Taiwan, and Hong Kong are the major Asian trade and investment partners for Latin America. Although Japan, without any doubt, is the largest exporter and importer in absolute terms, Latin American shares of Korea's total were the highest among Asian countries trade in 1996 and 1997. Korea's investments in Latin America in 1997 recorded the highest amount in its history, US$614 million, accounting for a record-high 11.7 percent of Korea's total overseas investments. All this meant that the Latin American market became more important to the Korean economy than to any other Asian economy.

Meanwhile, Brazil, Chile, Argentina, Mexico, Peru, and Ecuador, in that order, are the main exporters to the Asian region. Among others, Chile and Peru are focusing more on Asian markets as part of their trade diversification strategy, and this explains why they are the only two South American countries joining the Asia-Pacific Economic Cooperation (APEC).
This interregional partnership, formed in the early 1990s, has come into crisis recently. The momentum for expansive trade and intensive investments was threatened by the financial crisis in Asia first, and then by the contagion of this crisis over Latin America, and finally by policy responses here and there.

What was worse than the 1980s situation, however, was the contagion of this Asian crisis over Latin America in 1998 and 1999. The real threat, at the turning point of the century, was the change of mood between the Asian and Latin American policymaking fronts. As more Asian goods, cheaper with the currency devaluations, appeared in the local markets of Latin America, several Latin American countries erected tariff and non-tariff barriers to restrict Asian imports. This might signal a new era of conflict and severe competition between Asia and Latin America, ending a short-lived cooperation period.

Ironically, however, the crisis opened and widened the opportunity and space for better mutual understanding, strategic cooperation or alliance, and institutionalization by sharing the new economic model, political and socioeconomic challenges at both the domestic and international fronts. First, Asia's first serious financial crisis since the late 1970s/early 1980s served as the momentum for an enhanced awareness of the interdependence on each other. One region has come to understand the dynamics of the liberalized trade regime, and that it was increasingly vulnerable to the financial situation and policy responses of the other. Secondly, such awareness of interdependence promotes strategic alliance between the two regions. Examples of the immediate outcome were the free trade initiatives between Korea and Chile, and between Japan and Mexico. The ultimate Korea-Chile and Japan-Mexico free trade arrangements will represent a new momentum for Asia's presence in Latin America and for redefining strategy in its relationship with the region and ultimately intensify intra-industrial trade and cooperation. Thirdly, a more serious effort toward the institutionalization of Asian-Latin American relations has been undertaken in the post-crisis context. The East Asia-Latin America Forum (EALAF) proposal gains significance given the traditionally low profile of Latin America in the Asian policymaking framework of international relations and vice versa. The success of such an institutionalization, however, will depend on the realization, identification and harmonization of mutual interests, problems to solve, and realistic methods in the globalized context.

Executive Summary

Ⅰ. Introduction

Ⅱ. Economic Relations in the 1990s

Ⅲ. Impact of the International Financial Crisis

Ⅳ. Challenges Ahead

V. Conclusion

References