Trade between Latin America and China dates back centuries to when Guangzhou silk and porcelain was exported to Acapulco, Mexico, in return for Mexican silver. Fast forward to the present and China has become South America's second-largest trading partner behind only the US, following a more than tenfold surge in bilateral trade between the two partners from US$15 billion to US$183 billion in the past 10 years. The trade boom over the past decade delivered benefits for both partners. But now, against the backdrop of a global economic crisis, the dependence of Latin America on exporting its commodities to China risks becoming a curse, warned a recent World Bank report titled 'Latin America and the Caribbean's long-term growth: made in China?' 'The fact that Latin America's relationship with China is dependent on commodity exports raises the red flag that, instead of a blessing, it might end up a curse for growth,' the World Bank warned. That's because a major slowdown in China's economy would depress commodity prices, which has started. Under a more optimistic scenario, China's economic growth will not fall too sharply and commodity prices will not decline so steeply, in which case Latin America can maintain economic growth decoupled from the US and Europe, the World Bank said. But in a worst-case scenario, commodity prices will fall sharply, meaning 'Latin America would need to activate all shock absorbers, while international financial institutions scale up their assistance to the maximum extent', it warned. A bad global scenario could have crippling implications for some Latin American countries, it said. The challenge for the continent's policymakers was to harness opportunities afforded by deeper and broader links to the global economy, and China in particular, which had emerged as an important growth pole for South America. While most of China's exports to Latin America are manufactured goods, less than 20 per cent of Latin American exports to China are manufactured goods, according to the United Nations. In 2009, more than 80 per cent of Latin American exports to China came from a handful of commodities, namely iron, soya beans, crude oil and copper, according to a report by Kevin Gallagher published by the Centre for Latin American Studies at the University of California, Berkeley. About 92 per cent of Latin American manufactured exports compete with Chinese products. Brazil lost 700,000 manufacturing jobs and US$10 billion in income last year, said Foreign Policy in Focus, a US think tank. Mexico's maquiladora factories - plants that import and assemble duty-free components for export - also compete with cheap Chinese goods in the US market. From 1996 to 2008, Latin American exporters lost 8 per cent of their share in exports to the US, or roughly US$2.7 billion, to Chinese competition, said a joint report by the Woodrow Wilson International Centre for Scholars, Institute of the Americas, and the Chinese Academy of Social Sciences. Some 60 per cent of Latin American anti-dumping complaints targeted China, mainly on manufactured products including textiles and footwear, the report added. In a June visit to the continent, China's vice-president Xi Jinping said it would promote trade in high value-added goods with Latin American nations, the China Daily reported China's acquisitions in Latin America jumped from less than US$4 billion in 2009 to more than US$12 billion last year, of which more than 90 per cent was on resources for export to China, wrote Gallagher. Acquisitions and major deals included last year's buyout by Chinese oil state giant Sinopec of the Brazilian arm of Spanish oil major Repsol for US$7.1 billion; and a 2010 agreement that Brazil oil major Petrobras would supply oil to China for 10 years in return for a US$10 billion loan from the China Development Bank. Venezuela signed a similar agreement to supply China with 200,000 barrels of oil per day for 10 years in return for US$20 billion worth of loans, and Ecuador gained a US$1 billion loan from China to finance oil and infrastructure projects. 'At first glance, China's recent agreements with Ecuador and Venezuela appear mutually beneficial,' said Margaret Myers, director of the China and Latin America programme at the Inter-American Dialogue, a US centre for policy analysis. 'But the extent to which they will benefit Ecuador and Venezuela is less certain. In the absence of institutional controls and macroeconomic foresight, oil-tied investments in Ecuador and Venezuela are unlikely to generate long-term, sustainable growth,' Myers warned. This was echoed in the Woodrow Wilson report, which cautioned that the 'inexperience of Chinese companies in labour relations, environmental concerns, and relations with local communities have led to more than occasional frictions'. Last year the government of Rio Negro province in Argentina signed a deal to lease 320,000 hectares of farmland to Heilongjiang Beidahuang Nongken Group, one of China's largest rice millers and soya bean processors. Under the pact, the group would invest US$1.45 billion to grow soya beans, wheat and other agricultural products on the land for 20 years, according to the Americas Programme of the Centre for International Policy, a US think tank. 'The deal, which was made public only after it was signed, has generated enormous national opposition.' As a result, in February this year, Argentinian president Cristina de Kirchner announced plans to restrict the acquisition of land by foreigners. China's huge trade and investment with Latin America helped create the conditions needed to propel Latin America's economy at growth rates above the global average, said the World Bank. But Myers has a warning. 'Chinese investment in Latin America continues to promote growth, but long-term success will require strong institutions and responsible policy formulation,' she said.