South America has had a good 21st century so far. This has become even more clear since the crisis of 2008 engulfed the world's richest nations, while most of the countries on the continent powered forward. In this light the words of Deng Xiaoping, who introduced China's economic reforms, seem prophetic: "It is often said that the 21st century will be the century of the Pacific. But I believe it could also be the century of Latin America."

It is no coincidence that South America's fate in the past 11 years has been tied to the rise of China itself. For a long time closely connected with the US and Western Europe, the Asian boom provided markets for South American commodities which gave these countries an opportunity to diversify and expand their export markets. Between 1999 and 2009, Latin American trade with Asia rose sixfold to $230bn - about half of that with China alone.

"The old saying used to go that when the US or Europe sneezes, Latin America gets a cold," says Professor Sherban Leonardo Cretoiu, head of international business at the Fundação Dom Cabral, Brazil's prestigious business school. "But that has now changed, because we've diversified our trade, largely by expanding ties with China." Indeed, one reason Mexico is seen as not sharing in this Latin growth story (leaving its tragic drugs war to one side) is its overwhelmingly ties to the economy of the US.

But even though it's more resilient than it used to be, South America faces two external risks that could take some of the shine off its boom. The first is that of a slowdown in Chinese growth, or even a 'hard landing', which would reduce demand for commodities and hit global growth. The second hangs over the whole world: that of a prolonged recession in Europe or the return of financial crisis due to eurozone debt problems.

Broadly speaking, economists say a slowdown in China would hit hardest South America's smaller, more open economies, which rely predominantly on a single export or on 'hard commodities', such as metals, especially Chile and Peru. 'Soft commodities', such as the soya that Argentina and Brazil export, would be less affected, and the larger and more diversified a country is, the better it would weather such a storm. Brazil, with its population of 190 million and where trade is only 25% of GDP, would be hit less hard.

In the case of Europe, which is likely a more serious risk, the direct effects would be primarily financial and would hit countries most reliant on credit and capital flows, such as Brazil and Chile, rather than Peru or Argentina, where credit is nearly non-existent.

If Chinese growth slows - and no one is talking about recession, just a slowdown to levels still enviable in the West - commodity markets would likely take a hit.

"You have smaller economies which are almost mono-exporters, they export one type of commodity good," says Tony Volpon, head of emerging markets research for the Americas at Nomura Securities, New York. "Chile exports copper, silver and a few other things. In Peru, all the important exports are metals. These economies are clearly much more vulnerable to any slowdown in global growth."

Chinese demand for commodities would not drop equally for all sectors.

A slowdown in construction is more likely, with its attendant drop in demand for metals, than a slowdown in demand for things like soya."All the [Chinese markets for] metals are tied to the urbanisation process. A lot of growth post-crisis was spent on infrastructure and real estate," says Volpon. "Where you don't take the hit is something like soya, because the Chinese are not going to stop eating."

Indeed, one of the main criticisms levelled at the Chinese economy is that in its post-crisis stimulus, it over-emphasised government-backed infrastructure spending while neglecting consumer demand."For several years rapid growth in China has been driven by increasingly wasted investment," wrote Peking University finance professor Michael Pettis in The Financial Times in November. "[Adjustment will] require Beijing to become serious about transferring wealth from the state to the household sector."

This is better news for Argentina and Brazil, which also rely heavily on food exports. In Brazil, by far Latin America's biggest economy, soya is the second-largest export after iron ore and is increasingly pumping up sales of the country's meat.

"President Dilma's recent trip here was a success for Brazilian meat producers," says Tatiana Rosito, deputy mission head at the Brazilian embassy in Beijing, housed in an unadorned, low-slung military-style building besides countless other embassies. "And this means not only meat as a basic good, but increasingly as a branded Brazilian product."

China is also a market for Brazilian industrial products, most notably its small Embraer aeroplanes, which could see a boost in demand if Chinese consumers started to get richer even faster.

Brazil's size and diversification make it especially resilient, but a hit in commodity prices or demand levels would come at a much worse time for its economy than for Peru or Chile. These small countries remain charging ahead while the Brazilian economy has been slowing down, from 7.5% growth in 2010 to around 3%-3.5% in 2011. "It really matters where the countries are when they get hit," says Volpon. "If everybody gets hit with the same shock, [those currently in a downswing] don't have a lot of room. That's a worry for a country like Brazil."

Whereas the threat of a slowdown in China remains hypothetical, the crisis in Europe is very real, and a disaster scenario there would have farther-reaching consequences. The European common market is the world's largest economy, and South America has strong trade and financial ties to the Old World. While a collapse in Europe would hit trade worldwide through a global slowdown, the primary contagion mechanism to Latin America would be financial.

"In terms of the credit and capital flows channel, Chile and Brazil would be more vulnerable because they tend to have deeper credit markets compared with Argentina and Peru, where there is basically no credit. That's especially true in Argentina," says Volpon.

Though Chile has a higher ratio of credit to GDP than Brazil, Brazil is a bit more vulnerable since so much of this has come so quickly, doubling in the past decade. Long plagued by hyperinflation and crippling interest rates, it has gone through a rapid catching-up process where credit is concerned in the past 10 years - creating a consumer boom just as important for growth as the sale of commodities to China - and many economists argue that this credit expansion is likely to reach its limit soon.

This is not lost on the IMF, which in its Global Financial Stability Report for September noted that: "In Brazil and Turkey, credit quality appears strong on the surface, but rapid growth in domestic credit - particularly to the household sector - poses a key challenge to future stability." In one sense, effects of the eurozone crisis are already visible in Brazil. Paradoxically, any kind of global crisis or instability, even if caused by the rich countries, tends to mean a rapid flight of capital to exactly those markets and currencies, which are seen as more stable. So convulsions in European markets in 2010 meant reversals of funds out of emerging markets, sales of the Brazilian real, which finally came down a bit in value, and sales of stocks (Brazil's BM&F Bovespa had a particularly disappointing year).

Jerome Booth, head of research at Ashmore Investments Management in London, believes problems in Europe and the US are primary. "The so-called hard landing in China simply isn't going to happen," he says. "Whereas in Europe and the US you have really major risks and almost no policy manoeuvrability. China and Latin America are a really good fit, whereas we previously had seen a massive over-dependence on the US and the West. And even today, this is where the real downside risk is."

Booth argues that one of the real problems hanging over Latin America and China is that they are exposed to currency risk in the developed world, since most of their trading is done in dollars.

The solution is to trade in Latin American currencies and Chinese yuan, he says, and the sooner this is possible, the better. If this were done all at once, the results could be catastrophic for the dollar, but it is in the long-term interests of both China and Latin America, he adds.

Public declarations from Brazil and China point in this direction, and Rosito confirms that this process is indeed moving forward and "in the research stage" in the case of Brazil.

Latin America has a history of booms followed by disappointing busts. And today there are real risks that the party will not be able to go on forever. That said, it is better to be looking out for possible problems from the peak of a wave than to be actually embroiled in crisis, like most of the world's rich countries.