The European Union and Latin America: Too Little, Too Late?

Gabriel Cohen

6 mins - 26 de Julio de 2023, 07:00

The European Union (EU) and Community of Latin American and Caribbean States (CELAC) held their first bi-regional summit in eight years this week, convening at the Brussels headquarters of the European Council. With key leaders such as Brazil’s Luiz Inácio Lula da Silva and Colombia’s Gustavo Petro in attendance, the summit was seen by many as a chance for EU leadership to try and regain valuable diplomatic ground in a region it has largely ignored over the last decade.

“For too many years Europe has been turning its back on what is, without a doubt, by far the most Euro-compatible region on the planet, which is Latin America and the Caribbean,” said José Manuel Albares, the Spanish Minister for Foreign Affairs, European Union and Cooperation. Spain’s current government made the summit a priority for its pro tempore presidency of the European Council.

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Indeed, Mr. Albares raises a convincing argument. Though the EU remains the largest investor in the Latin American region, since 2014 foreign direct investment figures have stagnated in major emerging markets such as Brazil and Argentina where competitors have grown their relative investment. China has long since displaced the EU as Latin America’s second-largest trade partner (following the United States), as well as become a regional financing source which rivals traditional multilateral institutions such as the Inter-American Development Bank.

This trend of stagnating relations is perhaps best epitomized by the EU–Mercosur association agreement, for which negotiations were concluded in 2019 following two decades of talks. Growing concern in European capitals over deforestation in the Amazon – coupled with protectionism and a diplomatic spat between the French and Brazilian presidents – led to a fizzling of communication, one then worsened by crises such as the COVID-19 pandemic and war in Ukraine.

Quite simply, Latin America has been far from a priority for European leaders in the last few years. But today, many in Brussels, Paris, Berlin, and Madrid have realized that the region holds significant strategic value, particularly in the face of growing great power competition with China, Russia, and even the United States.

For example, over two-thirds of global lithium reserves are expected to be contained in Latin America, particularly in the so-called Lithium Triangle (Argentina, Bolivia, and Chile) as well as Mexico and Peru. Argentina is expected to join Chile among the copper heavyweights in the coming years, while its Néstor Kirchner pipeline is set to turn the country into a major player in oil and natural gas—the latter of which is particularly essential for an EU decoupling from Russian energy exports.

All of which explains the EU approach to the summit, which rested primarily on the announcement of the Global Gateway Investment Agenda, designed to channel €45 billion in investments and financing towards Latin America. Renewable energy, green hydrogen, digital infrastructure, and environmental sustainability served as starting points for early investments, which included photovoltaic solar panels in Brazil and energy-efficient housing in Chile.

For a bloc facing pressure both at home and abroad to invest more in the green transition, this investment agenda is an attempt to shore up the EU diplomatic and economic presence within Latin America. The focus on sustainable supply chains in the various agreements signed at the summit, meanwhile, serves to differentiate the EU from more extractive rivals for development-minded leaders such as Chilean President Gabriel Boric. Boric has made growing local production capabilities – enshrined in Global Gateway investments and the modernized EU–Chile association agreement – in his resource-rich country a significant part of his economic agenda.

However, politics has threatened to infect the revitalized relationship. During South American visits by both European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz earlier this year, neither climate change nor investment served as the major sticking point, but rather the ongoing war in Ukraine. Key regional leaders such as Lula and Argentinean President Alberto Fernández have been resistant to the EU’s efforts to draw them into condemnation of Russia; the former has even made headlines since the war’s start by laying blame for the ongoing conflict at the feet of Ukraine and the West.

Indeed, Ukraine regularly surfaced as a discussion at this week’s summit, particularly following news that Russia would be suspending its participation in the Black Sea grain initiative. Press briefings for both EU and CELAC leaders were dominated by the issue, with over half of the questions at the final press conference on Tuesday night concerning the two organizations’ different views of the war. The joint declaration was notably signed by all but one member country, with CELAC member (and Russian ally) Nicaragua refusing to sign onto even the watered-down version of the summit statement owing to a paragraph on the conflict.

The risk facing European leaders is allowing the geopolitical issue of Ukraine to shape EU relations with a critical region such as Latin America. The EU is choosing to reengage now, following years of prioritization of other regions such as the Indo-Pacific and greater Mediterranean, when rivals such as China and Russia have kept up their local presence. Arriving with an investment package of nearly €50 billion may be effective in making up for lost time, but attempts to pressure local leaders on what is perceived as a political issue is also likely to backfire.

In the ebb and flow of international politics, it is never too late to reverse a trend of decay and reinvest in a relationship. As such a historically critical trade and investment partner within Latin America, the EU is in a strong position to reprioritize the region in its foreign policy agenda. However, part of this reprioritization must come with understanding of the valuable ground that Europe has lost to strategic rivals. Mercosur has expressed interest in pursuing trade talks with China and other Asian markets, while both Washington and Beijing have pursued access to the same South American lithium reserves that Brussels covets.

With a focus on investments in green and sustainable industries and infrastructure to move Latin American economies up the supply chain into higher value-added sectors, the European Union has pitched an attractive offer. Now the coming years must see consistent EU engagement to ensure that the disinterest of the past decade does not return to fruition. Because today it simply cannot afford another eight-year hiatus.

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