© Pexels / Janeth Charris

Europe wants to expand cooperation with Latin America and the Caribbean

The European Union recently published a new agenda for the EU's relations with Latin America and the Caribbean in June. BDI and LADW welcome this initiative. The new geopolitical reality has a major impact on international economic relations. The wish to diversify markets is great and Latin America has much to offer. The EU shares this view and proposes the following priorities in its cooperation.

Strengthening political dialogue

The European Commission intends to intensify and further develop the dialogue with the Community of Latin American and Caribbean States (CELAC) - bilaterally with individual countries and multinationally with Mercosur, the Pacific Alliance, the Andean Community, and the Central American Integration System (SICA), among others.

The upcoming EU-CELAC summit on 17-18 July 2023 in Brussels is a great kick-off. For the first time in eight years, heads of state and government will come together again for an exchange. This is a unique opportunity for the EU to show Latin America and the Caribbean its great interest in strengthening political and economic partnerships. The dialogue should be used to define future topics for cooperation and recommend activities and actions based on them. The agenda should include renewable energy and green hydrogen, decarbonisation and climate protection, digitalisation and the circular economy.

Strengthening the common trade agenda

The EU wants to increase trade with the region by concluding and ratifying the EU-Mercosur agreement, which is a priority, and modernising the existing agreements with Chile and Mexico. The sustainability provisions within the ratified agreements with Central America as well as Colombia, Peru and Ecuador will be given greater consideration.

Trade agreements play an important role for a strong position of the EU as a trade and investment partner and as a credible alternative to competitors from China and the USA in the region. The German business community has been waiting for the ratification of the EU-Mercosur agreement for more than 20 years. As a market with its 260 million inhabitants, Mercosur is remarkably attractive for Europe.  The agreement could abolish almost all tariffs, open public procurement markets, facilitate services and simplify regulatory cooperation. The agreement also sets high standards for environmental protection and workers' rights. A separate sustainability chapter regulates biodiversity, sustainable forestry and the fight against illegal logging.

Against this backdrop, we look forward to the 2nd half of 2023, when Spain takes over Council Presidency in the EU and Brazil the Mercosur Presidency, and hope that the time will be used to push forward with the conclusion and subsequent ratification.

More investment through Global Gateway in infrastructure and energy

The EU is seeking closer cooperation with partners in the region to create the conditions for sustainable investment. The Global Gateway infrastructure plan provides the framework for a value-based investment proposition that meets high international standards. There is also great potential in renewable energy. According to the Commission, Latin America and the Caribbean have had the world's highest share of renewable energy in electricity generation in 2021, at 61 percent. The EU sees a lot of potential here: cooperation could further reduce dependence on fossil fuels by making greater use of renewable energy sources and improving energy efficiency.

The good news is that Latin America and the Caribbean are to be the main focus of the Global Gateway initiative in 2023. The EU launched the infrastructure plan  about three years ago in response to China's "New Silk Road".

In its strategy paper, the European Commission recently announced that it will bring consuming and resource-rich countries together in a club to strengthen supply chains and diversify procurement. This could strengthen the EU's competitiveness and reduce strategic dependencies - for example with regard to critical raw materials. The success of the Global Gateway Initiative in Latin America and the Caribbean depends crucially on whether the EU can provide the global plan with sufficient financial resources, clear award procedures and mobilise the money.

German industry is highly interested in establishing and expanding cooperation in renewable energies and especially green hydrogen with Latin America and the Caribbean. With plenty of wind, water and sun, the region has excellent conditions to produce renewable energies. At the same time, the industry's demand for green hydrogen is growing rapidly and a significant part of this demand must be covered by imports. The declaration of interests announced in the strategy paper in the energy sector and the exploration of mutually beneficial partnerships are certainly helpful.

Expanding the digital alliance

The EU recommends, among other things, a continuous dialogue with Latin American countries to promote digital compatibility.  This includes, for example, the safe introduction of 5G, regulating digital markets and services, managing data and ensuring cybersecurity.

In the area of digitalization, there are also many opportunities to expand our partnerships with Latin America and the Caribbean, to jointly set up new flagship projects and to intensify digital policy dialogue. There are many topics, such as Industry 4.0, Artificial Intelligence, Internet of Things, to tackle the transformation and face the challenges. The region is already a pioneer in many areas of digitalization and plays a crucial role in regulating and developing international standards.

The EU-Latin America Strategy is of great importance. It underlines once again the potential there is in bilateral cooperation. At the same time, it also illustrates Europe's strong interest in intensifying engagement with the region, expanding information exchange and offering support services that can help countries adapt to and comply with a new EU regulatory framework. Now words must be followed by action!