La UE concreta la base del mutuo provecho con Latinoamérica

EU concretizes the basis for mutual benefit with Latin America


09 | 12 | 2023


Channeling investment and support to development digital opens a cooperation channel that Europe can use as a lever to obtain strategic materials.

In the picture

Official photo of the III EU-CELAC Summit, held in Brussels in July 2023 [EU Commission].

The European Union has begun to manage the agreements reached with the Community of Latin American and Caribbean States (CELAC) at last July's summit. Long overdue, the summit served to resume the commitment to cooperation between the two regions: at a time of high technological demands, the EU can share digital advances, while Latin American countries can supply crucial materials for the new industrial revolution, such as green hydrogen or lithium, whose production requires foreign investment. Whether the desire of partnership does not remain mere declarations as on other occasions depends on how the geopolitical urgency of the new world order is perceived.

The holding of the III EU-CELAC Summit in July 2023 was important in itself, as it meant a reunion that had not taken place since the 2015 summit (the next one should be held in two years' time). The double workshop convened in Brussels, during the Spanish presidency, focused on the digital opportunity offered by the partnership between Europe and Latin America. At the summit, issues such as cooperation in the field of key raw materials, such as rare earth metals, open market access and sustainable development were discussed. The strengthening of cooperation in multilateral fora and global peace and security were also discussed.

Prior to the summit, the European Commission pledged an investment of 45 billion euros until 2027 largely earmarked for energy transition and connectivity in CELAC countries, managed through the EU's main external action initiative, the Global Gateway. This with the goal to improve relations and thus become the first partner in the region. Large regional banks, such as CAF and IDB, also participate in the investments.

diary of the Global Gateway investment

The diary Global Gateway is an initiative to strengthen the EU as a global player and promote European values. It is a geopolitical project to compete with China's Belt and Road Initiative. Examples of such investments include the following projects:

agreement With the 'Team Europe' initiative, the EU is promoting the development of renewable hydrogen in Chile. Under this initiative the EU will invest 4 million euros in this initiative and the German Federal Ministry for Economic Affairs and Climate Protection (BMWK) another 4 million euros. A Renewable Hydrogen Fund was also created with an budget of 216 million euros. The EU Latin America and Caribbean Investment Fund (EU LACIF) is contributing EUR 16.5 million and the European Investment Bank (EIB) together with the German development Bank (KfW) is contributing EUR 200 million. The objectives of the program are: the transformation of Chile into a regional leader in green hydrogen subject , the production of 150% of the existing global H2 market and 15% of future demand by 2050, and the reduction of emissions from Chile's mining sector. An important fact is that Germany, due to its large industry, has a need for green hydrogen and therefore finances a significant part of the investments.

Investments in El Salvador's internal transport: In El Salvador, the Union will mainly finance two projects to improve mobility within the country. The first project is the Pacific Train, for cargo and passenger transport, which will receive financing of 150 million euros. The train will connect San Salvador with Acajutla, a coastal town 80 kilometers from the capital, and it would be possible to extend it to the border with Guatemala. The second project is a metro line of subject monorail in the area Metropolitan San Salvador with an investment of 300 million euros. These two projects will be beneficial for trade in El Salvador and will improve the country's internal transportation.

Decarbonization of the Panama Canal: The EU is also investing in the process of decarbonizing the Panama Canal. The Canal has the goal to become carbon neutral by 2030. The strategy to meet this goal implies, for example, that ships use sustainable fuel such as H2 or synthetic fuel and that the production of electricity for the operation of the Canal is carbon neutral. This investment is core topic because it coincides perfectly with the new diary of investments in Latin America's energy transition.

EU-CELAC Digital Alliance

The commitment to the partnership digital is also part of the Global Gateway framework . The Digital Alliance, according to the EU itself, is "an informal cooperation framework based on shared values". The initiative has three pillars - investments in connectivity, cybersecurity and digital rights - and is to be financed with3.4 billion euros for Latin America from the Global Gateway program budget and 135 billion euros from the European Fund for Sustainable development Plus. The abstract objectives of the Digital Alliance are similar to those of the Global Gateway, but specifically deal with the digital transition, the creation of laws for digital services and markets, and the regulation of digital investments. This policy is used to enhance the Union's strategic position in the region and because both regions have common interests in the region.

The data show that there is a wide gap in Internet access between the EU and CELAC. In the EU, 97% of households have an Internet connection, but in Latin America and the Caribbean the figure is only 67%. Furthermore, there is a big difference between CELAC countries; for example, in Brazil 77% of households have an Internet connection while in Haiti it is only 7%. It can be concluded that investments in connectivity are necessary and important to reduce the gap between regions, but it is necessary that investments prioritize the countries that would benefit most from them.

The partnership also includes cooperation for infrastructures such as the BELLA program and the Copernicus Centers and will establish dialogues on digital policies, Internet governance, protection of data, artificial intelligence and other relevant technologies. However, for the realization of the goals huge investments are needed because just to adjust the connectivity gap would require investments of more than $50 billion, so it can be stated that despite the great goals of agreement, there is still no clear path to achieve them.

Economic relations

The proposed strategicassociation is based on a broad commercial relationship, which reached 369 million euros in 2022 and which, although it has already grown by 32% in the last ten years, has the potential to intensify even further.

The largest trade link is with Mexico and the Mercosur countries; the latter are also the main destination for investments made from the EU, followed by the Caribbean nations. With a total of €693 billion of investment in 2021 (45% more than in 2013), the EU is the leading investor in Latin America and the Caribbean.

But if in terms of investment in the region, the EU as a bloc is ahead of the United States and far ahead of China, the same is not true in terms of trade. In each subregion China is more involved than the EU (and in several it is also surpassed by the United States, notably in the case of Mexico and Central America, which is logical given the proximity of these actors, but also in the case of the countries of the Andean Community and Chile.

These figures confirm the intensive economic relations between CELAC and the EU and the fact that the EU is an essential investor for Latin American countries. The promised investments with the Digital Alliance and the Global Gateway initiative in general will help to increase this link and, with it, the EU's economic influence vis-à-vis China, which has grown significantly in the Western Hemisphere in recent years.

The political dimension

In recent years CELAC felt forgotten by Europe because there were few meetings between the two regions and hardly any new collaborations were signed to deepen economic and political relations. For example, the agreement free trade agreement between the EU and Mercosur, reached in 2019, remains to be signed and ratified. Therefore, the cooperation initiatives referred to here may signify the beginning of a new stage of closer relations.

The EU and most CELAC countries have widely shared values. At the July summit it became clear that they agree on the defense of democracy, human rights and an international system governed by international law. Although in Latin America there are some democratic setbacks and the weakness of many institutions, 67% of Latin American citizens support democracy as a political system. Almost a generation has grown up in a democratic environment and the system has been consolidated even in unfavorable economic situations.

This means that there is a basis for close cooperation between the EU and CELAC: almost 50% of Latin American citizens chose the EU as the best partner for closer relations.

Enhanced cooperation is clearly in the European interest, for several reasons. First, because it reinforces the Global Gateway program, which so far has not been very successful in its objectives. Second, because in the face of the threat from China it is important for Europe to cooperate with other democracies. And third, because Europe needs to diversify its economic partners. Cooperation in subject digital and other projects, such as the infrastructure or renewable energy projects mentioned here, represent an opportunity to address a broader partnership , and in purely economic terms we should not lose sight of the fact that the CELAC countries can meet European demand for raw materials.