Atlantic Community:Open Think Tank Article "An EU-LAC Strategic Partnership? It Takes Two to Tango!"

December 22, 2011 | 2 comments | Print | E-Mail Your Opinion

An EU-LAC Strategic Partnership? It Takes Two to Tango!

Susanne Gratius: The EU is the leading investor in Latin America and the second trading partner, but despite great efforts, the EU is losing the race against China in the region. The next EU-LAC Summit in 2012 in Santiago de Chile should be a great opportunity to put this strategic partnership back on the right track.

Is Latin America a strategic partner of the EU? Officially, yes; in practice, no. Twelve years ago, the EU and Latin America agreed, at their first ever summit in Rio de Janeiro, to create a strategic partnership and to start free trade negotiations with MERCOSUR. At that time, the EU was a privileged partner of the region serving as a counterbalance to Washington, China was far away, and the European integration model was still in vogue.

Today, the EU-MERCOSUR process is going nowhere and Europe’s relations with Latin America are declining, paradoxically at a time when the region is booming. For decades, Brussels had invested large amounts of money to stabilize and democratize Latin America. Now, when the region became a motor of global growth, the EU’s attraction and power are in free fall, the United States are a declining power, and China is dominating the new world.

The traditional European formula of inter-regionalism applied to Latin America has been replaced by bilateralism. Brazil and Mexico individually became strategic partners of the EU, and bilateral free trade agreements replaced bloc-to-bloc negotiations. Colombia, Chile, Mexico and Peru have already signed free trade deals with the EU, while inter-regional agreements have been established with Central America and the Caribbean.

All of these countries account for less than 3% of the EU’s extra-regional trade, and for none of them is the EU a main economic partner. FTAs have not stopped the negative trend in EU trade and investment flows to Latin America: in the period 2008-2009, FDI flows diminished by 23% and trade fell by a similar percentage. Although Spain is still the main European investor in Latin America, compared to the main competitors China and the United States, the EU has been mainly absent from Latin America’s boom.

The economic giant of Brazil is the real challenge for the EU. In 2010, Mexico ranked 20^th on the list of EU’s trade partner, while even without an FTA, Brazil has risen to number 9. Although the EU is still Brazil’s major trade partner, in 2010, China became Brazil’s top investor and export market. Beijing has already signed free trade agreements with Costa Rica and Chile and might soon initiate negotiations with Brazil. Thus, time for an agreement with the EU is running out.

Prospects don’t look bright. FTAs have had a limited effect on trade concentration towards China and the United States. Despite signing FTAs ten years ago, neither Mexico nor Chile is a particularly close economic partner of the EU; in fact, Europe had a much larger economic presence in both countries in the 1990s.

The EU also missed a historic opportunity to sign an association agreement with MERCOSUR, its main economic and political partner in Latin America. EU-MERCOSUR negotiations did not conclude in 2011, as initially foreseen, and commercial offers will now be presented at the EU-LAC summit in 2012. This is a step back, and time is running out, in favor of China.

It is not too late to correct the decreasing European weight in Latin America. But several results should be reached at next year’s EU-LAC summit in Santiago de Chile, including:

A rational choice on the FTA with MERCOSUR; currently, such a deal is being held up by disagreements over a small percentage (4%) of sensitive products. If the inter-regional formula is not working, the EU should start a bilateral negotiation with Brazil, like it did with other strategic partners.
The inter-regional format could be resuscitated by initiating a political dialogue between the EU and the Community of Latin American and Caribbean States (CELAC) on regional and global issues.
The paternalistic European development approach to Latin America has to be replaced by a horizontal exchange on the solutions of the global financial crisis, using the Latin American experience on the management of financial shocks.

It is no longer the Monroe Doctrine but the Brasilia and the Beijing Doctrines that represent the major obstacle for a European recovery of Latin America. And it is no longer Latin America that claims to improve market access in Europe, but the EU itself that, in midst of its worst ever crisis, should look beyond Europe and Asia to sell its products and technology.

Susanne Gratius is a senior researcher at FRIDE since 2005. Prior to joining this think tank, she worked as a researcher at the German Institute for International and Security Affairs (SWP), Berlin, and at the Ibero-American Studies Institute (IIK, now GIGA), Hamburg. She holds a PhD in Political Science from the University of Hamburg and the University Complutense of Madrid.

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December 19, 2011

Markus Fraundorfer, GIGA German Institute of Global and Area Studies, Hamburg, Bronze Contributor (21)

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I agree that the EU can only secure its own weight in the world when it finally wakes up to the new realities in Latin America. These new realities relate first and foremost to the emerging power status of Brazil in the world. The question is no longer if Brazil will continue its unprecedented rise. Rather, the question is if the EU will be able to realise Brazil’s huge potential as one of the most influential powers in the near future. The EU would do well to look beyond China’s rising influence in the world. As a consequence, the EU might acknowledge that Brazil is a better partner for the future than China or Russia in terms of democracy, respect for human rights and the rule of law. It is debatable if in a few years’ time the EU will have a similar economic and political weight in the world as today. It is also questionable if the EU will be able to maintain its international image as a defender of human rights and human dignity. Co-operating with authoritarian regimes such as China or Russia, which ignore the core values of the EU (human rights, democracy, rule of law), will certainly not promote this image EU decision-makers always emphasise. Brazil can be a promising partner for the EU in many different aspects ranging from trade relations over human rights issues to climate change.

December 22, 2011

Raquel de Caria Patrício, School of Social and Political Sciences, Bronze Contributor (15)

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A great and realistic point of view about the EU-Latin America partnership. It is good to remember that since the establishment of the EU-Brazil strategic partnership in July 2007, the trade between the parties has decreased instead of growthing. However, and if it is true that China`s presence in the region has strongly increased, both through trade and foreign investment, as China gains its place as an engine of world`s economy, it can`t be forgotten that this reality isn`t the same throughout all the region. The Chinese presence in Latin America is strong in South America, but in Central America and in the Caribbean the strongest presence is still the North American. Besides, as Brazil becomes more dependent on the Chinese economy and doesn`t make its leadership on South America effective, this region moves itself to the sphere of influence of Beijing. Thus, it becomes evident that there is a fracture in the Panama Canal, no longer between a North-American sphere of influence and another one under the Brazilian influence, as Lula had outlined at the beginning of his Administration in 2003, but between two new projects for the Americas: a Central America and the Caribbean under North-American influence and a South America under Chinese influence. Now that Brazil is worried about the harmful effects of its relationship with China and elevates the relationship with the developed countries to a priority of its foreign policy - which is no longer only focused on South-South dialogue - a new opportunity arises to EU, which has Brazil as its main challenge. The EU should thus seize this opportunity, because today it is the EU who needs Latin America and not vice versa. But to do so, the EU has to establish compromises with Latin American countries on agriculture, putting an end to the protectionism of the Common Agricultural Policy.