EU, Latin American Countries Pledge to Boost Trade, Amid Underlying Tensions

The need for deeper trade and investment cooperation between the EU and the Caribbean and Latin American countries took centre stage this weekend, as leaders from those regions met in Santiago, Chile. In that context, EU leaders sought to dispel lingering concerns over their region’s economic struggles - stressing that the 27-country bloc’s problems are on the mend - while both sides urged the need to avoid protectionism and finalise pending trade pacts.

“The deepening of the ties of the EU - which stands as the world’s largest economy and provides 40 percent of Latin America’s foreign direct investment (FDI) - and some of the economies that are among the fastest growing, situated in Latin America, is in all of our interests, especially now that we are fighting together for procuring sustainable growth, jobs, and security for all of our citizens,” European Commission President José Durão Barroso urged earlier in the summit.

Trade between the EU and Latin America has more than doubled over the past ten years - up to €202 billion - and increased partnership between the two regions has been suggested as a way to boost economic growth further on both sides. However, observers note that deepening trade and investment ties in practice is likely to be difficult, particularly given recent tensions between the EU and some Latin American countries in these areas.

Concerns over allegedly protectionist measures being taken by regional powerhouses Argentina and Brazil, for instance, have surfaced repeatedly over the past year, particularly after Buenos Aires’ nationalisation of Spanish-owned oil-and-gas company Repsol YPF’s domestic subsidiaries. Argentina and the EU are also sparring at the WTO over various import policies adopted by the South American nation.

Despite these differences, leaders from the EU and CELAC countries jointly reiterated their stance against protectionist measures in their political declaration following the summit.

Leaders also reaffirmed their commitment “to adopt policies that promote trade and investment between CELAC and EU countries,” noting that this could in turn contribute to ensuring sustainable development, while facilitating economic growth and boosting employment in both regions.

EU-Mercosur talks must advance, leaders say

Trade observers were also watching the Santiago summit to see what signal, if any, the high-level meeting might bring on the future of the EU’s long-running talks with South American customs union Mercosur.

The two sides have been engaged in talks for a region-to-region Association Agreement - including an FTA - since 1999, only for these to be suspended in 2004 after hitting various obstacles, such as in the area of agricultural trade. The EU and Mercosur eventually agreed to relaunch the talks in 2010.

However, Mercosur - which counts as full members Argentina, Brazil, Uruguay, and Venezuela, with Paraguay’s membership temporarily suspended - has seen its own share of tensions within its membership over the past year. The controversial sidelining of Asunción following the 2012 impeachment of President Fernando Lugo - and subsequent entry of Venezuela in Paraguay’s absence - had sparked questions over whether Mercosur’s internal reshuffling would slow the nearly two-decade long negotiations with Brussels.

Ultimately, the two sides did hold a meeting last October where, officials said at the time, progress was made in the trade and political cooperation pillars of their planned Association Agreement.

Brussels currently has several agreements already in place with other players in the region. For instance, the EU’s trade deal with Colombia and Peru is in the final stages of being formalised. It is expected to take effect on a provisional basis by the end of March, pending domestic ratification by Colombia.

Brussels also has trade pacts with Santiago and Mexico City, and clinched last year an Association Agreement with six Central American countries. It also has an Economic Partnership Agreement with the Caribbean Community (CARICOM) countries, and strategic partnerships with Brazil and Mexico.

The next CELAC-EU summit is scheduled to be held in 2015 in Brussels.