Home Topics Economy, trade & employment Latin America – EU: a summit to nowhere?

Latin America – EU: a summit to nowhere?

-

By Javier Farje, LAB

altThe 6th European Union – Latin America and the Caribbean Summit held in Madrid on 18 May issued a declaration that talks of “a new stage in the bi-regional partnership: innovation and technology for sustainable development and social inclusion”. Along with the repeated promises of improving relations, at both the political and economic levels, it was impressive rhetoric but it was hard to see signs of any concrete progress.

Even some of the participants seemed to feel it was all a waste of time (as, indeed summits often are). Venezuelan President Hugo Chávez, Cuban leader Raúl Castro, and the President of Uruguay, José Mujica, feeling perhaps that their speeches would be better appreciated at home, stayed away.

On the EU side, neither the new British Primer Minister, David Cameron, nor his Italian counterpart, Silvio Berlusconi, attended, and the German Chancellor, Angela Merkel, spent just a couple of hours in Madrid. After all, the eyes of Europe are not on the exotic jungles and mountains of Latin America but on the troublesome Mediterranean waters of Greece.

Furthermore, the hosts, Spain, have had to adopt severe economic readjustments and budget cuts, in order to avoid falling into the “Greek syndrome. While José Luis Rodríguez Zapatero was polite, assuring the participants that Spain would always support Latin America in Europe, his mind must have been preoccupied by the volatility of the stock markets and the threat of industrial action.

Obstacles

In any case, like other summits, this one has not solved the main problem in the relationship between Latin America and Europe – the opening of European markets for the region’s products. It was clear that, on both sides, it was near impossible to present a united front.

Unlike the EU, Latin America attend these summits as a regional bloc, but this disguises real political and economic divisions, not only within the region but also within the various trading blocs in the region. This was clear before the summit began: the Honduran president, Porfirio Lobo, did not attend because Brazil and the “Bolivarian” bloc threatened to boycott the meeting if he was invited. He only attended the Central America –EU summit.

Mercosur, which is the only functioning trade bloc in Latin America, still has serious disagreements, mainly between the two biggest economies in the organisation, Brazil and Argentina.

The four remaining countries in the Andean Community (CAN) have profound differences over trade agreements with third parties. While Colombia and Peru have signed trade agreements with the USA, Bolivia and Ecuador have no intention of following suit.

Regional integration

And Peru and Bolivia have different approaches towards the issue of regional integration.

Some years ago, Peru’s Foreign Minister, José García Belaunde, told me at a meeting in the Peruvian Embassy in London that regional integration did not require a trading bloc to negotiate agreements as a bloc, because each country had its own priorities and should be allowed to sign whatever bilateral accords it saw fit to benefit its economy.

In contrast, Bolivia’s President Evo Morales has criticised those members of the Andean Community that have signed free trade agreements with the US, arguing that they should have been consulted at the CAN level. The same goes for the free trade agreement that Peru wants to sign with the EU.

In relation to Central America, their main concern is not so much regional integration but fair trade with the EU.

This is the Latin America that attended the Spanish summit. On the one hand, the “moderates” (Peru, Colombia) arrived in the Spanish capital ready to sign agreements. On the other hand, the “radicals” (Argentina, Bolivia, Venezuela) attended the meeting armed with a heavy political arsenal.

The first thing Bolivian president Evo Morales did after his arrival in Madrid was to accuse the opposition Peoples Party (PP), of former Spanish prime minister Jose Maria Aznar, of being involved in a coup attempt in 2008, something that the current Spanish prime minister could not go along with.

And Argentina reiterated its desire to discuss the sovereignty of the Falkaland/Malvinas Islands, an issue that the new British coalition government refuses even to talk about.

A hesitant EU

On the EU side, things did not start well either. A week before the summit, ten EU member-states issued a statement against negotiations with Mercosur because “the strategic agricultural interests of the European Union are clearly at stake”. France, one of the biggest beneficiaries of agricultural subsidies, was the most prominent nation to sign the document.

Europe is worried about the stability of the euro, and the crisis in Greece (another nation that signed the “anti” Mercosur statement) and in other weakened economies, like Spain and Ireland. Many consider the opening of European markets to agricultural produce from Mercosur as a threat to Europe’s economic recovery.

They believe that European produce cannot compete with agricultural exports from the Mercosur countries (50% of all Mercosur exports already go to Europe). According to COAG, the Spanish Agricultural Union, labour costs in South America are much lower than in Europe. Furthermore, European agricultural produce are subject to strict health and environmental regulations.

COAG believes that Europe could benefit with cheap imports of grain to feed its livestock, but it cannot compete with meat coming from Mercosur

Negotiations between Mercosur and the EU have been more or less on hold since 2004, when serious disagreement about tariffs and European protectionism emerged.

Although there is a promise to restart talks between Mercosur and the EU, it remains to be seen what Europe has to offer. If France insists on keeping the subsidies and maintaining its current level of agricultural production, it is difficult to see how an agreement could be achieved that would in any way benefit Latin America.

The same could be said for Central America. Most of Central American exports to Europe are agricultural. The sub-region imports milk powder and cheese, among other things, and exports bananas, beef and rice. If the EU or the “awkward ten” (that is, the ten European nations that want to defend their agricultural sector) insist in protecting Europe’s agricultural sector, Central America will not agree to a trade deal with the EU.

In any case, any agreement would take time to be approved. According to Fredrik Erixon, from the European Centre for International Politics and Economy, based in Brussels, “trade politics are so volatile right now, that politicians are afraid to force votes on these trade deals”. For instance, an important trade agreement with South Korea, which is being opposed by Italy, has not yet been put to a vote. And the trade agreements signed with Colombia and Peru may have to wait too.

The participants talked about a new era in the relations between Latin America and Europe. But, haven’t we heard this before?