Latin America Turns Its Back on Europe

Preparatory meeting for foreign ministers at the 21st Ibero-American Summit in Paraguay. Photo by Marcelo Sayao, EFE.

Latin America Turns Its Back on Europe
Latin American countries throw themselves into their relationships with each other and with Asia
The absence of half the invited countries spoils the Ibero-American Summit in Paraguay
Latin America will grow 4% in 2012, according to the OECD and CEPAL

El País: América Latina da la espalda a Europa
Soledad Gallego-Díaz reporting from Buenos Aires October 28, 2011

The eyes of the majority of the countries in Latin America, with the possible exception of Mexico, are on Asia, especially China and India, because what Latin America needs in coming years is for consumption to stay afloat so it can continue exporting energy, food, and primary materials at good prices, and the driving force for this trade seems to be the growth of an enormous middle class in Asia which is anxious to provide for itself. Europe, plunged in a grave crisis, and the United States, incapable for the moment of relaunching solvent growth, seem farther away than ever, although Latin American countries recognize that these regions are still indispensable to their development. “Simply put, they know their most dynamic commercial partner, for now and very possibly for coming years, is China,” Chinese press agency Xinhua has published.

Chinese dynamism functions in both directions: a high-ranking Brazilian official explained this Friday in Buenos Aires that his country already has 70 businesses installed in China; 35 are representatives of already-existing firms, but the other 35 are new ones established directly in China with Brazilian capital.

Circumstances in Latin America have changed in a formidable and encouraging way in the last ten years, fundamentally because the Asian economy’s boom has coincided with committed democratic governments in the majority of countries which have, to greater and lesser degrees, brought large numbers of their citizens out of poverty and created lower-middle classes capable of forming attractive internal markets. The most spectacular case is Brazil, with its 200 million inhabitants and formidable natural resources, but the process is also very clear in Argentina and Colombia, to cite two examples. The growth of intraregional commerce is also notable: it has clearly risen, from 15% of Latin American international trade in 2000 to almost 20% in 2010.

Certain as it is that Latin America’s business relationship with China is its most dynamic – the United Nations’ Economic Commission for the region (CEPAL) believes that before 2015, the Asian country will replace the European Union as Latin America’s second largest trading partner – for the moment, the US and EU are still bigger trading partners for the region as a whole (when Mexico is included) and continue to be its primary investors, which is very important. The clearest exception, and the one many Latin American countries see as a model, is again Brazil, where China overtook the United States in bilateral trade, albeit by a small difference of 19 million dollars, during the January to March quarter of this year.

Even so, factoring in Mexico, the U.S. receives 23% of Latin American exports compared to Asia’s 22% and Canada’s 19%. As for U.S. imports, 19% come from Latin America and 34% from Asia. It’s easy to imagine that Washington is paying attention to these figures.

As for the EU, its crisis could indirectly benefit Latin America, not by improving its commerce but rather because European businesses are increasing their investments in the region in search of better returns than they receive inside the Union. This has already been the case for many Spanish companies: in 2010, Banco Santander did more than 35% of its business in Brazil, and BBV close to 50% of its business in Latin America. YPF, the Argentinian affiliate of Repsol, contributed almost 40% of the parent company’s business, and the same goes for Telefónica and its partners in the region.

A great opportunity for the European Union would be a commercial agreement with “Mercosur”, the sub-regional union made up of Brazil, Argentina, Uruguay, and Paraguay, but negotiations have gone on for six years without noteworthy advances. Among the principal obstacles are pressure from European farmers, who don’t want to open their markets to Latin American products, a prerequisite for Mercosur to open its borders to European products and services. “The European Union has in recent years invested more money in Latin America than in China, India, and Russia combined, and it would be reasonable to develop that link,” maintains the commissar of EU Commerce, Karel De Gutcht. The problem is that China is in a hurry, and Latin America doesn’t want to lose time, either.

Explore posts in the same categories: Business, Latinoamérica, Spain, Translations

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