International Trade Today | EU-South America Summit
The South American Appeal By Gabriela Castro-Fontoura As the EU-South America summit ended in Chile last month, we were reminded that South America and Europe have been trading partners through their entangled history. Now, despite the strong influence of the US in the region’s economy and the growth of South-South trade, Europe remains key to South American trade for many reasons. In terms of South American commodity exports, Europe is a strong buyer. For example, according to the USDA Foreign Agricultural Service (FAS), a third of Uruguay’s meat exports went to Russia. According to the FAS, the EU was by far the main buyer of Ecuadorian bananas, accounting for over 40% of total production. Latin America is also looking at Europe for non-traditional, non-commodity exports, such as software and creative services. Most South American countries have been experiencing strong economic growth in the last few years. The IMF expects the region to grow at 3.6% this year and forecasts up to 6% for Peru, for example. This growth has put huge pressure on infrastructure development, and South America looks at Europe for manufacturing but also for expertise. A UK Department for Business, Innovation and Skills (Feb 2012) showed that just Brazil absorbs 1.8% of UK exports (more than China and Japan). A country like Brazil cannot be ignored in terms of EU trade. Brazil is not only a huge source of commodity imports for Europe, but it is also one of the world’s largest producer of soft drinks, mobile phones and cars. It supplies many European airlines with passenger jets through its iconic company, Embraer. Europe exports heavily to Brazil, too. The Manufacturer (June 2012) stated that Ò in 2011 Brazil spent £429m on UK machinery, £384m on British cars, £269m on our pharmaceuticals and £108m on our drinkÓ . We must also not forget the importance of travel and tourism in South American-European trade. The current economic growth experienced
28 Issue 2 | March 2013
by countries such as Brazil, Chile and Colombia, means that more South Americans than ever before can now afford holidays in Europe, which are highly sought after mainly for cultural reasons. Business travel (including trade shows and conferences) between the regions is also strong. Education is another strong link between the regions, with South American students now more frequently attending universities in France, Spain and the UK, for example. Investment provides a key link between both continents. For example, Spain is the largest investor in Peru, with the UK coming second. The challenge is for South American countries to channel this investment in a way that contributes to raising productivity and addressing social issues, not just generating profit that will go back to Europe with no sustainable impact in the continent. When looking at EU-South American trade, it is clear that this vast continent cannot be treated as one. National differences, in terms of policy, economic context and vision, are very strong. To simplify, we would say there are two strong tendencies in the continent at the moment that impact on trade with the EU. There is a group of countries more inclined towards free trade and openness, such as Chile, Peru, Colombia and Uruguay. And then there is a group of countries, mainly Brazil, Argentina, Ecuador and Venezuela, that have embraced strong protectionist measures. Argentina is regarded by the WTO as one of the two most protectionist countries in the world. Trading with South America matters to Europe on many levels, one of which is human rights. Transparency is also a key concern of trade between the regions. However, it is not the time for Europe to feel snug, and the balance of power is now making things more even between Europe and South America, if not plainly favourable to South America. As Europe suffers a deep re-