Latin America and the Caribbean and the European Union: striving for a renewed partnership

Includes bibliography

This report is a contribution by the Economic Commission for Latin America and the Caribbean (ECLAC) to an updated analysis of trade, investment and cooperation relations between Latin America and the Caribbean and the European Union, preparatory to the Seventh European Union-Latin America Summit to be held in Santiago, Chile, in 2012. The publication forms part of ECLAC's 2010-2012 technical cooperation programme with the Spanish Agency for International Development Cooperation (AECID). The Latin American economies have shown tremendous resilience in coping with the deep global economic and financial crisis of 2008-2009 and they have recovered much more vigorously than either the European Union or the United States. After a period of strong growth between 2003 and 2008, followed by a slight recession in 2009 during the global crisis, the region's GDP grew by 6% in 2010 and is forecast to expand by a further 4% in 2011. The region's robust resistance to the external turbulence partly reflects the reforms implemented over the last two decades, which have resulted in greater fiscal and monetary prudence and stricter financial supervision. Another factor that has recently sustained the buoyancy of Latin America's economy is the retargeting of its exports towards China, the rest of Asia and other developing regions where demand has continued to grow strongly. For the first time in its history, the region has achieved high growth rates with macroeconomic stability while also reducing poverty and inequality. Since the crisis, the Latin American and Caribbean region has been viewed differently by the rest of the world and renewed interest has been shown in the region owing to its vast natural resources and strong and sustained growth as a market for consumption and investment. China and other developing Asian countries have become the primary source of demand for various Latin American and Caribbean natural resources to satisfy their own domestic needs. At the same time, the United States and the European Union have speeded up the negotiation and signing of free-trade and association agreements with various countries in the region as a response to the more active Asian presence in Latin America and the Caribbean and to take advantage of the latter's burgeoning market. The ties between the European Union and Latin America and the Caribbean are becoming closer in other areas. Firstly, in the economic sphere, the European Union was the main source of Foreign Direct Investment (FDI) in Latin America and the Caribbean between 2000 and 2009. In fact, the Latin American market became a key source of earnings for several European companies, particularly with the European market in the doldrums. In the same period, trade in services between the two regions also outpaced the European Union's services trade with the rest of the world. Secondly, on the political front, having participated in six biannual presidential summits since 1999, which have produced concrete results, the two regions are now preparing for the 2012 Summit in Santiago. Thirdly, the two regions have intensified their cooperation in various areas. The European Union has supported a number of initiatives in areas such as urban development, social cohesion, higher education, internationalization of small and medium-sized enterprises (SMEs), information and communications technology and climate-change mitigation. The two regions also complement each other culturally and have fostered deep political and economic bilateral relations. As the great author Carlos Fuentes once noted, "Latin America is the most European continent outside Europe". Nonetheless, shortcomings remain which the region needs to address: poverty and inequality persist not only as a moral problem but also as a hindrance to growth and the region continues to lag behind industrialized nations in terms of technology, innovation and competitiveness. In these areas, the European Union offers opportunities to create networks and finance public-private cooperation between businesses and governments in Latin America and the Caribbean and to promote technological and business alliances. The key challenges facing the European Union include finding new sources of growth for its national economies, new sources of financing for their public and private debt, and sources to supply basic natural resources. In these areas, Latin America and the Caribbean offers several possibilities. Against this backdrop, this report will, we hope, foster a better understanding of relations between the two regions in the areas of trade, investment and cooperation, and in the formulation of proposals to strengthen bilateral ties. .