March 2018

By Daniel P. Erikson and Gabriella Ippolito

In remarks before his trip to Latin America last month, U.S. Secretary of State Rex Tillerson mused about the importance of the Monroe Doctrine, which he called “as relevant today as the day it was written.” Latin American leaders and analysts were largely nonplussed by the Trump administration’s invocation of the nearly 200-year old policy, originally conceived to oppose any efforts by Europe to reassert power over its former colonies in the hemisphere. To be sure, the primary targets of Tillerson’s attention were Russia and China, two states he described as “predatory actors” in Latin America. Renewed engagement by Europe has largely escaped the notice of U.S. policymakers and would, in any case, be seen in a different light. Nevertheless, European and Latin American governments are directing new energies towards developing stronger political and trade ties as they each contend with the challenges posed by shifting U.S. policies.

Despite their deep cultural, linguistic, and historic ties, relations between the European Union and Latin America are only now beginning to reach their potential. According to top EU diplomat Federica Mogherini, “Europe, Latin America, and the Caribbean share a cultural heritage based on centuries of common history. And what is more, we share the same values and world view. We believe in a world order that is based on cooperation, on regionalism, on multilateralism.” The European Union, traditionally focused on managing relations with the United States, the Middle East, and, more recently, China, while the rest of Asia has usually ranked Latin America towards the bottom of its foreign policy priorities. However, Europe’s economic ties with Latin America and the Caribbean have grown in recent years, reaching $235 billion in bilateral trade in 2016. The European Union accounts for half of all foreign direct investment in Latin America and the Caribbean, and it is currently the region’s third largest trading partner behind the United States and China.

In 2018, the European Commissioner for Trade Cecilia Malmstrom is pursuing two major trade deals with Latin America that could lock in long-term economic benefits if they can be achieved. The EU’s trade negotiation with Mexico, launched in May 2016, aims to build on the existing $57 billion in bilateral trade. Even as Mexico remains locked in contentious NAFTA talks with the United States, it is simultaneously pursuing the EU-Mexico free trade deal intended to replace one signed two decades ago and expand beyond industrial goods to include agricultural products, services, and investment.

The European Union is also engaged in trade negotiations with MERCOSUR (the Spanish acronym for the South American Common Market consisting of Brazil, Argentina, Paraguay and Uruguay). The EU, with a population of 500 million and a GDP of $17 trillion, accounted for 21.8 percent of MERCOSUR’s total trade in 2016, and EU investment in the trade bloc more than tripled between 2000 and 2014 from $141 billion to $494 billion. The EU is eyeing MERCOSUR’s population of 275 million as an attractive market for European goods and services. Currently, the EU has bilateral Partnership and Cooperation agreements with Argentina, Brazil, Paraguay and Uruguay. (There is no such agreement with Venezuela, which joined MERCOSUR in 2012 but is currently suspended from the group and facing sanctions by the EU.) After nearly two decades of fits and starts since EU-MERCOSUR negotiations first began in 1999, the current effort, launched in May 2016, is gathering momentum. However, the biggest obstacle may be the fierce opposition by Irish and French agricultural producers, especially in the beef and cattle industries, who are loathe to face increased imports from Argentina and Brazil.

Europe and Latin America’s renewed embrace is driven in part by their mutual desire to diversify their trading relationships as the United States pursues new and more unpredictable trade policies that create greater uncertainty in the global trading system. This new paradigm, if successful, may redirect billions of dollars of trade and investment and tie Mexico and Brazil-led MERCOSUR, the two economic giants of Latin America, ever closer to the European Union.