Latin America Needs Its Own EU

It’s been more than 100 years since most Latin American countries secured their independence. Yet the region and its resources remain subject to exploitation by the rest of the world.

It’s time for Latin America to say, “No más.” The continent can take inspiration from its former colonizers in Europe—by uniting as a common trade bloc. The whole world stands to benefit from such an arrangement.

Latin America is famously rich in raw materials and natural resources, from oil and gas to lumber and ore. Some resources are especially concentrated. Argentina, Bolivia, and Chile, for example, hold over half the world’s lithium—a crucial element of rechargeable batteries, like those that power electric vehicles.

Central and South America have consistently contributed such raw materials to global supply chains without reaping the economic benefits of value-add manufacturing. “Latin America has long been on the edges of global supply chains, providing raw materials for others to transform,” as one recent Bloomberg article put it.

According to a United Nations-sponsored report, Latin America accounts for just 5 percent of global manufacturing exports, a number that hasn’t changed for decades. Asian countries, on the other hand, saw their share of global manufacturing jump from 23 percent to 37 percent between 1990 and 2016.

In the Darien Gap
Immigrants from Haiti depart a base camp for their trek through Darien Gap on Oct. 18, 2021, at Las Tekas, Colombia. The Darien Gap, which connects North and South America, is where the Panamerican Highway was never completed due to severe terrain, high cost and myriad environmental concerns.
John Moore/Getty Images

There’s no single reason that accounts for Latin America’s dearth of value-add manufacturing industries. But economists agree on one of the most important factors—the region’s lack of successful trade agreements with the rest of the world.

Creating a pan-Latin American trade bloc, not unlike the European Union, could help reverse some of these trends. Latin American countries would be able to secure far better trade agreements by working together. The region’s pooled GDP of $5.5 trillion could provide considerable deal-making leverage.

Latin American countries have tried to create such a cross-border regional trade alliance before. In 1991, the presidents of Argentina, Brazil, Paraguay, and Uruguay signed a treaty establishing a free-trade zone known as Mercosur.

Over the past 30 years, Mercosur has fallen short. Only four of the region’s 20 countries are full members of the bloc. And those members have focused on intra-regional trade at the expense of exerting leverage on a global scale.

Though Mercosur has underachieved, most Latin American countries are eager for more trade. The region’s governments have signed almost 450 bilateral trade deals since 1973.

A new regional trade bloc would need both broad buy-in from Latin American nations and a clear focus on the concrete goal of bringing more manufacturing to the region.

A successful regional trade agreement could reverse decades of economic stagnation and bring many benefits, including lifting nearly 90 million Latin Americans out of extreme poverty.

Greater domestic manufacturing in the region could also have the added benefit of promoting political stability while reducing crime and corruption by adding more good-paying jobs to the tax base. Additional government revenue could help bolster educational opportunities and beef up law enforcement.

And as Latin America’s share of global manufacturing increases, so too will its need for high-quality infrastructure to transport manufactured goods. A regional trade bloc could use its leverage to secure funding for roads, railways, ports, and other critical infrastructure. It might even be the impetus to finally bridge the Darién Gap in the Panama-Columbia borderland—the last remaining break in the Pan-American Highway system between Central and South America.

A strong Latin American trade bloc and the regional manufacturing capacity it would bring are also in the interests of North America. The last two years of supply-chain snafus have shown how over-reliance on China as the manufacturer for the world can be a massive headache.

China and Europe would benefit from a stronger Latin American manufacturing presence, too. China is struggling with labor shortages. Its ministry of education is predicting a shortage of 30 million manufacturing workers by 2025. European nations are facing similar problems, with 39 percent of manufacturers saying labor shortages are hampering their work.

Latin American countries’ network of existing bilateral trade deals may hint at some will for more trade consolidation. Brazil has acted as a regional trade leader before, and it’s conceivable that they could help win other nations’ willingness to at least consider a more unified trade apparatus in Latin America.

Some non-governmental organizations are already thinking about what a Latin American trade bloc might look like. For instance, The Hispanic Institute is currently drafting treaty language that takes inspiration from the Treaty of Rome, which established the European Economic Community, the precursor to the European Union.

The last of the viceroys and conquistadors departed long ago, but Latin America still isn’t getting a fair shake. Catching up on decades of lost economic progress won’t happen overnight. But regional trade integration is the first step.

Gus West is president of the Hispanic Institute (www.thehispanicinstitute.org).

The views in this article are the writer’s own.

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