To build lasting partnerships against climate change in a fragmenting international order, Europe should demonstrate the ambition of the Global Gateway in Latin America, where China’s Belt and Road Initiative has the advantage.
The EU’s top diplomat Josep Borrell is saying all the right things about Latin America. He has repeatedly declared that both regions share common values, history, culture and languages, but that ties must deepen. On his return from a week-long trip to the region last May and across a series of articles, Borrell stated that the time had come to re-engage with Latin American countries, which understandably feel neglected.
The reason behind these declarations is that for all the talk of cooperation, the EU’s engagement in Latin America has been underwhelming. Even before the war in Ukraine, the EU has followed the United States’ shift eastwards. It has attempted to compete with an ascendant China in Africa and Asia, setting up high level summits and committing to investment in both regions. Meanwhile, a 2021 virtual summit was the first European meeting with Latin American leaders in six years. While the historic Mercosur trade deal was agreed in 2019 – after 20 years of negotiations – ratification has stalled.
But now the EU is looking to get serious with its international partners through the Global Gateway strategy. Announced in December 2021, it is an investment framework for digital, energy and transport infrastructure around the world, focused on sustainable projects. It aims to mobilise 300 billion euros by 2027.
The Global Gateway is widely held as the EU’s response to China’s Belt and Road Initiative (BRI), which is Beijing’s economic strategy to invest in infrastructure in countries across the world. Adopted in 2013, the Chinese strategy has funnelled massive amounts of capital into the close to 150 signatory countries. It has used the past decade to invest hundreds of billions of euros into countries across Africa, Asia, Oceania and Latin America, with plans to commit an estimated 1 trillion euros. The EU is seeking to provide an alternative model, where investment in infrastructure is coupled with sustainability, both in terms of the environment and of economic independence.
In Latin America, the BRI has advanced infrastructure and energy projects in numerous countries since 2017. To date, 20 Latin American countries have signed up to the BRI, after Argentina’s accession in February 2022. Chinese investment had been welcomed by politicians of all inclinations, from Jair Bolsonaro’s administration in Brazil to Nicolás Maduro’s Venezuela. In return, China has secured steady access to Latin America’s vast natural resources and commodities, and a growing middle class market of Latin American consumers for its manufactured products.
Although comprehensive data on BRI investments in Latin America are difficult to obtain, there is no shortage of documented individual cases.
In Mexico, Chinese companies have been hired to deliver the capital’s new metro system, the ‘Maya Train’ across the Yucatán peninsula, and buses that run on natural gas. They have acquired energy companies in Chile – such as CGE and Chilquinta – worth over 5 billion euros. In Peru, a Chinese firm acquired the country’s largest power utility company, Luz del Sur, for 3.3 billion euros. A Chinese consortium was the sole entrant for a 1-billion-dollar tender to build a new hydroelectric dam in Argentina, and it has invested in the country’s nuclear power sector. In Brazil, China is the only foreign investor providing state financing to large scale solar projects over 50MW.
Chinese companies are also making major contributions to the development of the ‘lithium triangle’, made up of Argentina, Bolivia and Chile. The area houses over half of the world’s deposits of the metal, which is a key element for the energy transition, as it is used in batteries inside electric cars and non-fossil fuel electricity plants. In January 2023, Bolivia’s state-owned lithium company signed a deal with a Chinese consortium to extract the metal in the country.
But in 2023, the Global Gateway is poised to make a name for itself. Although a formal announcement of investment projects is expected sometime in early 2023, a preliminary list shows dozens of prospective projects for EU investment around the world. In Latin America, 14 projects are aimed at areas such as improving electric transmission lines in Argentina, developing lithium extraction capabilities in Chile, converting urban bus fleets to electric power in Costa Rica, and kickstarting regional dialogue on green hydrogen. Nonetheless, the number and scale of the projects in Latin America pale in comparison with those planned for African countries.
Although at first glance Africa may be the obvious region for the EU to direct its investment into, Latin America represents an enormous opportunity for the Global Gateway and the EU to find like-minded partners in its key priorities of protecting the environment and pursuing a rules-based international order.
Latin America has the potential to be the EU’s main partner in the fight against climate change. Far from a relationship based on the extraction of resources, the EU could act hand in hand with the most biodiverse region in the world and countries with the will to pursue serious climate action. Latin America is a hub for renewable energy, producing over a quarter of its energy from green sources, which is twice the global average. Latin American countries also have enormous potential for global leadership in green hydrogen, and some are making extremely ambitious bets to forego key fossil fuel revenue in exchange for nature conservation.
Thus, more ambition must be shown in the number, scale and significance of Global Gateway projects in Latin America once they are officially launched. These projects would likely need to focus on the energy transition, such as by developing new renewable energy installations and repurposing old platforms. Investment must be carried out equitably, so as to replace the numerous jobs provided by the fossil fuel industry, while facilitating shift countries’ dirty subsidies to clean energy. Finally, helping develop the key industries of the future – by allowing countries to commercialise their rare earths and green hydrogen potential – would create an economically sustainable model for Europe’s Latin American partners.
China is looking to the future, sunsetting the BRI for its new Global Development Initiative, which seeks to correct previous mistakes. Experts expect its economic engagement with Latin America to intensify in 2023, attempting to dispel public image concerns and revamping financing models. This time, the EU cannot afford to be missing in action. It’s time to offer a compelling alternative.
