Given the current uncertainty over the global economy’s recovery, interest in the prospects of the South American continent, which seems finally able to express its true potential, has increased. All too often the expectations over the EU / Latin American accords have been set too high. Today, the increase in commercial and financial exchange are guided by a bottom-up logic; promising forms of interdependence are emerging in a pragmatic way and are producing concrete benefits. Within this framework, even large infrastructural projects do not follow ideal strategic guidelines, even if they obviously stimulate further economic activity due to increased regional integration.
The most dynamic sectors are banking, communications, and energy. They all share a strong capability as catalysts for and multipliers of the development of yet other productive sectors.
Unlike in the past, Latin America’s fairly good reaction to the global economic crisis is due to some characteristics it has recently shown; much stronger fiscal solidity; freely floating exchange rates, increased diversification; and a notable opening up of trade both for goods and for capital. This environment has been instrumental in seizing the opportunities available thanks to Asia, which during the recession took on the role of growth engine for South America (thanks in particular to the demand for commodities) and which is now destined to consolidate its position as a strong regional partner.
The weaknesses of Latin American economies are above all productivity and competitiveness (which in turn limit innovation). For this reason the area saw better results compared to past crises, but worse ones compared to similar economies. Furthermore, income distribution remains very uneven.
In order to sustain overall growth projections, energy needs have been increasing extremely quickly, and this opens up great opportunities for international players that have the right know-how. Financing the necessary investments will require an active role of the banking sector, as it will of the EU as a whole if the tools needed to encourage the participation of European firms and to foster lasting relationships are activated.
Energy security is an issue that becomes ever more important. It is highly likely that countries in the area will further diversify their relationships (both as energy producers and consumers) in order to avoid excessive exposure and vulnerability. This will make the situation even more complex and articulated, even as the trend points towards the consolidation of three or four large groups for the area.
In light of the infrastructure and energy needs, the public sector’s role in the future is certain to remain crucial, yet the dynamism of the private sectors should guarantee the proper mix of the two.
As far as the political situation goes, the “European model” has certainly received a strong blow from the repercussions of the global economic crisis. The relationships with Latin America reflect a revision of the previously existing situation, with Europe in a relatively weaker position. However, the potential for a complementary relationship remains very high. Europe should think of its relationship with South America in terms of a “new Atlantism”, focused this time on the South Atlantic, and thus on a triangular web of accords compared to its traditional ties to the United States. In this way, the EU-South American alliance would be better able to constructively contribute to global governance.
