EU’s Four Latin Cards

From the August 2004 Trumpet Print Edition

The EU already has four cards up its sleeve ready to play in the free-trade war with the U.S. over Latin American markets. Four countries stand out, despite their existing structural weaknesses, as having the potential to offer real attraction to EU investment. Of all EU member nations, Germany in particular has already significantly penetrated these four nations both economically and politically.

Mexico

The EU is the largest single investor in Mexico. Between 1999 and 2003, Mexico’s exports to the EU increased by 19 percent. This was exceeded by the EU’s exports to Mexico, revealing an increase of 28 percent over the same period. In July, Mexico’s President Vicente Fox announced that he was turning his sights south. He is seeking membership within the Latin trading combine Mercosur, itself due to join with the EU in a trade pact of unprecedented scope in October.

Chile

Chile’s primary trading partner is the EU, representing 21 percent of Chile’s trade. It is also Chile’s main provider of foreign direct investment. The EU-Chile Association Agreement, announced at the 2002 EU-Latin America Summit in Madrid, was described by the European Commission as being the most innovative and ambitious ever negotiated by the EU. And no wonder. In an interview with German daily newspaper Die Welt, Chile’s Foreign Affairs minister, Soledad Alvear, commented, “We in Chile would like to closely coordinate our foreign policy issues with Europe” (Santiago Times, May 18). She then struck a chord on a note about which we are destined to hear more in the future: “We definitely share more values with Europe …. There is a strong European influence all over Latin America—not the least because of German immigrants. We simply feel very close to Europe” (ibid.). Many of those German immigrants fled the Allied occupation of Germany as World War ii drew to a close. In the mid-1940s, they “migrated” via the Vatican ratlines, an underground network established by Rome, in collaboration with the German authorities, to spirit Nazis, and much of their loot, out of Germany and to enable their resettlement in Latin America and other New World countries. Many of the sons of these escaped Nazis are firmly ensconced in positions of influence in Latino countries. One such is Nestor Kirchner, president of Argentina.

Argentina

Kirchner, the German son of a Nazi father, was elected last year as the popular choice of the electorate following Argentina’s catastrophic flirtation with free-market economics. Stacking his administration with his Catholic-Germanic/Hispanic family connections, Kirchner is proving a fairly shrewd dealer. He is very conscious of his European heritage. In fact, he elected to unveil his inaugural economic policy in Europe rather than in his home country. This is a strong indicator of where he sees Argentina’s future benefactors coming from. Kirchner has allied with European Commission President Romano Prodi to accelerate efforts to conclude a free-trade deal with the Latino Mercosur trade group, known as the Common Market of the South. If this group is successful in signing a free-trade agreement with the EU, similar to that already enjoyed by Mexico and Brazil, it will become the largest single trade bloc in the world!

Brazil

Brazil is proving to be the real mover and shaker in efforts to align with the EU. In Brazil, over 15 percent of industrial production is vested in German subsidiaries. This is set to escalate even more under the aggressively anti-U.S., pro-EU populist leadership of Brazil’s President Luiz Inácio Lula da Silva. After having run a current-account deficit in excess of $33 billion in 1998, Brazil turned its economy around to the point where it achieved a trade surplus of $13 billion in 2002. Yet it is Brazil’s coziness with Germany where the real political pay-off lies. Brazil acquired German assistance with its nuclear program back in 1975 through a German-Brazilian nuclear treaty. Shortly after, Brazil produced enriched uranium, a component necessary for nuclear weaponry. Recently, Berlin advanced the prospect of closer cooperation with the upper echelon of Brazilian military authorities, armaments manufacturers and procurers. This has raised suspicions that both powers intend to pool resources to produce nuclear arms. Such a prospect changes the status quo of the entire region.