EU to invest €45bn in Latin America and Caribbean

Package includes projects to extract minerals, electrify bus fleets and help protect Amazon rainforest

Brussels: EU leaders in Brussels have announced €45bn (£39bn) in investments to Latin America and the Caribbean, some of which will speed the shift to clean energy, but made little headway thawing a frozen trade deal that critics say will further degrade the Amazon rainforest.

The EU-Celac summit, the first of its kind since 2015, aimed to bring the EU closer to Latin American and Caribbean countries. Disagreements over how to refer to the war in Ukraine in the final text soured negotiations.

The investment package, which includes private sector funding, covers projects to extract critical minerals, electrify bus fleets and help protect the Amazon rainforest in Brazil. It also includes projects in areas like healthcare and telecommunications.

“It’s not just about how much, but also how we are investing,” said the European Commission president, Ursula von der Leyen, adding that she wanted the money to come with high environmental and social standards.

Diplomats at the summit made little progress on the controversial free trade deal with Mercosur, the South American trade bloc, which Von der Leyen said she hoped to conclude this year – beyond a line in the declaration taking note of “ongoing work”.

The EU has not ratified the free trade agreement it agreed in 2019 with four Latin American countries – Brazil, Argentina, Paraguay and Uruguay – because it fears doing so will speed up the destruction of the Amazon rainforest. Under former president Jair Bolsonaro, Brazil rolled back rules to protect the environment and starved its environment agency of funding to enforce laws. Farmers, loggers and miners cut and burned trees in the Amazon rainforest faster in 2021 than they had in the 15 years beforehand.

Luiz Inácio Lula da Silva, who won Brazil’s presidential election campaign on a platform of protecting the Amazon and Indigenous peoples’ rights, has criticised the EU as “protectionist” for attaching strings to the goods it imports.

The French president, Emmanuel Macron, told reporters at the summit it was “not a threat but respect” to apply the same standards at home and abroad. An unlikely alliance has formed in France between environmentalists, who fear the deal will destroy more of the Amazon, and farmers, who worry about competition from foreign imports.

The EU hopes fostering trade with Latin America will help it hit its own climate goals. In a speech on Monday, Von der Leyen highlighted the region’s potential for hydrogen – a gas that can be made with renewable energy to clean up industries like steel-making and shipping – and critical raw materials needed for the energy transition, like lithium.

“Unlike other foreign investors, we are not only interested in investing in the pure extraction of raw materials,” she said. “We want to partner with you to build local capacity for processing, for making batteries, and for the final products, like electric vehicles.”

Ignacio Arróniz Velasco, a trade analyst at climate thinktank E3G, described it as a “subtle but significant shift” in EU rhetoric. During a trip to Latin America last month, Von der Leyen had talked about trade in hydrogen and minerals without adding support for the region’s own industries.

The Argentinian president, Alberto Fernández, praised the agreement for moving away from “extractivism”. “This whole idea that Latin America is just a producer of raw materials has always prevented us from industrialising.”

The summit, he added, was the first time this had changed. “It took us five centuries but we have succeeded.”

Latin America’s biggest trading partner is the US, followed by China, which mostly buys raw materials and crops, and sells manufactured products.

European politicians and businesses have tried to diversify their supply chains away from China in the wake of the war in Ukraine, which exposed the continent’s over-reliance on imports of Russian gas. The move has given new importance to trade links with Latin America and the Caribbean.

“We don’t want to repeat some of the errors of the past,” said Luisa Santos, the deputy head of lobby group BusinessEurope. “We want to make sure that we don’t put all our eggs in one basket.”

The summit declaration also stressed the importance of money to clean up economies, keep people safe on a hotter planet, and pay for damages from extreme weather. In paragraph 23 of the declaration, leaders agreed rich countries would recommit to getting $100bn a year in climate finance to poor countries, a promise that should have been met in 2020, and double finance to adapt to climate change by 2025.

Citing the unmet pledge from rich countries, Ralph Gonsalves, the prime minister of Saint Vincent and the Grenadines, said it was important to “hold their feet to the fire”.

“It would be an awful thing if you wrote this in paragraph 23 and then in 2025 we have no money.”