Opinion on the European Union's relations with Latin America (94/C 127/05)

On 23 March 1993 the Economic and Social Committee decided, in accordance with the fourth paragraph of Article 20 of its Rules of Procedure, to draw up an Opinion on the European Union's relations with Latin America.

The Section for External Relations, Trade and Development Policy, which was responsible for preparing the Committee's work on this subject, adopted its Opinion on 14 January 1994. The Rapporteur was Mr Vasco Cal, who replaced Mr Wagenmans.

At its 312th Plenary Session (meeting of 26 January 1994), the Economic and Social Committee unanimously adopted the following Opinion.

1. Introduction

1.1. The close historical and cultural ties between the countries of the European Community and Latin America have been given new impetus since 1986. The areas of cooperation between the two regions have become broader and deeper. The Economic and Social Committee has continued to keep a close watch on developments in these relations. Thus on 28 January 1993, it adopted an Information Report prepared by the Section for External Relations, Trade and Development Policy, on the European Community and the Countries of Latin America (Rapporteur: Mr Wagenmans) (1). The most recent Opinion on EC/Latin American relations was adopted in January 1990 (Rapporteur: Mr Vasco Cal) (2).

1.2. In the light of the sweeping changes on the international scene over recent years - particularly in the EU and Latin America - the Committee felt the need to tackle afresh the question of EU/Latin American relations. The present Opinion is based on the findings and conclusions of the abovementioned Information Report, to which diverse specialist institutions, experts, diplomats and others contributed.

1.3. In preparing the Opinion the Section for External Relations, Trade and Development Policy organized a hearing with representatives of the social and economic organizations in Latin America (employers, trade unionists, farmers, cooperatives, family and environmental organizations) on 30 September and 1 October 1993. The hearing resulted in a fruitful exchange of information and was thought to be very useful by both sides. The main findings of the hearing are integrated in this Opinion.

1.4. This Opinion (i) discusses the main EU/Latin American issues (ii) puts forward possible solutions and recommendations and (iii) analyzes future prospects in those fields most relevant to EU-Latin American cooperation. Attention focuses on the EU's role in Latin America and on the impact of economic relations and development cooperation between the two regions (including political dialogue and cooperation in the social sphere), including the third generation agreements and the New Agenda for inter-regional cooperation (environment, human rights, drugs, science and technology, etc.).

1.5. Following adoption of the ESC's January 1990 Opinion, the Commission approved a Communication on 11 June 1990 proposing guidelines for cooperation with the developing countries of Latin America and Asia. These guidelines were adopted by the Council on 4 February 1991 and since 1992 have set the pattern for cooperation with these countries.

2. Political dialogue with Latin America

2.1. The annual interministerial conferences under the San José Process (since 1984), the institutionalized meetings between the EC and the Rio Group (since 1990), and the two-yearly meetings between the European Parliament (EP) and the Latin American Parliament (since 1974) represent an appropriate institutional framework for furthering relations between the two regions.

2.2. This high-level political dialogue has played a decisive role in supporting democracy in Latin America and peace in Central America. It is clear that the EU must continue to play a prominent role in international support for democracy in the region, for in several countries democracy is still very vulnerable and even seriously threatened. The Committee calls on the EU to continue, through political dialogue, to promote respect for human rights and take a tougher line on social rights. Cooperation could also help to reinforce democratic institutions and the rule of law. The Committee wishes to underline that democracy will remain fragile unless poverty is tackled successfully.

2.3. The European Union must endeavour at all times to help defend human rights, democratic values and peaceful solutions in all countries and regions of Latin America by making use of its diplomatic, financial and other resources. It must continue to be active as a mediator in all relevant cases in trying to reconcile the parties and settle conflicts.

2.4. Economic themes and the 'New Agenda' will play a key role in relations between the two regions in the 1990s. The Latin American side has pointed to the need to tackle economic, trade and financial issues directly. The EU on the other hand does not want to settle trade questions definitively until the GATT Uruguay Round is completed.

The Council has authorized the European Investment Bank (EIB) to finance projects in Latin America, as requested in the previous ESC Opinion on Relations between the Community and Latin America (1) and in various resolutions of the European Parliament.

2.5. Bearing in mind recent developments in relations between the two regions, the emergence of new areas of cooperation, Latin American expectations of the cooperation instruments and EU conditions for their use, together with the Committee's concern at the incomplete use of financial resources and the fragmentary nature of development cooperation, it is evident that the EP, Commission and Council and their Latin American partners must try to revamp the political dialogue so that it more closely reflects actual events in the areas of cooperation, investment and trade, and enables them to work together more appropriately and effectively.

2.6. Despite enlargement of delegations in Latin America, the Commission has relatively few financial and human resources to allocate to development cooperation with Latin America. Most of the Latin American partners have insufficient specialist staff and very few resources for practical cooperation with the EU. This is a brake on inter-regional relations. There is little scope for new commitments under the third generation agreements or for intensifying efforts to put EU/Latin American relations on a more comprehensive, institutional basis.

2.7. Launching political dialogue along new lines - more in keeping with the modest scale of Commission cooperation, addressing specific cooperation problems, and responding to Latin American requests - requires (i) increasing and making better use of EU and Member State resources for cooperation (ii) observing priorities (iii) rationalizing use of resources (iv) making conditions of access to cooperation more flexible and (v) gradually broadening the agenda to include issues identified by Latin America.

2.8. In the longer term, cooperation could be extended, intensified and institutionalized along lines similar to the association agreements with Mediterranean and Central and Eastern European countries. Accordingly the Committee advocates the creation of bi-regional consultative bodies which can take a broader, strategic view and draw up proposals stretching beyond the third generation agreements, with an eye to the 21st century.

2.9. The Maastricht Treaty provides for the implementation of an EU development cooperation policy coordinated between all the Member States. Internal EU political dialogue should ensure that Member State and EU cooperation policies are coherent and complementary. Community measures should also be coordinated with those of the relevant multilateral bodies, notably the IMF and the World Bank. Such measures would be highly significant for Latin America, since the EU and its Member States taken as a whole are the main source of cooperation with the region.

2.10. By the same token, while acknowledging the effort made over the last few years by democratic Latin American governments, it would be desirable to develop the internal political dialogue in Latin America in order to strengthen consultation mechanisms in general as well as the consultation mechanisms of relations with the EU. This would enable them, as the integration process becomes more institutionalized in the region, to speak to the EU with one voice, e.g. in putting forward proposals for democracy, human rights, broader cooperation, market access and so on. Moreover, it would help them to move beyond declarations of principle and devise fully fledged policies in a number of basic areas, such as the economic and social, or on international issues like the environment and drugs. Such a process would create opportunities to establish closer links between the two regions, particularly in the wake of the implementation of the Maastricht Treaty.

3. Cooperation with Latin America

3.1. The Committee welcomes the new cooperation guidelines, the third generation agreements and the wide range of instruments for consolidating inter-regional relations. It notes with satisfaction that both parties have made a real effort to coordinate cooperation.

3.2. The Committee acknowledges the efforts of the EP delegations for relations with Central America, Mexico and South America, the work of the Commission's Directorate for Latin America in managing development cooperation with this region, and the analysis and promotion of inter-regional relations by the Institute for European-Latin American Relations (IRELA), which is backed by the Commission.

3.3. However, in spite of these efforts, full and effective use is still not being made of cooperation resources, principally because of the rigidity of procedures, and because economic and social operators are unaware of the possibilities available, particularly in the area of economic cooperation and access to EIB funds.

3.4. Both sides need to plan, implement and evaluate development cooperation programmes and projects more efficiently. The Commission is therefore urged to prepare an overall report on the scope and impact of EU cooperation in Latin America. This should include an assessment of the use in recent years of the different budget headings and future projections. In the Committee's view, it is important to know the extent of actual implementation of the cooperation guidelines for 1991-95, estimated to represent a total of MECU 2 900. Similarly, it would be helpful to know how far the multi-annual planning scheduled to begin in the early 1990s has advanced. In addition to the quantitative analysis, however, it would be useful to analyze the practical impact of cooperation in the field, among the direct beneficiaries - in other words, to conduct a qualitative analysis, even if the projects involved were only a sample.

3.5. To this end, the Commission should provide information on its methodology and technical/institutional instruments for planning and evaluating development cooperation, including information on how the European Parliament goes about monitoring such cooperation. A comparison with existing mechanisms for the ACP countries, covering consultation machinery and the level of institutionalization, would also be valuable in this context.

3.6. The Committee would recommend that the report contain a detailed study of factors affecting the implementation of programmes and projects at both the negotiation stage and during processing through the Commission; it would appear that internal rules, an excessive work-load and delays in the payment of committed funds are slowing down the implementation of programmes and projects. More information should be provided on the pre-conditions for successful cooperation and on the part played by factors such as political will, programme/project design, technical and administrative capacity, experience and familiarity with the situation. An assessment should also be made of whether it is appropriate to fund numerous small-scale projects from a variety of budgetary headings, spread over a wide geographical area and covering many fields, or whether the impact would be magnified by concentrating on priority areas.

3.7. It is suggested that the Commission report also cover Member State cooperation policy and include a study of future prospects for the coordination stipulated in the Maastricht Treaty. It is also considered important for EU Member States to take measures to reach the 0,7 % of GNP fixed by the United Nations for cooperation with developing countries: in 1991 only France, Denmark and the Netherlands reached this figure.

3.8. It is also important to know to what extent the Latin American countries, individually and collectively, have the necessary political will to come to grips adequately with EU cooperation, have the resources to devise and implement projects, are able to design projects which are really viable, and can come up with sufficient human and material resources for all this. It would also be advisable to assess the practical effect of these aspects on EU cooperation. A study needs to be made to see if the Latin American partners are affected by the fragmentary nature of cooperation, e.g. in the form of administrative problems, or if small-scale projects actually facilitate manageable cooperation and NGO participation.

3.9. Some programmes are geared towards a target group or specific objective: it is only realistic to channel resources towards those areas and objectives which are viable. The example offered by the human rights programme for Central America, signed in Lisbon in February 1992, is worth mentioning on account of its political importance and regional nature. The programme is directed at members of the armed forces (target group) and aims to improve public security and the working of the judicial system (specific objective). It would be interesting to assess the programme's impact on the judicial structure, to determine whether it has reinforced civil society against the historical dominance of the military and to examine the role of the government of the countries concerned in the programme.

3.10. In the economic sphere, the granting of generalized tariff preferences to Bolivia, Peru and Colombia since 1991, and to the six Central American countries since 1992, is of major significance. The report should study this case, involving trade promotion combined with anti-drugs measures, in detail: it should assess whether the granting of tariff preferences has any real impact on Latin American exports to the EU and, most importantly, whether the measures being taken by these countries enable them to benefit fully from the facilities offered.

4. Trade relations with Latin America

4.1. Latin American demands centre upon improved access to European markets. The recent GATT Agreement, which commits the EU to reduce external agricultural protection and export refunds by the year 2000, will certainly make it easier for agricultural produce from the countries of the South to enter the Community and international markets. Of course, to boost their agricultural exports the Latin American countries will also have to improve quality and market their products more competitively and effectively (presentation, packaging, etc.), and comply more strictly with the relevant plant and animal health standards.

4.2. The EU argues that the internal market will stimulate the demand for imports and that marketing costs will consequently fall. Latin American imports will, however, have to adjust to greater competition. Moreover, national quotas will disappear as a Community policy emerges. It is, however, accepted that harmonization of technical, environmental and health standards does complicate the entry of products not meeting the established requirements (1).

4.3. In view of this new situation, the Commission needs to launch a major information initiative among Latin American operators to ensure that they can meet the new requirements and adequately exploit the new market opportunities. The Commission delegations should play a more active role in this. This could include an advisory programme for Latin American exporters, not only in relation to the new conditions and standards, but also offering technical advice on how to improve the quality of their products and to meet technical requirements for packaging, labelling, health aspects, etc. Help in better use of the GSP is also needed, although experience with other regions has proved that the impact of the system is limited unless production methods are modernized and quality is enhanced in order to improve competitiveness.

4.4. There has been a structural change in the pattern of Latin American exports, but it is not as yet sufficient to reverse the negative trends of the past decade. The proportion of EU imports coming from Latin America has fallen to 5,5 %, and the proportion of EU exports going to that region stood at 3,8 % in 1990. However, the EU accounts for well over 20 % of Latin America's foreign trade, and it is with the EU that Latin America produces its highest trade surplus. The principal Latin American products remain agricultural and raw materials, and trade between the two regions is concentrated on a small number of countries in each of them.

4.5. Only a few Latin American countries have managed to diversify their exports, despite the emphasis on this aspect in the structural adjustment programmes. The Latin American countries must make a greater effort to restructure and diversify their economies. In its recent report 'The Social and Economic Progress in Latin America', the Inter-American Development Bank recommends an increase in 'human investments' such as education and training, health care and food supply, which would smooth integration into the world market. However, the prospects for sustained development would also be improved if the Latin American countries exported higher quality and higher-added-value goods, if trade barriers were removed and if there was an end to the uncertainty in economic relations caused by lack of knowledge - or fear - of the changes wrought in the EU by the internal market and Maastricht.

4.6. The Committee further recommends that the GSP arrangements for the three Andean Pact and six Central American countries be extended and that an evaluation be made of any (negative) repercussions on the exports of countries not covered by these arrangements.

4.7. Finally, the Committee considers that a universally acceptable solution must be found to the banana problem, and welcomes the negotiations currently being pursued to this end. The Committee has noted the GATT Panel's comments of last May, to the effect that the current Community arrangements are highly discriminatory against Latin American exporters and contrary to GATT rules. Although the Committee, in its Opinion of 27 November 1992, endorsed the Commission's proposals to protect EU and ACP producers, it thinks that the interests of Latin American producers should also be given due consideration (1). In this respect the Committee regards the EU's offer of support for diversification and development programmes in the Latin American banana-producing countries as highly significant (2).

5. Investment in Latin America

5.1. The Latin American countries are trying to attract direct European investment. Over recent years the EU has been one of the principal sources of direct investment in the region. In some years it has outstripped all others. Direct investment can help to generate employment, to promote technology transfer and to modernize infrastructure, agriculture and industry. It can also contribute to the economic stability of the recipient country.

5.2. However, the world recession and investment requirements in the EU itself (arising from the internal market) and in other areas (such as Central and Eastern Europe) could lead to a diminishing flow of direct European investment to Latin America. At the same time the wave of privatizations, which attracted major capital flows, has come to an end in a number of Latin American countries. A number of other factors have also been influential, such as the attempted coups d'état in Venezuela, the presidential crisis in Brazil and the referendum against privatization in Uruguay.

5.3. Against this backdrop, EU instruments for promoting cooperation investment, such as the Business Corporation Network and the EU-IIP have an important role to play. More could perhaps be done - e.g. through the EU representations in the various countries - to bring these instruments to the notice of potential investors. Member State financial incentives to encourage companies to invest in Latin America are likewise of primary importance.

5.4. Some Latin American countries have achieved a sufficient level of economic development, stability and economic growth to be eligible for EIB loans and financial support from the Member States for a whole range of projects (e.g. improved energy supplies, trade promotion, industrial cooperation, joint ventures and technology transfer). This is helping to improve the business climate, build mutual confidence and broaden Latin American market prospects for European products.

5.5. The Committee urges the Commission to prepare studies on European investment opportunities in Latin America and, in the light of its findings, to draw up proposals for expanding the range of EU instruments for promoting such investment. Similarly, it calls upon the Member States to take steps to back direct private and public investment in the region. It is also important for Latin America that a favourable business climate be maintained, that an adequate legal framework be created, notably to combat the expropriation practices which have been used in the past, and that sufficient economic and political stability prevail to try to attract and keep foreign investors in the region and encourage the repatriation of capital which had fled the region in the past.

5.6. Past mistakes - which led to the debt crisis and cost the region the 'wasted decade' of the 1980s - must be avoided in the use of public and private funds. It must be remembered that debt is still at a high level and could, in the medium-term, jeopardize the relative stability achieved over the last few years.

6. Regional integration in Latin America

6.1. The Committee hopes that the new initiatives to revitalize the integration process in Latin America will meet with greater success than in previous decades. The NAFTA is undoubtedly an important step in the right direction, and progress is also being made on such integration projects as the Andean Pact, the General Treaty on Central American Economic Integration and MERCOSUR. At present the focus of integration is on trade liberalization. In spite of the obstacles which might arise in the future owing to the stark differences in development levels between some countries, the process of regional integration is fundamental to the future development of the region and its integration into the world economy.

6.2. The challenge facing these integration processes is to boost intra-regional trade and achieve levels of productivity and competitiveness in line with international market requirements, while taking account of the interests of local businesses and the social situation of the majority of the population. The integration process in Latin America will always place the countries concerned in a dilemma: to maintain national sovereignty or create supra-national bodies.

6.3. The Committee is convinced that the integration process in Latin America can only succeed if it has adequate popular support and if consensus is achieved in a number of key areas: respect for human rights, application of basic standards in labour relations and social policy, adequate tripartite consultation and sufficient funds to remedy regional and sectoral imbalances. Only a few of these elements are to be found in the integration agreements which have been concluded or are currently being negotiated. The Committee feels it is essential that the EU cooperation programmes help to reinforce the links between (i) economic development and regional integration and (ii) the defence of human and trade-union rights.

6.4. The Community's own experience of removing internal borders, economic and social cohesion, consultation of the social partners and social and economic regulation could perhaps be of considerable assistance to the Latin American social partners in making up their minds about the advantages and disadvantages of integration in their own region. The Committee therefore urges the EU to create opportunities for cooperation with the social partners in both regions and for an exchange of information and experience by organizing regular meetings with economic and social partners in Latin America. The Committee sees a possible role for itself in this, comparable to its role in the Lomé Convention and cooperation with the Maghreb countries.

6.5. The Committee considers that the EU should maintain and even extend its cooperation programmes intended to boost integration processes in Latin America (e.g. MERCOSUR).

7. The New Agenda for cooperation with Latin America

7.1. EU-Latin America cooperation involved ECU 370 million in 1992. This is a modest amount in view of the serious problems in Latin America and the aid granted to other regions. Although the Committee realizes that development in Latin America will benefit most from adequate EU economic and trade measures, it also considers that development cooperation can act as an important catalyst and stimulus for the economic, social and political development of the continent. The Council, Commission and European Parliament should therefore consider whether there is any scope for increasing development aid to Latin America.

7.2. The Committee believes that the EU must strengthen cooperation in the following traditional fields: job creation, support for industrial and agricultural SMEs, measures to promote investment, support for scientific and technological projects, promotion of agricultural and rural development (including land distribution), better vocational training, combating environmental pollution, the anti-drugs campaign, encouraging development action through NGOs, improvement of the human rights situation, and help for refugees.

7.3. Rural areas should continue to be of particular interest, since they are home to a major part of the population in some Latin American countries. Support for land reform and an equitable distribution of the available land is an important factor, especially in Central America. In this connection the Committee would in particular urge support for small farmers', rural workers' and autochthonous peoples' organizations in order to prevent the outbreak of situations such as recently occurred in Southern Mexico. Land reform is important not only from a social and economic angle, but also for its relevance to the policy of national reconciliation currently being pursued in various - mainly Central American - countries and to the need for environmentally sustainable development. This could culminate in a policy to promote ecologically sustainable economic development, building upon the principles established at the Rio Earth Summit in January 1992.

7.4. Given that poverty is a primary target of cooperation policy, the EU should support social programmes according priority to the poorest urban populations who are the main victims of structural adjustment programmes. Particular support should be given to education and literacy schemes for women, and projects based on equitable development and growth.

7.5. It is recommended that attention be given to carrying out cooperation programmes which encourage tripartism and the participation of the social partners, and safeguard social rights. Such programmes reinforce democracy and help to prevent social conflict.

7.6. Care must be taken to ensure that EU and Member State economic cooperation programmes pay sufficient attention to respect for trade union rights, labour stability, development of social security systems, equal treatment for women in the workplace, and measures against child labour and other forms of child abuse and exploitation. The Committee would here reiterate the importance of including a social clause in the GATT and other trade agreements; the new World Trade Organization should address this as a matter of utmost urgency.

7.7. Despite the Rio Conference, environmental awareness in Latin America is still weak. Economic growth is given priority without sufficiently questioning the sustainability of this growth. Environmental targets are not reached as a result of insufficient or inadequate diagnosis of the problems. The EU should therefore reinforce the aspect of sustainability of the cooperation programmes, amongst other things by applying the criteria concerned more strictly.

7.8. The Committee welcomes the increasing attention in EU policy to the status and opportunities of women. The status and living standards of many women in Latin America have deteriorated considerably, especially under the impact of the structural adjustment programmes; opportunities for children have also been seriously affected. The Committee advocates an increase in funds for projects aimed at enhancing the status of women, improving their living standards and increasing their participation not only in the production process but also in educational and social activities and decision-making.

7.9. Although current relations are dominated by economic questions and the New Agenda, both regions should cultivate their historical, political and cultural ties, e.g. by encouraging projects in areas such as university exchanges and preserving the cultural heritage. Cooperation should be reinforced in the field of education, training, technology and science, where the EU can play an important role on the ground of this common cultural heritage.

7.10. A Community immigration system remains to be adopted. Latin American migration to the EU remains at a relatively low level, although Latin American citizens benefit from more flexible arrangements in some countries, while entry visas are required in others. This issue was not considered by the Schengen Group. The Committee calls for the continuation of this open policy towards Latin America and for clear procedures. It regrets reported cases of irregularities at certain EU border posts. In this connection it should not be forgotten that millions of Europeans from Germany, France, Britain, Italy, Spain and Portugal have migrated to Latin America in the not too distant past. Europeans have been welcomed with open arms in Latin America throughout the last 100 years. This is why the principle of mutual solidarity has an important place in international relations.

Done at Brussels, 26 January 1994.

The Chairman

of the Economic and Social Committee

Susanne TIEMANN

(1) CES 962/92 fin.

(2) OJ No C 75, 26. 3. 1990, p. 13.

(3) OJ No C 75, 26. 3. 1990, p. 13.

(4) OJ No C 221, 28. 8. 1989, pp. 32-38.

(5) OJ No C 19, 25. 1. 1993, p. 99.

(6) OJ No C 108, 19. 4. 1993, p. 41.