26. 3. 90 Official Journal of the European Communities No C 75/13 
Opinion on EC economic and trade cooperation with Latin America 
(90/C 75/03) 
On 29 March 1989 the Economic and Social Committee, acting under the fourth paragraph 
of Article 20 of its Rules of Procedure, decided to draw up an Opinion on EC economic and 
trade cooperation with Latin America. 
The Section for External Relations, Trade and Development Policy, which was responsible 
for preparing the Committee's work on the subject, adopted its Opinion on 19 January 1990. 
The rapporteur was Mr Vasco Cal. 
At its 273rd plenary session (meeting of 31 January 1990), the Economic and Social Committee 
unanimously adopted the following Opinion. 
1. The Community and its Member States must 
make it clear—in the face of events in Eastern Europe, 
the improving international situation, and the emerg­
ence of new poles of attraction in the world—that their 
legitimate commitment to the full implementation of 
the Single Act will not blind them to their responsi­
bilities towards the rest of the world. 
The challenges facing the Community in the pursuit 
of its aims and strategies oblige it to strengthen its 
innovation capacity and promote more appropriate 
forms of cooperation with the different parts of the 
world. 
Economic and trade cooperation between the Com­
munity and Latin America stands at the crossroads. 
Trade 
1.1. Latin America's share of EC external trade has 
fallen steadily in recent years and is now below 5%. 
The main EC imports from Latin America are raw 
materials and foodstuffs (60%) and fuels (15%), while 
the main EC exports are machinery and transport 
equipment (50%) followed by chemicals and manufac­
tures (30%). 
The Community's share of Latin American external 
trade is larger, at around 20%. The trade balance is in 
Latin America's favour, with the EC accounting for 
around 30 % of its trade surplus. 
The asymmetry of Latin America's trade with the Com­
munity—importing industrial products and exporting 
raw materials and fuel—makes it very vulnerable to 
fluctuating commodity prices. This has meant a serious 
deterioration in the terms of trade with the Community 
over the last few years. Over and above these factors and the consequent prob­
lems of market access, the generalized system of prefer­
ences (GSP), which covers up to 70% of other develop­
ing countries' exports, only applies to about 12% of 
Latin American exports to the EC. 
At the same time, intra-regional trade has dropped from 
the 13 % achieved in 1981 to around 10 % of total trade. 
Humanitarian aid 
1.2. The humanitarian aid granted was signally inad­
equate to tackle the serious problems which exist. 
Central America alone—where the bulk of this aid is 
concentrated—has around two million refugees and 
repatriated and displaced persons, out of a total popu­
lation of 25 million. Latin America has also been among 
the regions worst hit by natural disasters. 
The increase in aid for refugees and repatriated and 
displaced persons since 1985, and in aid to combat drug 
abuse since 1987, has brought humanitarian aid over 
the last four years to around 20 million ECU. 
Recent decisions by the Community and various Mem­
ber States to earmark more funds for humanitarian aid 
should help boost EC influence considerably in this 
sphere, and prompt other developed countries to take 
similar action for the benefit of those most in need and 
facing the worst problems. 
In recent years, a specific budget heading has been 
allocated to the fight against drugs, though the amount 
involved has been relatively small (around 5 million 
ECU). Despite the importance of such an action for 
some Latin American countries, the cooperation pro­
gramme to combat drug abuse, advocated by the 
Council of Ministers in June 1987, has still not been 
No C 75/14 Official Journal of the European Communities 26. 3. 90 
fully implemented. In view of recent events in Latin 
America, a sufficiently funded programme of this type 
is of paramount importance. 
Development aid 
1.3. Latin America receives around 10% of all EG 
food aid. 
Around one third of this aid is allocated via non­
governmental organizations (NGO) and international 
agencies; the remainder is supplied directly by the Com­
mission. 
Initially aid took the form of EC food surpluses and 
was sent to countries with a structural food deficit, or 
with shortages caused by drought, natural disasters, or 
armed conflicts. 
However, the allocation of food aid now gives greater 
consideration to local production and marketing con­
ditions. This is thanks to the new regulation, adopted 
three years ago, which divorces food aid from the 
common agricultural policy (CAP) and includes it under 
the objectives of promoting a secure food supply and 
supporting food production in the developing countries. 
Counterpart funds in local currencies are also being 
used increasingly to support development projects 
funded as part of financial and technical cooperation. 
1.4. In budgetary terms, financial and technical 
cooperation is the main instrument of EC cooperation 
with Latin America. It focuses on the poorest countries 
and on the population groups most in need there. 
The EC has no common cooperation policy, and the 
Member States provide around six times as much aid 
as the Community. Funds have thus been thinly spread, 
and the impact of cooperation from the Community 
has of necessity been limited. 
At its meeting of 21 November 1989, the Council recog­
nized the need to strengthen coordination of Com­
munity aid with aid from the Member States, particu­
larly by developing Community/Member State co-
financing, and strengthen coordination with other aid 
donors. 
Financial and technical cooperation is conventional in 
form, and is based on projects which focus on rural 
development and agrarian reform. 
The beneficiary countries and institutions lack the tech­
nical capabilities to devise, present and implement pro­
jects, and the Commission departments have not found 
a satisfactory response to the difficulties caused by this. 
The growing number of development activities has 
not yet been matched by a corresponding increase in technical staff at the EC delegations in Latin America 
and in the Brussels departments; only recently these 
departments were reorganized to improve their 
response to the tasks in hand. The project-based 
approach and the reliance on annual budget allocations 
also make it difficult to administer this form of cooper­
ation efficiently, and have led to under-use of appropri­
ations. 
The main innovation in the field of financial and techni­
cal cooperation has been cooperation with and support 
for sub-regional bodies [Andean Pact and Central 
American Common Market (CACM)]. The EC has 
provided support for pre-investment projects and pro­
grammes, institutional back-up, diagnoses, sectoral 
studies and experts' reports. The recently approved 
programme to boost regional integration and trade 
in Central America includes measures for dismantling 
trade barriers and supporting regional payments and 
EC financial support for the imports needed to boost 
investment; this programme should strengthen even 
further these innovative aspects of financial and techni­
cal cooperation. 
1.5. Cooperation via NGO has had a greater impact 
than might be expected from the limited funds involved; 
this is because NGO are generally more familiar with 
the local conditions in which projects will be carried 
out. 
Most of the micro-projects financed fit in better with 
the socio-economic structure of the beneficiary 
countries, and NGO are playing an increasingly import­
ant role in tackling the problems of project management 
and support. 
Economic cooperation 
1.6. Economic cooperation, which covers trade pro­
motion, energy cooperation, scientific and technical 
cooperation, training, industrial cooperation and 
environment protection, provides the clearest example 
of the gulf between the proclaimed objectives and the 
resources available for their achievement. 
The relevant budget headings have together averaged 
just 4,5 million ECU per year over the last 13 years. 
A new financial instrument was recently set up to 
provide easier access to capital for small firms interested 
in joint investment with local partners, but its results 
have been limited. The European Investment Bank (EIB) 
is still not active in Latin America and this limits the 
potential of this particular financial instrument. 
26. 3. 90 Official Journal of the European Communities No C 75/15 
2. The institutional and political factors which deter­
mine the effectiveness of cooperation with Latin Ame­
rica need to be examined carefully if a more stable 
framework is to be secured for the future. 
Recent developments in Latin America 
2.1. Politically, the restoration of democratic regimes 
and progress towards peace in Central America, 
together with the emergence of embryonic regional 
integration areas, are helping to strengthen Latin Ame­
rica's relations with the Community and its Member 
States. 
However, Latin America's economic difficulties, caused 
by its accumulated foreign debts and the deterioration 
in its terms of trade, are creating social problems which 
will be further aggravated by the region's demographic 
explosion. 
2.2. The matter of Latin America's foreign debt 
(around 400 thousand million dollars) will have to 
be tackled jointly and will require close coordination 
between domestic adjustment and international support 
measures. Without this, all efforts will be in vain. 
An analysis should be carried out of Community sup­
port for efforts made by Latin American nations to 
reduce their debt servicing burdens and the flight of 
capital. Both of these factors considerably reduce these 
countries' ability to import, and impede their normal 
economic and social development. 
The stability of fledgeling democracies is being threat­
ened by the dramatic social consequences of indebted­
ness, economic recession and hyperinflation, the huge 
disparities in income and wealth distribution, and the 
growing poverty of large and particularly vulnerable 
population groups. The Community should increase its 
support for the democratic process, and contribute 
towards more evenly balanced economic development. 
The need for a consistent overall strategy 
2.3. In a Resolution of 22 June 1987 on guidelines 
for strengthening the EC's relations with Latin America, 
the EC Council of Ministers endorsed the need 
'to implement a consistent overall strategy for 
strengthening relations and cooperation between 
the Community and its Member States on the one 
hand and Latin America and its States and regions 
on the other'. 
The Resolution includes the following priority guide­
lines for bolstering cooperation: 
— an improvement in the effectiveness of official devel­
opment assistance, by better coordination with 
Member States' assistance, — support for efforts to achieve regional integration, 
— broader access to the Community market, through 
the GSP and support for diversification of pro­
duction, 
— encouragement of joint ventures, in cooperation 
with the relevant public and private organizations, 
— training of administrators and technicians, 
— activities in the field of information and communi­
cation, with due account being taken of the cultural 
dimension of relations, 
— the possibility of implementing a cooperation pro­
gramme to combat drug trafficking, 
— a new impetus to the flow of export credits, taking 
into account the progress made in Latin American 
countries' adjustment policies. 
2.4. Although the Resolution marked a significant 
step forward, cooperation with Latin America remains 
largely unchanged over two years later, and economic 
and trade relations have not grown significantly 
stronger. 
The institutional framework accentuates the wide var­
iety of cooperation instruments, with a large number 
of annually-funded budget headings. The cooperation 
agreements with Latin American countries do not 
include financial protocols; agreements covering differ­
ent regions and with different objectives exist side-by-
side, and some of them are still first-generation. Political 
cooperation between the Member States and the Com­
mission has still not been put into practice, whilst 
coordination among Latin American nations has been 
limited to the sub-regional integration areas and the 
Rio group. The Community is holding talks with the 
Rio group on the problems of indebtedness and econ­
omic recovery. 
Development cooperation can only be effective if it is 
adapted to the environment and to the particular needs 
of each country or region. This requirement should not, 
however, involve a multitude of cooperation instru­
ments which, in the end, are applied uniformly to a 
variety of situations. 
2.5. If cooperation is to be stepped up effectively, 
relations between the Community and Latin America 
and their respective countries/regions need to be put 
on a broader and more orderly institutional footing. 
When the Council's planned 'consistent overall strat­
egy' is drawn up, the case should be considered for 
No C 75/16 Official Journal of the European Communities 26. 3. 90 
embarking on negotiations in the medium term with a 
view to an overall framework agreement. 
In Latin America, this would improve the prospects 
for strengthening political cooperation, by prompting 
agreement between individual countries on joint pos­
itions. 
In the Community, Member States would be more 
closely involved in the planning and preparation of the 
negotiations; this would have a positive spin-off effect 
on other on-going activites and on the coordination of 
Member State and Community initiatives. 
The main subjects for cooperation with Latin America 
would be settled in joint negotiations which would fix 
the objectives, principles and methods. 
3. The completion of the Internal marked and recent 
economic trends in the Community improve the pros­
pects for effective, mutually beneficial cooperation 
between the EC and Latin America. 
Impact of the Internal Market 
3.1. The completion of the Internal Market may 
boost trade with the rest of the world (see the ESC 
Opinion by Mr Beltrami, OJ No C 221, 28. 8. 1989). 
A number of measures may benefit Latin American 
exports: the phasing-out of national quota restrictions, 
safeguard measures, regional tariff quotas (under the 
GSP) and volume quotas (under the bilateral textiles 
agreements); the removal of non-tariff barriers, with 
particular reference to technical regulations and stan­
dards; the liberalization of public procurement and the 
freedom to provide services. 
However, those countries (including the countries of 
Latin America) which find it most difficult to gain 
access to the Community market and respond to market 
changes may suffer from the keener competition. The 
role of trading companies could be stepped up in order 
to encourage Latin American exports and international 
marketing of small and medium-sized enterprises (SME) 
products. 
International trade and agriculture 
3.2. The fact that agricultural products in raw or 
processed form make up the bulk of Latin American 
exports to the EC limits the scope for short-term 
growth. The present General Agreement on Tariffs and Trade 
(GATT) Uruguay Round multilateral negotiations may 
lead to gradual cuts in export subsidies, to the advan­
tage of some Latin American exports. 
The situation in this sector has led financial and techni­
cal cooperation to give priority to support for agrarian 
reform and peasant farming for local consumption. 
This approach must be strengthened so as to avoid 
subsidizing large-scale export crops. 
The Community's recent decision to support the drive 
to boost intra-regional trade in Central America will 
also help countries in the region to sell their surplus 
farm produce. Such three-sided cooperation has enor­
mous potential and can gradually be expanded and 
consolidated. 
Priorities for the funding of economic cooperation 
3.3. Efforts to diversify Latin America's exports must 
be supported by existing cooperation instruments, 
which need greater funding. 
Industrial cooperation should play a more prominent 
and coordinated role, with investment being promoted 
and greater use being made of new forms of financing 
(risk capital, joint ventures, etc.). Non-repayable sub­
sidies should continue to play an important part in 
development assistance, but they are clearly insufficient 
and are not geared to current needs. 
The EIB should assume a clear role in Latin America. 
EIB support (both financial and technical) should be 
available for the development of regional and sub-
regional financial institutions, thus allowing them, inter 
alia, to act as go-betweens responsible for direct man­
agement of subsidies and global loans. EC financial 
assistance must be more closely coordinated with that 
from other sources such as the World Bank and the 
Inter-American Development Bank. 
The Community's track record in assisting its own 
SME sector can help to create a better framework for 
cooperation between Latin American small firms. The 
provision of clear, detailed information about the possi­
bilities offered by the various economic cooperation 
instruments is vital in order to increase Community 
involvement and motivate the economic and social 
operators who have a key role to play in this form of 
cooperation, which is the form best suited to Latin 
America's development level. 
26. 3. 90 Official Journal of the European Communities No C 75/17 
Planning and partnerships in technical and financial 
cooperation 
3.4. Financial and technical cooperation needs to be 
better planned so that it is more closely geared to the 
development policies of the beneficiary countries. 
The rise in the number of EC delegations in Latin 
America and the expansion of their technical capabili­
ties, together with the use of indicative national pro­
grammes negotiated by the Commission and the coun­
try concerned, will improve the project- and pro­
gramme-approval procedures, make cooperation more 
effective and allow a more accurate regular assessment 
of this cooperation. 
It is vital to make EC economic and social operators 
aware of these indicative programmes in order to ensure 
greater transparency and better coordination with the 
cooperation efforts of Member States, institutions and 
firms active in Latin America. A guarantee of Com­
munity budget funds in the medium term is essential for 
dialogue with the authorities in the countries concerned. 
In the field of financial and technical cooperation, the 
Community could consider specific sectoral or global 
support for those imports most urgently needed by 
established firms lacking hard currency. 
Staff training 
3.5. Greater priority—and hence adequate funding 
—should be attached to cooperation in the training of 
administrative and managerial staff. The Latin Ame­
rican countries must also step up their basic education 
policies, as this is a crucial factor in economic and 
social development. 
Better trained local managerial staff, in both the public 
and private sectors, are vital for the countries involved 
and are also important for the future of EC-Latin 
American economic and trade relations. 
Done at Brussels, 31 January 1990. Scientific and technical cooperation also needs to be 
stepped up. More Latin American researchers should 
be given the chance to train in the EC and take part in 
Community and European research and development 
(R&D) programmes. 
The rapid advance of new technologies is changing 
world production and trade patterns. Priority areas for 
scientific and technical cooperation with the developing 
nations should be expanded and better geared to the 
needs of Latin American researchers and managers. 
Cooperation at a sub-regional level 
3.6. The CACM and Andean Pact agreements cover 
economic and trade cooperation. While providing a 
better framework for cooperation, these agreements do, 
however, lack the instruments and resources needed to 
achieve their declared objectives. 
The lack of financial protocols in these agreements and 
the need to rely on budget allocations fixed from year 
to year independently of the agreements, limit the effec­
tiveness of this type of cooperation and make it imposs­
ible to plan beyond the short term. 
With its experience of economic integration, the EC 
is well placed to offer technical back-up for the sub-
regional bodies of Latin America, as the recently 
approved programme for Central America shows. 
Community funding should give priority support for 
efforts to increase sub-regional economic integration. 
Development and the environment 
3.7. Environmental issues demonstrate the interde­
pendence of all of the world's regions. Whilst these 
issues are clearly gaining importance, it is equally clear 
that in many countries the environment is deteriorating 
rapidly. On 21 November 1989, the Council outlined 
key ways to incorporate environmental considerations 
in development cooperation policy. It is urgently necess­
ary to back up these declarations of good intent with 
the appropriate funding. 
The Chairman 
of the Economic and Social Committee 
Alberto MASPRONE