Communication from the Commission to the European Parliament and the Council on the Commission's objectives, in the framework of the relations between the European Union and Latin America, in view of the 3rd Summit of Heads of State and Government of the European Union and Latin America and the Caribbean to be held in Guadalajara (Mexico) on 28 May 2004.
Date: 2004-03-30
Institutions: European Commission
Subjects: Caribbean Islands, EU relations, Latin America, foreign policy, summit meeting

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.4.2004 
COM(2004) 220 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

on the Commission’s objectives, in the framework of the relations between the European 
Union and Latin America, in view of the 3rd Summit of Heads of State and  
Government of the European Union and Latin America and the Caribbean to be held in 
Guadalajara (Mexico) on 28 May 2004. 

EN 

   EN 

 
 
 
  
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

on the Commission’s objectives, in the framework of the relations between the European 
Union and Latin America, in view of the 3rd Summit of Heads of State and  
Government of the European Union and Latin America and the Caribbean to be held in 
Guadalajara (Mexico) on 28 May 2004. 

1. 

THE  RELATIONS  BETWEEN  THE  EUROPEAN  UNION  AND  LATIN 
AMERICA 

This  Communication  defines  the  objectives  of  the  Commission  in  the  framework  of  the 
relations between the European Union and Latin America in view of the 3rd Summit of Heads 
of State and Government of the European Union and Latin America, to be held in Guadalajara 
(Mexico)  on  28  May  2004.  Nonetheless  this  Communication  includes  some  specific 
references  to  the  Caribbean  countries  whose  participation  at  the  Summit  is  of  utmost 
importance for the strengthening of the bi-regional partnership.  

The Guadalajara Summit will be the first Summit of Heads of State and Government in which 
the  enlarged  European  Union  and  Latin  American  countries  will  have  the  opportunity  to 
assess the current state of their bi-regional relations.  

These  relations,  which  aim  at  contributing  to  peace,  political  stability  and  economic 
development in the region, are of utmost importance for the European Union. 

Social  and  political  stability  in  Latin  America  is  vital  for  global  peace  and  security.  The 
European  Union  is  contributing  to  the  creation  and  consolidation  of  structural  stability  in 
Latin America through political dialogue, cooperation and economic relations.  

The  European  Union  is  interested  in  developing  a  political  partnership  with  Latin  America 
which promotes global governance and strengthening multilateralism. It is also interested in 
intensifying the dialogue with the region on the key issues discussed at major UN events and 
meetings.  Latin  America’s  deep  commitment  to  multilateralism  was  reaffirmed  at  the  last 
Presidential  summit  of  the  Rio  Group  in  Cusco  (Peru)  which  underlined  “the  need  to 
reactivate initiatives related to the reform and update of the United Nations system, especially 
in collective security matters”.  

The European Union is Latin America’s second most important trading partner. The European 
Union has gradually strengthened its economic and trade links with Latin America, resulting 
in  trade  figures  that  more  than  doubled  between  1990  and  2002.  European  Union  imports 
from  Latin  America  increased  from  €  26.7  to  €  53.7  billion,  and  exports  to  the  region  rose 
from  €  17.1  to  €  57.5  billion1.  This  positive  trend  is  bound  to  be  reinforced  thanks  to  the 
enlargement of the European Union which will become, as from 1st May 2004, an integrated 
market of 455 million inhabitants. The European Union will thus become the biggest market 

1 

These  figures  include  the  Andean  Community,  the  Caribbean  region,  Central  America,  Chile,  Cuba, 
Dominican Republic, Haiti, Mercosur and Mexico 

2 

 
 
  
 
                                                 
in  the  world,  offering  enormous  possibilities  for  Latin  American  countries  to  sell  their 
products to a wider range of consumers. 

The European Union is also the most important source of foreign direct investment (FDI) for 
Latin  America.  Flows  of  European  FDI  to  Latin  America  peaked  in  2000  and  have  since 
diminished. However, the total stock of European investment in Latin America grew from € 
176.5 billion in 2000 to € 206.1 in 20022. 

Last, the European Union is the leading donor of development assistance for Latin America. 
In addition to the contributions from the Member States, since 1996 the European Community 
budget  for  Latin  America  has  totalled  more  than  €  500  million3  per  year.  Furthermore, 
between 2000 and 2003 the European Investment Bank invested € 1,104 million in the form 
of  loans  for  projects  of  mutual  interest  to  the  countries  of  the  European  Union  and  Latin 
America.  

2. 

THE RIO DE JANEIRO AND THE MADRID SUMMITS 

Rio de Janeiro  

The  first  Summit  between  the  Heads  of  State  and  Government  of  Latin  America,  the 
Caribbean and the European Union was held in the city of Rio de Janeiro on 28 and 29 June 
1999. 

The Summit was convened as a result of the political will to enhance bi-regional relations and 
its objective was to strengthen political, economic and cultural understanding between the two 
regions in order to develop a strategic partnership.  

The three strategic dimensions of this partnership are: a fruitful political dialogue respectful of 
international law and based on the strong attachment of both regions to multilateralism; solid 
economic  and  financial  relations  based  on  a  comprehensive  and  balanced  liberalisation  of 
trade  and  capital  flows;  and  more  dynamic  and  creative  co-operation  in  the  educational, 
scientific, technological, cultural, human and social fields.  

This partnership is built on shared values and aims to contribute to the furthering of common 
objectives  such  as  strengthening  representative  and  participatory  democracy  and  individual 
freedom,  the  rule  of  law,  good  governance,  pluralism,  international  peace  and  security, 
political stability and building confidence among nations. 

Madrid 

On 17 May 2002, three years after the Rio de Janeiro Summit, the second Summit of Heads of 
State and Government of the European Union, Latin America and the Caribbean took place in 
Madrid. This Summit consolidated the process which begun in Rio de Janeiro and confirmed 
both regions’ commitment to the development of the bi-regional strategic partnership. 

2 

3 

These  figures  include  the  Andean  Community,  the  Caribbean  region,  Central  America,  Chile,  Cuba, 
Dominican Republic, Haiti, Mercosur and Mexico 
These  figures  include  the  Andean  Community,  the  Caribbean  region,  Central  America,  Chile,  Cuba, 
Mercosur and Mexico 

3 

 
 
  
 
                                                 
The  decision  to  develop  a  more  efficient  political  dialogue  with  the  aim  of  bringing  the 
positions  of  both  regions  closer  together  on  international  issues  highlights  the  strategic 
dimension  of  this  partnership.  The  Madrid  Summit  established  new  modalities  of  dialogue 
and  consultation  such  as  regular  meetings  of  Heads  of  Mission  in  New  York,  Geneva  and 
Vienna.  

The conclusions adopted during the Summit reflect the convergence between the two regions 
on  themes  such  as  security,  disarmament,  terrorism,  the  fight  against  drugs  and  organised 
crime, and the eradication of small arms. 

The Summit marked the conclusion of the Association Agreement with Chile, a particularly 
important result of the Madrid gathering.  

The Heads of State and Government also noted the progress achieved in the negotiations with 
Mercosur  and  decided  to  call  a  Ministerial  meeting  in  order  to  give  the  negotiations  new 
impetus. 

One  of  the  most  important  themes  addressed  during  the  Summit  was  the  future  of  relations 
between  the  European  Union  and  the  countries  of  the  Andean  Community  and  Central 
America.  The  Madrid  Summit  declaration  gave  a  political  mandate  for  the  negotiation  of 
political  dialogue  and  cooperation  agreements  with  these  two  regions.  The  Madrid  meeting 
also opened the  prospect of the  negotiation of Association Agreements, including free trade 
areas. Two pre-conditions were established in this respect: the completion of the multilateral 
Doha development round, and the achievement of a sufficient degree of regional integration. 
The  political  and  co-operation  agreements  were  conceived  to  strengthen  EU  support  for 
attaining higher levels of regional integration, which would contribute towards the fulfilment 
of the regional integration pre-condition. 

The  Summit  also  confirmed  both  parties’  significant  interest  in  strengthening  bi-regional 
cooperation. In this context the Heads of State and Government underlined the importance of 
the  @LIS  and  ALBAN  programmes.  These  programmes  aim  at  strengthening  the  links 
between  the  European  Union  and  Latin  America  in  the  fields  of  information  society  and 
higher education respectively. 

Follow up to the Madrid Summit 

In  Guadalajara  both  regions  will  report  on  progress  made  and  actions  undertaken  since  the 
Madrid  Summit  in  the  framework  of  EU-Latin  American  relations.  Substantial  progress  has 
been made towards fulfilling the Madrid commitments. 

The European Union and Chile signed an Association Agreement in November 2002.  

The  European  Union  also  concluded  negotiations  of  Political  Dialogue  and  Cooperation 
Agreements with Central America and the Andean Community, signed by both sides in Rome 
in December 2003.  

With  regard  to  the  EU-Mercosur  negotiations,  two  ministerial  meetings  as  well  as  several 
negotiating  rounds  have  been  held.  The  ministerial  meetings  agreed  on  a  work  programme 
that  should  now  allow  negotiations  to  be  possibly  concluded  by  the  end  of  this  year  if 
circumstances at the Summit allow for it.  

Turning  to  cooperation,  it  is  worth  highlighting  that  since  the  launch  of  the  ALBAN 
scholarships  programme  at  the  Madrid  Summit,  a  total  of  251  grants  have  been  awarded  to 

4 

 
 
  
 
Latin  American  post-graduate  students.  Under  the  programme  for  the  promotion  of 
information  technology,  19  demonstration  projects  began  in  October  2003  with  the 
participation of 103 organisations from the European Union and 109 from Latin America. 

New initiatives have been launched both at regional and sub- regional level:  

At  sub–regional  level  EU  cooperation  has  focused  on  providing  support  for  regional 
integration.  This  includes  a  project  for  "Harmonisation  of  Technical  Standards,  Technical 
Regulations and Conformity Assessment Procedures", aimed at facilitating the free circulation 
of  goods  between  Mercosur  member  countries,  and  between  Mercosur  and  the  European 
Union; a trade- related technical assistance programme to support the process of the creation 
the Common Andean Market; and a programme supporting the Central American integration 
whose  specific  objective  is  to  increase  the  capacity  of  the  Central  American  Integration 
System  (SICA)  and  of  civil  society  to  strengthen  and  deepen  the  process  of  integration  and 
co-operation.  

At  regional  level  the  Commission  decided  to  contribute  to  the  Programme  for  Democratic 
Government  in  Latin  America  (PRODDAL)  led  by  the  UNDP.  Also,  the  Commission  has 
approved  a  programme  aimed  at  the  creation  of  the  Observatory  of  European  Union-Latin 
America  relations:  a  network  of  European  and  Latin  American  institutes  to  achieve  a  better 
understanding  of  regional  and  sectoral  challenges  in  the  framework  of  our  relations.  The 
Commission  set  up  a  web-mechanism  for  the  presentation  and  dissemination  of  EU-Latin 
American and Caribbean bi-regional projects.  

Furthermore, and in accordance with the decision taken by the Heads of State at the Madrid 
Summit,  a  bi-regional  seminar  to  carry  out  an  integrated  analysis  of  the  different  issues  of 
migration between the two regions was organised in Quito. 

Also civil society has played an important role in contributing to strengthening the bi-regional 
partnership by reinforcing the links between both regions’ civil society organisations and by 
conveying to the Summit its views on the most relevant aspects of our partnership.  

3. 

COMMISSION’S PRIORITIES FOR THE GUADALAJARA SUMMIT 

The Guadalajara Summit will be held in a more favourable economic climate than that of the 
Madrid Summit in 2002, a year in which Latin American recorded negative economic growth 
(-0.4%). According to the UN’s Economic Commission for Latin America and the Caribbean 
(ECLAC), in 2003 Latin American growth reached 1.5%, exports grew by 8%, inflation was 
down to 8.5% from 12.2% in 2002, and for the first time in 50 years the current account of 
Latin America as a whole showed a surplus (0.4% of GDP).  

In  2004,  the  regional  economy  is  expected  to  grow  by  3.5%,  leaving  behind  the  preceding 
"lost"  six-year  period,  and  gradually  entering  into  an  expansionary  cycle.  For  the  first  time 
since 1997, there is no Latin American economy for which negative growth is projected.  

However,  these  figures  do  not  leave  much  room  for  complacency.  Growth  in  2003  was 
modest if compared with the growth of other regions such as East Asia, which that grew by 
6.1%  in  the  same  period.  And  the  picture  of  recovery  is  still  uneven:  the  robust  growth  of 
Argentina  and  Costa  Rica,  for  example,  contrasted  with  the  slower  growth  of  Brazil  and 
Mexico.  

5 

 
 
  
 
The resurgence of social tensions in several countries of the Latin American region, and the 
rise  of  the  number  of  people  living  in  poverty,  cast  some  shadows  on  the  prospects  of 
consolidating the trend of economic recovery over the coming years. 

In addition, there are other reasons for concern such as, the increasing political instability in 
the Andean region. After the crisis of October 2003 and the resignation of former president 
Sanchez  de  Lozada,  Bolivia  is  in  a  critical  situation;  Venezuelan  society  continues  to  be 
bitterly divided between the fervent supporters of President Chavez and those who want him 
out  of  power;  in  Ecuador,  President  Gutierrez  lost  the  support  of  the  country’s  powerful 
indigenous  movement;  and  Colombia  remains  embattled,  fighting  a  war  against  guerrilla 
forces, paramilitary groups funded by extortion, kidnapping and drug money and sometimes 
indistinguishable from drug gangs. 

The economies of Central America have on average been performing better than those of the 
rest of the Latin America. However democratic policies are jeopardized by criminal violence 
and corruption. 

The Madrid Summit stressed that the top common priority of both regions is to strengthen the 
multilateral system on the basis of the purposes and principles of the United Nations Charter 
and  international  law.In  particular,  we  underline  the  importance  of  the  WTO  as  the  main 
forum  for  promotion  of  trade  liberalisation  and  the  establishment  of  the  basic  rules  and 
disciplines for the necessary regulation of the international trade system. The removal of trade 
barriers,  based  on  stronger  more  transparent  multilateral  rules,  allows  everyone  to  benefit 
from  the  comparative  advantages  of  their  respective  economies  and  fosters  competitive 
integration in world trade and reduces the scope for protectionism. . The Doha Development 
Agenda  launched  in  2001  should  bring  benefits  to  all  WTO  members  by  increasing 
international trade and economic growth. This new round of negotiations should contribute to 
integrating  developing  countries  into  the  world  economy,  including  through  special  and 
differential treatment provisions, fully taking into account the priorities and concerns of our 
citizens  and,  promoting  sustainable  development.  Both  regions  therefore  supported  the 
relaunch of the DDA negotiations decided in December 2003 after the setback of the Cancun 
Ministerial (September 2003). In view of its communication endorsed in December 2003 on 
"reviving the DDA - an EU perspective" and of recent declarations made by Latin American 
governments,  the  Commission  expects  the  Guadalajara  Summit  to  give  renewed  strong 
political support to the on-going negotiations, which should bring about significant progress 
by the Summer.  

Social cohesion 

According to the ECLAC, the number of people living in poverty Latin America reached 227 
million  in  2003,  accounting  for  44.4%  of  the  population4  This  percentage  is  higher  that  for 
Eastern Europe, the Middle East and North Africa, even though Latin America has a higher 
GDP per capita than those regions.  

Political  instability  and  social  tensions  are  inextricably  linked  and  are  partially  the  result  of 
the high levels of inequality, poverty and exclusion that prevail in Latin America. Inequality, 
poverty  and  exclusion  weaken  democracy  and  threaten  peace  and  stability.  Economic 
exclusion  engenders  political  exclusion  and  vice-versa.  By  endangering  social  justice, 
inequality provokes social unrest and discontent. 

4 

“2003 Preliminary overview of the economies of Latin America and the Caribbean” 

6 

 
 
  
 
                                                 
Social  tensions  and  economic  performance  are  also  closely  linked,  since  uncertainty  of  any 
kind negatively affects the behaviour of financial markets and investors. 

Addressing these problems with the objective of increasing the levels of social cohesion is an 
overriding  priority  for  Latin  America.  Latin  America  can  no  longer  postpone  taking  bold 
measures  in  social  and  fiscal  policies  to  respond  to  the  signals  of  distress  coming  from  a 
significant part of the population. 

The Commission expects that concrete decisions will be taken in the field of social cohesion 
in Guadalajara. This is explored in more detail in section 4 of this communication. 

Regional integration 

In order to take full advantage of the favourable perspectives identified by ECLAC, it is also 
necessary  to  achieve  a  greater  degree  of  economic  integration  between  the  countries  of  the 
region. 

The  insufficient  degree  of  economic  integration  in  Latin  America  can  be  appreciated  by 
looking  at  the  importance  of  intra-regional  trade  as  a  proportion  of  all  trade;  for  Latin 
America  the  proportion  is  15.4%,  while  for  North  America  it  is  40.3%,  Asia  48.9%  and 
Western Europe 67.3%.  

This  shortfall  of  effective  regional  integration  constitutes  a  serious  obstacle  to  the 
development of the region. Specifically, further integration is required if Latin America is to 
attract more foreign direct investment (in 2003 FDI was US$29 billion, 25% less than in 2002 
and substantially below the US$38 billion that was the average for the period 1990-2002) and 
have a greater capacity to withstand and respond to external shocks.  

The shortfall of effective regional integration is also an obstacle for deeper EU-Latin America 
relations. The EU has supported and continues to support the regional integration processes in 
Mercosur, Central America and the Andean Community. As far as Central America and the 
Andean Community are concerned, the Madrid declaration implies that further progress with 
regard  to  regional  integration  is  one  of  the  key  conditions  for  the  launch  of  negotiations  on 
possible  Associations  Agreements.  This  progress  is  also  needed  for  the  satisfactory 
conclusion of the current negotiations with Mercosur.  

The  Guadalajara  Summit  should  send  a  clear  message  with  regard  to  the  progress  that  is 
necessary in the field of regional integration and should give a new impetus to sub-regional 
integration processes in Latin America. These themes are examined in greater detail in section 
5.  

4. 

SOCIAL COHESION  

During the 1990’s Latin American countries began a  process of economic restructuring  and 
policy  reforms  and  took  substantial  steps  towards  further  democratisation.  However,  the 
benefits  of  democracy  and  development  have  not  yet  been  felt  by  large  sections  of  the 
population.  Inequality,  poverty  and  exclusion  are  a  common  pattern  in  all  Latin  American 
countries; they constitute a hindrance to economic development and they generate instability 
and discontent across the region. 

It is urgent to deal with these problems in depth and move towards more political and social 
stability in the region.  

7 

 
 
  
 
Inequalities and exclusion in Latin America  

According to the Inter American Development Bank5, Latin America consistently records the 
highest  average  level  of  inequality  of  any  region  in  the  world.  The  unbalanced  income 
distribution patterns are evident when compared to other regions. The Gini Coefficient which 
measures inequality in terms of income distribution is higher in Latin America (0.51) than in 
South  Asia  (0.37)  and  Eastern  Europe  (0.29).  In  the  late  1990s,  the  wealthiest  20%  of  the 
population  received  some  60%  of  the  income,  while  the  poorest  20  percent  only  received 
about 3 %. 

Compounding the problem of inequality is social exclusion. Socially excluded populations in 
the region, by gender, age, race, ethnicity, disability and HIV/AIDS, migration status or other 
excluding  features,  share  poverty,  suffer  multiple  and  cumulative  disadvantages,  stigma  and 
discrimination. Socially excluded groups lack a voice and influence over the policy processes 
that shape structural reforms. 

Their cost for the region 

Inequality  and  exclusion  have  a  high  cost  for  the  region.  They  not  only  slow  the  pace  of 
poverty  reduction  and  hamper  sustainable  development,  but  also  fuel  political  and  social 
instability. 

Again according to the Inter American Development Bank, high income inequality may result 
in  higher  poverty  levels  since  the  poor  obtain  a  smaller  share  of  total  income.  If  LAC’s 
income  distribution  corresponded  to  the  expected  distribution  for  a  region  of  its  level  of 
development,  the  number  of  poor  people  would  be  reduced  by  half.  Reductions  in  equality 
can improve the contribution of economic growth to poverty reduction.  

Social inequalities and exclusion prevent wide sectors of society from contributing to growth 
through consumption, savings and investment. This limits the expansion of internal markets. 
Inequality and exclusion reduce growth by reducing the opportunities of poor people and poor 
regions  to  improve  their  productivity  and  earnings,  as  well  as  by  reducing  competition, 
international competitiveness and efficiency in resource allocation.  

Improving  the  low  productivity  of  poor  and  excluded  workers,  which  in  many  countries 
comprise more than half of the labour force, should be key to enhancing prospects for growth 
in  Latin  America.  For  example,  rough  estimates  of  the  growth  impact  from  expanding  the 
educational  and  labour  market  opportunities  of  excluded  groups  show  that  Bolivia’s  GDP 
could increase by 36 percent, that of Brazil by 13 percent and Guatemala’s by 14 percent. 

Inequality  and  social  exclusion  have  been  linked,  in  LAC  as  well  as  in  other  regions,  with 
social upheaval and threats to public safety, especially in countries with high ethnic or racial 
diversity.  A  lack  of  direct  attention  to  problems  of  inequality  and  social  exclusion  may 
translate  into  social  and  political  instability  and  low  growth.  Inequality  and  exclusion  are 
closely  associated  in  vicious  circles  with  each  other  and  with  increased  poverty,  reduced 
growth and social and political crises. 

5 

American  Development  Bank,  prepared  a  background  document  for  the  EC/IADB  Seminar  on  social 
cohesion in Latin America and the Caribbean: “Inequality, exclusion and Poverty in Latin America and 
the Caribbean: Implications for Development” 

8 

 
 
  
 
                                                 
 
The Commission’s initiative 

At  the  last  ministerial  meeting  between  the  EU  and  the  Rio  Group  (Vouliagmeni,  March 
2003), the Commission proposed to place social cohesion at the centre of bi-regional relations 
between the EU and Latin America and suggested that social cohesion should be one of the 
main  topics  at  the  Guadalajara  Summit.  The  Commission  announced  the  organisation  of  a 
joint European Union/Inter American Development Bank seminar on social cohesion. And it 
also  announced  that  it  would  adopt  a  regional  programme  to  promote  the  exchange  of 
experiences and best practice between the both regions. 

In the context of the Guadalajara Summit, and in a framework of close cooperation with the 
Inter  American  Development  Bank,  the  Commission  proposes  that  the  Heads  of  State  and 
Government take concrete decisions aimed at: 

Encouraging  Latin  American  countries  to  adopt  sound  and  efficient  policies  to 

A. 
increase social cohesion by reducing poverty, inequalities and exclusion. 

In this context three main sectors are concerned:  

Democratic governance 

According  to  the  last  Latinobarometro  survey  only  one  in  five  Latin  Americans  trusts  their 
judicial  system,  only  17%  trust  their  parliament  or  congress  and  only  11%  trust  political 
parties.  Democracy  is  perceived  as  having  failed  to  widen  access  to  public  goods  such  as 
equality  before  the  law.  It  is  not  possible  to  develop  inclusive  societies  if  large  parts  of  the 
population feel excluded from the political system. Measures that ought to be taken by LAC 
governments in this field include improving the functioning of electoral systems, guaranteeing 
the  independence  of  the  judiciary,  improving  the  functioning  and  representative  nature  of 
political parties.  

Social policies 

According  to  the  Inter-American  Development  Bank,  the  last  decade  witnessed  substantial 
gains  in  social  programs.  However,  social  sector  reforms  did  not  overcome  implementation 
problems nor did they succeed in significantly expanding access to quality health, including 
safe  drinking  water  and  nutritional  health,  education  and  housing  services  for  the  poor, 
thereby leaving many effectively excluded. 

Therefore, sound and effective polices should urgently be implemented to increase access to 
quality health education and housing, to improve social protection systems, and to implement 
employment policies aimed at reducing segregation and discrimination across labour markets. 

It is necessary that social policies and programmes go beyond achieving universal access to 
services to include the goals of equity and quality in education, health and housing, especially 
for  the  poor  and  excluded.  Inequality  not  only  appears  between  those  who  have  access  to 
services and those who do not, but also between those who have access to good services and 
those that only benefit from poor quality services. 

The  management  of  social  policies  should  be  improved,  as  should  the  effectiveness  and 
efficiency of public spending.  

Public finance and fiscal policy 

9 

 
 
  
 
High levels of inequality are closely linked to unfair and inefficient fiscal policies. Taxation 
policy  has  a  special  significance  in  LAC  because  of  its  potential  to  contribute  towards  the 
development  of  effective  systems  of  democratic  rule  that  effectively  include  the  poor  and 
disadvantaged. While weak states are deplored as one of the most serious shortcomings of the 
region, LAC government spending is low, partly because of limited institutional capacity for 
tax  enforcement  and  inefficient  tax  collection.  In  comparison  to  industrial  economies, 
government revenue in LAC countries relies more heavily on value added taxes than income 
taxes and property taxes. This hampers the redistributive role that the tax system should play. 

LAC  governments  should  consider  fiscal  reforms  in  order  to  increase  their  tax  base,  and  in 
particular to promote equity and to allow for adequate levels of social spending.  

Encouraging  the  international  community,  including  international  financial 

B. 
institutions, to support the measures referred to above.  

International  co-operation  must  support  these  efforts,  while  respecting  the  principle  of 
ownership that implies that the countries concerned – their governments, businesses and civil 
societies – must lead the quest to build greater social cohesion. LAC countries should include 
all  measures  relevant  to  the  reduction  of  poverty,  inequality  and  social  exclusion  in  their 
national  plans.  And  international  support  and  cooperation  should  be  based  on  these  plans. 
Reform  programs  supported  by  the  international  community  and  in  particular  by  the 
international  financial  institutions  should  be  carefully  screened  for  their  impact  on  social 
cohesion  and  social  stability.  And  there  must  be  more  and  better  coordination  between  all 
donors including EU Member States. 

International financial institutions and donors should support more counter-cyclical fiscal and 
monetary  policies  to  deal  with  the  negative  impact  of  recessions  as  well  as  support  social 
investments  from a long  term inequality reduction  perspective.  If growing  economies are to 
improve  social  cohesion  through  the  fight  against  poverty,  exclusion  and  inequality,  thus 
laying  the  foundations  of  sustained  and  stable  growth,  international  financial  institutions 
should pay attention to these aspects in the negotiation of macro-economic stability objectives 
for each country.  

Intensifying cooperation between the European Union and Latin America in the 

C. 
field of social cohesion. 

The principle of social cohesion lies at the core of the European Union's values. And that is 
also why the European Councils in Lisbon and Feira made the promotion of social cohesion 
an  essential  element  in  the  Union's  strategy  to  achieve  its  objective  of  becoming  the  most 
competitive and dynamic knowledge-based economy in the world by 2010.  

The  enlargement  of  the  EU  to  include  10  new  Member  States  on  1  May  2004  will  require 
renewed  efforts  to  promote  social  cohesion  within  the  Union.  The  European  Union  has 
developed social policies and working methods that have proved successful. The experience 
gained by the European Commission and Member States in this field could be very useful for 
Latin America.  

Cooperation between the European Union and Latin America should focus on the sharing of 
this  experience  and  the  transfer  of  European  know-how.  Attention  should  be  given  to 
experiences of the development, implementation and evaluation of social and fiscal policies in 
favour of social cohesion. 

10 

 
 
  
 
Before  the  Summit  a  programme  of  €  30  million  aimed  at  facilitating  the  transfer  of 
experience  and  know-how  between  public  administrations  of  both  regions  in  the  fields  of 
health, education, taxation and justice will be submitted to the Commission for approval. The 
programme  will  favour  the  development  of  networks  of  public  administrations  dealing  with 
these policy sectors.  

In deciding how to develop a European perspective on issues of poverty and social exclusion, 
the  Lisbon  European  Council  chose  to  draw  on  the  experience  of  the  European  strategy  for 
employment which has been in place since 1997. It thus adopted what is known as an Open 
Method  of  Coordination.  This  method  allows  for  dialogue,  exchange  of  experience, 
establishment of common objectives and evaluation of policies in areas relevant for fighting 
exclusion. The Commission encourages  the  countries of Latin America to launch a regional 
process which will create a new dynamic for dialogue and exchanges between countries of the 
region,  allowing  them  to  learn  from  each  other’s  successes  and  failures.  If  the  countries  of 
Latin  America  were  to  decide  to  establish  such  a  mechanism,  the  Commission  would  be 
willing  to  provide  and  finance  technical  support.  In  this  context  it  is  also  worth  noting  the 
importance of social dialogue. 

The Working Group 

These objectives have been discussed in the working group on social cohesion set up by the 
Commission together with the Inter-American Development Bank after the seminar on social 
cohesion that took place in June 2003 in Brussels. Other institutions also participated in the 
group,  such  UNDP  and  ECLAC,  and  various  Latin  American,  Caribbean  and  European 
experts. 

The group met twice (Mexico, October 2003 and Brussels, February 2004) and adopted a set 
of  recommendations  which  inspire  those  proposed  by  the  Commission  and  detailed  above. 
These proposals have been addressed to the Senior Officials tasked with the preparation of the 
Summit.  If  approved,  these  recommendations  will  be  submitted  to  the  Heads  of  State  and 
Government at the Guadalajara Summit.  

The Commission encourages the Heads of State and Government to adopt these proposals at 
the Summit. They will provide a social cohesion agenda based on clear guidelines as well as 
fresh political support to shape policies oriented towards greater social cohesion.  

5. 

REGIONAL INTEGRATION  

Importance of regional integration in LA 

The other key subject the Commission would like the Guadalajara Summit to focus on is the 
importance  of  deepening  regional  integration  throughout  Latin  America.  From  the 
Commission’s  perspective,  deepening  the  process  of  regional  integration  throughout  Latin 
America is not an end in itself. In economic terms it , will help the region fulfil its potential 
and  facilitate  the  insertion  of  the  individual  countries  into  the  international  markets. 
Politically,  it  will  allow  Latin  America  to  become  a  more  influential  player  on  the  global 
scene. 

The EU cannot be indifferent to achievements in the field of regional integration: we stand to 
gain  from  having  a  strong  partner  on  the  other  side  of  the  Atlantic  with  whom  we  can 
continue to expand our strategic alliance. 

11 

 
 
  
 
EU experience has taught us that the economic benefits of regional integration are substantial: 
bigger  markets  are  more  attractive  to  foreign  investment;  economic  integration  improves 
competitiveness;  and  it  strengthens  the  region’s  capacity  to  withstand  external  economic 
shocks.  

Regional  integration  is  also  important  for  stability  and  conflict  prevention.  Closer  co-
operation can be a catalyst for democracy and improved human rights. Regional integration 
provides opportunities for countries to become more active and influential partners in, rather 
than dependant spectators of, global, political, economic and social developments.  

The absence of a regional integration system that effectively covers the whole Latin American 
region  has  led  to  the  development  of  sub-regional  initiatives.  Beyond  Mercosur,  this  is  also 
true for sub-regions that have been characterised by political instability, internal and external 
conflict, and extremes of poverty and social exclusion, as is the case of Central America and 
the Andean Community. 

The EU has always supported these regional integration initiatives and is convinced that they 
can  make  an  important  contribution  to  political  stability,  economic  and  social  development 
and  social  cohesion  within  each  sub-region.  It  considers  that  further  progress  towards 
deepening  integration  is  a  sign  of  political  and  economic  maturity  and  their  capacity  to 
undertake reforms, and will continue to work with and provide support to these processes.  

The  EU’s  support  to  the  process  of  sub-regional  integration  has  taken  the  form  of  human 
resources development, institution building, support for the formation of customs unions and 
the development of common policies. In addition to the key role played by the Commission, 
exchanges have also involved other European institutions such as the Parliament, the Court of 
Justice and the Economic and Social Committee. Macroeconomic convergence is an aspect of 
economic  integration  that  remains  a  challenge  for  Latin  American’s  sub-regions.  The 
Community  is  ready  to  continue  supporting  macroeconomic  convergence  efforts  in  Latin 
America through the provision of technical assistance.  

The  aim  has  not  been  and  will  be  not  to  recommend  a  European  model,  but  rather,  where 
relevant, to share European experience with interested parties in Latin America.  

As  regards  Central  America  and  the  Andean  Community,  the  importance  of  making 
substantive progress in their respective integration processes was confirmed by the Heads of 
State  and  Government  at  the  Madrid  Summit.  In  defining  the  roadmap  for  future  relations 
with both regions, the Madrid Declaration made any move towards an Association Agreement 
(including  an  FTA)  conditional  upon  the  completion  of  the  DDA  and  the  achievement  of 
satisfactory degree of integration in both regions. 

In doing so, the Madrid Summit made clear that the deepening of our relations with Central 
America  and  the  Andean  Community  should  proceed  on  a  bi-regional  basis.  It  remains  the 
Commission’s view that given the differences in economic weight and development, only bi-
regional  (as  opposed  to  bilateral)  agreements  are  sustainable  in  the  long  term  and  can  offer 
benefits  to  both  regions.  In  this  context,  the  recently  concluded  Political  Dialogue  and 
Cooperation  Agreements  with  Central  America  and  the  Andean  Community  mark  an 
important step forward and underline the commitment of the Latin American partner regions 
and the EU to work together in support of current integration processes. 

Governments  participating  in  the  Central  American  and  the  Andean  Community  integration 
integration  models. 
processes  expressed  commitment 

towards  deeper 

to  advancing 

12 

 
 
  
 
Nonetheless, the integration measures actually put in place has not always corresponded to the 
commitment  at  political  level.  Bilateral  avenues  with  third  countries  such  as  FTAs  are 
sometimes pursued to the detriment of the integration process. The recent policy debate in the 
Andean  Community  shows  that  perceptions  of  the  usefulness  of  such  enhanced  integration 
vary. In Central America the debate concerns the type of model of integration to be pursued.  

Central America 

Central  America  has  made  significant  progress  in  conflict  resolution,  democracy  and 
economic  development  over  the  past  decade.  Furthermore,  since  2002  the  re-launch  of  the 
regional  integration  process  has  become  a  priority  for  Central  American  governments.  The 
EU  enjoys  additional  credibility  in  the  sub-region  thanks  to  its  political  support  for  the 
pacification  process  and  the  return  to  democracy  in  the  context  of  the  San  Jose  Dialogue 
(initiated  in  1984)  and  also  thanks  to  the  significant  volume  of  development  cooperation 
provided  over  the  past  two  decades.  There  is  a  need  to  capitalise  on  this  by  playing  a 
facilitating role in the field of Central American regional integration. 

Although  the  process  of  Central  American  integration  dates  back  to  1950,  its  first  four 
decades  were  characterised  by  significant  lapses  and  setbacks.  However,  since  the 
establishment  of  a  new  integration  framework  in  1993,  the  Central  American  Integration 
System (SICA), the process of regional integration has moved ahead steadily, building on the 
stability  provided  by  the  resolution  of  the  internal  conflicts  that  existed  in  a  number  of 
countries. The necessity to take further steps towards economic integration was acknowledged 
by  the  Heads  of  State  of  the  CA  countries,  who  committed  in  March  2002  to  adopting  an 
action  plan  to  complete  the  CA  customs  union  by  December  2003.  The  accomplishment  of 
this objective has not been possible due in part to the proliferation of trade negotiations with 
numerous third parties, in particular the recently agreed Free Trade Agreement with the USA 
(CAFTA).  Nevertheless,  progress  has  been  achieved  in  other  respects,  namely  the 
harmonisation of 92% of tariff lines, the signature of a treaty on investment and services and 
the implementation of a dispute settlement mechanism. At the Belize Presidential Summit of 
19 December 2003 a renewed commitment was taken to forge ahead with the customs union 
before  the  end  of  2004.  Progress  will  also  need  to  be  made  on  the  removal  of  non  tariff 
barriers,  establishment  of  a  common  customs  administration,  implementation  of  common 
standards  policies,  etc.  Furthermore,  experience  shows  that  real  progress  in  regional 
integration  will  only  be  achieved  if  special  attention  is  paid  to  the  effective  application  and 
enforcement  of  approved  measures.  The  shortfall  of  effective  regional  integration  is  also 
borne out by macroeconomic data, and indicators such as the current levels of intra-regional 
trade will need to be improved.  

The  Central  American  sub-region  appears  to  have  turned  the  page  on  the  era  of  internal 
conflict and political instability. There is a high level of commitment to regional integration, 
which  is  seen  as  a  necessity  both  to  improve  competitiveness  and  to  prevent  conflict. 
However  in  two  countries  there  exist  some  doubts  regarding  the  model  of  economic 
integration that should be followed (Costa Rica) and whether economic integration should be 
pursued at all (Panama, which has not yet confirmed its interest in joining the customs union, 
due  to  its  highly  service-oriented  economy).  At  the  institutional  level,  not  all  countries  are 
members of the Parlacen and the Central American Court of Justice (CCJ). 

Andean Community 

As regards the Andean Community, the EU has supported the process of regional integration 
since  its  inception.  In  fact,  with  the  establishment  of  the  Andean  Pact  in  1969,  regional 

13 

 
 
  
 
integration in this area was the first of its kind in Latin America. The Andean region was also 
the first in Latin America with which the EU concluded a Cooperation Agreement (1983).  

During the 35 years of its existence, there have been various ups and downs in the process. A 
major  step  forward  was  taken  with  the  Trujillo  Protocol  of  1996,  which  transformed  the 
Andean  Pact  into  the  Andean  Community,  set  up  a  wide  range  of  regional  institutions,  and 
broadened the mainly economic and commercial agenda of the past to include co-operation on 
political and social matters. It is important to note that in addition to the objective of building 
a common external policy and launching the Andean Peace Zone, the Trujillo Protocol also 
set out the objective of creating a common market by 2005.  

With  political  agendas  often  dominated  by  important  domestic  challenges,  the  Andean 
countries have not  always been able  to focus  on the longer term benefits to be gained from 
regional integration and, as a consequence, the integration process continues to progress only 
slowly. Nonetheless, recent years have seen important new initiatives in the political field in 
areas  such  as  conflict  prevention,  border  cooperation,  the  fight  against  drugs  and  arms 
trafficking. Significant efforts have also been made to make the Andean Community a reality 
for its citizens, such as the introduction of an Andean passport, the establishment of working 
groups on consumer or indigenous matters, and direct elections to the Andean Parliament (not 
yet implemented in all CAN member countries).  

It is in the area of economic integration, often hampered by structural differences between the 
different countries and a lack of political will, that the Andean Community has encountered 
particular difficulties. With internal trade liberalised since the mid-1990s between four of the 
five  CAN  countries  (excluding  Peru),  the  Quirama  summit  in  June  2003  confirmed  that  the 
achievement  of  the  common  market  remains  the  goal  of  all  five  Andean  countries.  Thus, 
notable progress was made in 2003 by the adoption of a decision to harmonise the Common 
External Tariff up to 62% for all five countries (up to 95% when excluding Peru). However, 
recently  the  entry  into  force  of  the  latter  decision  was  postponed.  The  five  countries  have 
adopted a Common Customs Classification which should enter into force at the beginning of 
2005 but there is not yet a common customs administration. Intra-regional trade has increased 
a  little  but  remains  at  a  low  level  of  10-12%,  indicating  that  important  trade  obstacles  still 
remain.  In  addition,  various  initiatives  taken  by  individual  CAN  member  countries  towards 
the  conclusion  of  bilateral  Free  Trade  Agreements  outside  the  CAN  framework  risk 
undermining the integration process.  

Moving  towards  Association  Agreements  with  Central  America  and  the  Andean 
Community  

The  Madrid  Declaration  opened  the  avenue  for  the  launching  of  Association  Agreement 
negotiations  with  the  Andean  Community  and  Central  America  provided  that  two 
preconditions would be met, notable the completion of the Doha development programme and 
the achievement of a sufficient degree of regional integration. In view of the progress outlined 
before, and reconfirming the positive signal given in principle by the Madrid Declaration, the 
Commission  believes  that  the  Guadalajara  Summit  should  help  pave  the  way  towards  the 
opening  of  negotiations  on  Association  Agreements,  including  FTAs.  To  that  extent,  all 
efforts  have  to  be  made  by  both  sides  to  ensure  that  the  Doha  round  advances  as  much  as 
possible in 2004 towards its rapid conclusion, since any possible future FTA's shall be built 
upon the outcome of the Doha Development Agenda. The realisation of a sufficient level of 
regional integration would then become the trigger for lauching negotiations.  

14 

 
 
  
 
In order to advance the process and make the most efficient use of scarce ressources and time, 
the Commission proposes to start preparing the ground already at this stage for the opening of 
negotiations through a joint monitoring of progress in regional integration. By doing so, the 
Commission  hopes  that  the  perspective  of  negotiating  Association  Agreements  including 
FTAs region-to-region becomes a meaningful incentive to these regions to continue their own 
processes of regional integration.  

The Commission considers that it is important to define a clear set of criteria against which 
both regions’ progress is to be measured and the attainment of which would be considered as 
satisfactory.  

The  Commission  considers  that  a  satisfactory  degree  of  regional  integration  to  launch  FTA 
negotiations would include: 

1.  A  fully  operational  institutional  framework.  This  would  entail  assessing,  among  other 
things, effective  mechanisms for furthering the regional integration project and for ensuring 
the implementation and enforcement of decisions, including a dispute settlement mechanism, 
the  participation  of  all  countries  in  all  institutions  and  the  design  and  implementation  of 
sustainable financing mechanisms to support the institutional set-up; 

2. The creation of a customs union compatible with Art. XXIV of GATT and notified to the 
WTO  (including  common  external  tariff,  common  customs  administration  and  common 
external  trade  policy).  Furthermore  it  would  be  necessary  to  assess  the  effectiveness  of  the 
customs union of which an indicator could be the progress of intra-regional trade.  

3.  The  reduction  of  non-tariff  obstacles  to  intra-regional  trade.  An  increasing  share  of 
obstacles to trade is of a non-tariff nature. Therefore, special attention should be paid to the 
existence of effective rules that aim at removing these obstacles (either through harmonisation 
or mutual recognition), in particular in the area of technical regulations and standards and as 
regards  sanitary  and  phyto-sanitary  matters.  It  would  also  be  necessary  to  encourage  the 
concerned  countries  to  adopt  regional  regulatory  regimes  on  services  and  investment  that 
facilitate  future  negotiations  of  FTAs  with  the  European  Union.  And  to  asses  whether 
legislation to protect intellectual property rights and rules on government procurement exist, 
and whether there is progress in the establishment of a regional competition policy. 

In order to accelerate the process, and with a view to preparing the ground for the opening of 
the  negotiating  process,  the  Commission  proposes,  to  make  use  of  the  existing  institutional 
set-up  and  launch  a  monitoring  process  on  progress  in  regional  integration  along  the  lines 
described above. Officials from both sides would meet on a regular basis to review the state of 
integration  and  assess  whether  the  progress  achieved  permits  the  start  of  negotiations.  This 
exercise would be done in parallel but independently with the Andean Community and with 
Central America. 

In line with the Madrid conclusions, the future FTAs should build on the outcome of the Doha 
Development  Agenda.  The  EU  and  Central  America  and  the  Andean  Community  have  a 
shared interest to spare no energies in order to advance in the DDA negotiations. The scope of 
any FTA must provide added value to the multilateral regime.  

Finally, as regards the immediate future of our trade relations with Central America and the 
Andean  Community,  the  Commission  would  like  to  recall  that  trade  relations  with  both 

15 

 
 
  
 
regions  are  currently  based  on  the  GSP-drugs  regime,  which  offers  extremely  advantageous 
access  to  the  EU  market.  The  system  has  gained  further  in  attractiveness  as  a  result  of  the 
recently  adopted  amendment  to  the  GSP  regime,  which  limits  the  application  of  the 
graduation mechanism to principal GSP beneficiaries. The decision to extend the current GSP 
regime  for  an  extra  year  implies  predictability  of  the  preferential  regime  for  Andean  and 
Central American countries until the end of 2005. The Commission is currently re-shaping the 
EC GSP and it is exploring ways to continue to provide preferential market acces for import 
products from Central American and Andean countries after 2005.  

Mercosur 

The  European  Union  has  favoured  and  supported  a  strengthening  of  the  process  of  regional 
integration  in  Mercosur  and  has  therefore  supported  the  Mercosur  initiative  from  its  very 
conception in 1991. The EU continues to work towards a stronger relationship with Mercosur 
and a deepening of the Mercosur process internally with a view to help Mercosur to establish 
an effective common market. Part of the current work between the EU and Mercosur, but also 
part  of  the  negotiations  of  an  EU-Mercosur  Association  Agreement,  aims  at  reinforcing  the 
internal Mercosur programme to complete its common market by 1 January 2006.  

The EU-Mercosur negotiations would result in an association between two integrated regions. 
In fact it was shortly after the creation of Mercosur and the definition of solid objectives for 
deep integration towards a Mercosur common market, that the formation of an interregional 
association was first being considered. 

The  ‘region-to-region’  dimension  of  this  agreement  is  thus  creating  new  challenges  to  both 
partners as rules need to be defined between two players who internally are still developing 
their own set of intra-regional rules. Again, Mercosur integration is entirely interlinked with 
the  on-going  negotiations,  and  progress  in  deepening  integration  is  needed  both  to 
successfully conclude the negotiations and to make the agreement work. This progress mainly 
relates to the institutional aspects and to the trade aspects of the Association Agreement which 
is currently being negotiated. 

Political/Institutional aspects 

The first objective of an enhanced political dialogue between the EU and Mercosur would be 
ensured  through  the  creation  of  new  institutional  mechanisms  already  foreseen  in  the  draft 
chapter  of  the  agreement  on  political  dialogue.  Further,  The  EC  welcomes  Mercosur’s 
initiative to appoint a well known political figure as the President of the Mercosur Coreper in 
the  person  of  President  Duhalde.  This  appointment  contributes  to  the  overall  objective  of 
further strengthening the institutions of Mercosur. In the same spirit, the further upgrading of 
the Mercosur Secretariat, the establishment of a Permanent Court for Dispute Resolution and 
efforts towards streamlining the Mercosur decision making process are important steps. The 
Commission  hopes  that  this  institutional  strengthening  will  improve  the  implementation  of 
decisions  and  ensure  that  political  commitments  are  translated  into  effective  regional 
integration. 

Trade aspects 

The EU believes that the completion of the Mercosur customs union is an essential basis to 
make  this  agreement  possible.  In  addition,  Mercosur  integration  should  be  pursued  towards 
the establishment of a single market concept conducive to free circulation of goods, services 
and  capital.  To  successfully  conclude  the  negotiations  it  will  therefore  be  essential  that  the 

16 

 
 
  
 
intra-regional  rules  are  in  place  in  the  areas  subject  to  interregional  negotiations.  In  this 
respect,  the  EU  will  continue  to  negotiate  with  Mercosur  in  each  of  these  areas  in  order  to 
make this agreement truly ambitious and comprehensive, going beyond the respective WTO 
commitments.  

To this end, the work programme agreed on 12 November 2003 during the last EU-Mercosur 
Trade Negotiators meeting at Ministerial Level established several comprehensive rounds of 
negotiation  and  two  ministerial  meetings.  According  to  this  programme,  the  future 
comprehensive  trade  chapter  will  include  a  free  trade  agreement  in  goods  and  services. 
Further  it  will  also  cover  inter  alia  market  access/rules  on  government  procurement, 
investment, intellectual property rights, competition policies, SPS (sanitary and phyto-sanitary 
issues),  TBT  (technical  barrier  to  trade),  agreements  on  trade  in  wine  and  spirits,  business 
facilitation,  trade  defence  instruments,  a  dispute  settlement  mechanism  etc.  The  political 
impetus  given  by  the  ministerial  meeting  should,  under  appropriate  conditions,  enable  the 
groups  to  achieve  the  required  progress  in  each  area  so  that  negotiations  could  possibly  be 
concluded by October this year. 

The Commission expects that Heads of State and Government will encourage further progress 
on  the  work  programme  on  EU-Mercosur  negotiations  for  an  Association  agreement,  as 
agreed  on  12  November  2003  during  the  last  EU-Mercosur  Trade  Negotiators  meeting  at 
Ministerial  Level.  This  should,  under  appropriate  conditions,  enable  the  negotiations  be 
year. 
concluded 

October 

this 

by 

The Caribbean 

As in Latin America, the European Union has systematically supported regional integration in 
the Caribbean. The Caribbean Community and Common Market (CARICOM), established in 
1973,  decided  in  1989  to  advance  towards  a  CARICOM  Single  Market  and  Economy 
(CSME). When completed, the CSME will provide for the free movement of goods, services, 
capital,  labour  and  right  of  establishment  within  CARICOM  and  harmonised  laws  and 
regulations  affecting  commerce.  The  agreed  CSME  deadline  is  31  December  2005.  At  the 
same  time,  CARICOM  is  pursuing  further  integration  with  the  Dominican  Republic,  and 
in  2001. 
implementation  of  a  Free  Trade  Area  between 

started 

two 

the 

The EU is building on and reinforcing regional integration in the Caribbean by focussing its 
regional financial support under the 9th EDF regional indicative programme (2003-2007) on 
intra and inter regional integration processes including an  Economic  Partnership  Agreement 
(EPA) with the region. EPA negotiations will be opened in April 2004. EPAs are new WTO-
compatible trading arrangements, removing progressively barriers to trade within the region 
and  enhancing  cooperation  in  all  areas  relevant  to  trade.  The  EPA  process  is  vital  for 
consolidating  and  boosting  Caribbean  integration,  thus  laying  the  basis  for  enhanced 
economic relations between the EU on one side, and a stronger, more competitive Caribbean 
region on the other side." 

6. 

CONCLUSION 

The Commission attaches great importance to the success of the Guadalajara Summit, which 
will  be  the  first  in  which  the  enlarged  European  Union  participates.  The  Commission  has 

17 

 
 
  
 
 
 
 
taken initiatives, negotiated agreements, adopted programmes, and organised and co-financed 
seminars and meetings to ensure this success.  

However the success of the summit will largely depend on the ability of the Heads of State 
and  Government  to  take  concrete  and  far  reaching  decisions  that  give  new  impetus  to  our 
relations and map out their future course. 

In this Communication, the Commission argues that these decisions should focus above all on 
social  cohesion  and  regional  integration,  two  issues  that  are  vital  both  for  the  development 
and the stability of our regions and for the strengthening of our relations.  

The  Commission  proposes  that  the  Heads  of  State  and  Government  take  concrete 
decisions aimed at: 

Social cohesion: 

– 

– 

– 

– 

Encouraging Latin American countries to adopt sound and efficient policies -on 
democratic governance, social aspects and public finance and fiscal policies- to 
increase social cohesion by reducing poverty, inequalities and exclusion;  

Encouraging  the  international  community,  including  international  financial 
institutions, to support such social cohesion measures;  

Intensifying cooperation between the European Union and Latin America in the 
field of social cohesion; 

Adopting  the  proposals  suggested  by  the  working  group  on  social  cohesion  set 
up  by  the  Commission  together  with  the  Inter-American  Development  Bank 
after the seminar on social cohesion that took place in June 2003 in Brussels, so 
that they will provide a social cohesion agenda on the basis of clear guidelines.  

Regional integration 

– 

– 

Reconfirming the positive signal given in principle by the Madrid declaration to 
Central America and the Andean Community and paving the way towards the 
opening of negotiations on Association agreements, including FTA's which shall 
be built upon the outcome of the Doha Development Agenda. The realisation of 
a  sufficient  level  of  regional  integration  would  then  become  the  trigger  for 
lauching negotiations. 

Encouraging  further  progress  on  the  work  programme  on  EU-Mercosur 
negotiations  for  an  Association  agreement,  as  agreed  on  12  November  2003 
during  the  last  EU-Mercosur  Trade  Negotiators  meeting  at  Ministerial  Level. 
This should, under appropriate conditions, enable the negotiations be concluded 
by October this year. 

The  Commission  hopes  that  its  proposals  regarding  these  two  issues  will  be  considered 
positively by the Heads of State and Government and will be reflected in the conclusions of 
the Summit. 

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