Seeking El Dorado: Europe’s return to Latin America

Europe looked at Latin America for centuries as a place of renewed opportunities to build wealth and extend its geopolitical power. Yet, over the past 150 years, this focus has shifted increasingly closer to the European neighbourhood, both southwards and eastwards. As this happened, the US overtook Europe’s influence in Latin America. Economic, military and geopolitical interests – under the framework of the Monroe Doctrine – established the region’s dependency on its northern neighbour, ranging from trade and investment to involvement in domestic policies and in the ‘fight’ against drug–dealing, organised crimeand the threat of communism. More recently, as global power dynamics shift, China is emerging as an increasingly important actor in the region’s economic development, a relationship based on increased trade, massive infrastructure investments and soft diplomacy.

As Europe is increasingly losing ground in productivity and economic growth due to a decline in competitiveness and innovation, China is tightening its economic partnerships with Africa, Latin America and Asia alike. If Europe wants to remain a key actor in the global economy – and, more importantly, a geopolitical anchor for multilateralism – it must find a new way of engaging with Latin America, giving the region a priority role under international cooperation frameworks and adopting a more serious trade and investment framework. This includes the completion of never-pending trade agreements and the delivery of Global Gateway projects on a larger scale.  

What for?  

Latin America meets many of Europe’s strategic needs. Politically – with some notable exceptions in Central America and Cuba – there is broad alignment on democratic governance, multilateralism and international law. The 2022 UN vote condemning Russia as the aggressor in Ukraine proves this alignment. Economically, Latin America is home to essential resources such as lithium, copper and niobium. The region holds around half of the world’s lithium reserves and over 40% of its copper reserves, both key to the green and digital transitions. Today, China is the most common destination forthese critical raw materials, but there is a growing internal market attractive to European firms.  

Latin America stands to benefit equally from renewed cooperation. The EU’s investments in the region – even if not on the same scale as China’s Belt and Road Initiative (BRI) – are based on mutually beneficial objectives shared by the EU and local actors.  Covering social and local development as well as broader connectivity infrastructure, EU investments under the Global Gateway align with the green and digital transitions – key priorities for both Europe and Latin America. Examples include the extension of the BELLA digital connectivity cable, the deployment of a regional satellite to improve connectivity in remote areas, and the interconnection of energy grids to increase energy resilience and market efficiency. Similarly, the implementation of upcoming trade agreements is expected to benefit Latin American countries by increasing exports to Europe. In terms of climate finance and advocacy for sustainability and climate action, the EU has also been a close ally to countries like Colombia and Brazil when hosting recent COPs on biodiversity and climate, respectively.  

Giants in between giants 

Currently, the US remains the top trading partner for Central American countries – the immediate neighbourhood of the US – whereas China has become the top partner for South America. South American countries with access to the Pacific Ocean, such as Chile, Peru and Ecuador, have particularly deepened ties with China, the result of China’s assertive trade policies and soft diplomacy. This includes engagement in multilateral fora and deepened economic ties, benefiting from the Pacific Ocean linking the regions. China’s BRI is widely active in Latin America, with its infrastructure projects transforming ports, railways, airports, refineries and telecommunications networks.  

Europe’s story in this picture is one of gradual withdrawal, as in many cases the EU used to be the top trading partner, a position now held by China in many South American countries. Overall, in Latin America, the EU-27 went from being the second-largest trading partner after the US in 2007 to third – behind the US and China – in 2023. It is expected that by 2035 China will become the region’s primarytrade partner. 

Trade, tensions, treasures  

For Latin America to be taken seriously in Europe, countries beyond Spain and Portugal must take the lead in engaging with the region. November’s EU-CELAC Summit showed a low degree of political ambition from both regions: only three top leaders of EU member states attended, with EU Commission President von der Leyen, German Chancellor Merz and French President Macron canceling their attendance at the last minute, most likely due to political tensions involving host country Colombia’s President Gustavo Petro and US President Donald Trump. On the Latin American side, only six top leaders joined, with key leaders from Colombia’s left-leaning government and Uruguay (upcoming CELAC pro‑tempore presidency) participating, while Mexico and Argentina were conspicuously absent. China’s alternative meeting, the China-CELAC Forum held in Beijing last May, enjoyed more prominence among Latin American media outlets because of the high-level representation from top political leaders, including China’s Xi Jinping.  

Countries like France, Germany and Poland must take ownership of the relationship with Latin America and see it as an alternative pole in a context of shifting geopolitical alliances. A practical, objective-driven approach is needed – working together on shared challenges such as energy projects, rare earths and investment in supercomputing. If the Iberian Peninsula must take the lead in all discussions relating to Latin America, there is little chance for broader EU leadership to take over.  

Similarly, the EU needs to step up its engagement in international fora where Latin American countries are present, such as the G20 and the OECD, just as China has done in the context of the BRICS and its New Development Bank, which Brazil’s former president Dilma Rousseff now leads. The European Investment Bank (EIB) plays a key role in European investments worldwide; yet only around 15% of 2024 EIB Global lending – the EIB’s development finance arm– went to Latin America and the Caribbean, representing about 1.4% of the EIB’s overall lending for 2024. Although some EU member states are shareholders in regional development banks such as the Inter-American Development Bank (IDB) and the Corporación Andina de Fomento (CAF), Spain remains the main interlocutor, with limited shares and influence in these banks.  

The biggest quick win for the EU is to ratify and implement the agreement with Mercosur. Ifthe agreement is not ratified soon, the message will be that the EU is not ready to prioritise the region or move forward with a partnership based on practical objectives.  

As international relations become increasingly fragmented and uncertain, Europe needs new alliances rooted in strategic objectives. While maintaining ties with its key partners in the southern hemisphere, Europe should return to seeking closer cooperation with South America. It might just be the closest thing to El Dorado Europe gets.  

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.