www.coha.org/NEW_PRESS_RELEASES/New_Press_Releases_2006/06.29_EU_LAC_Summit.html

Council On Hemispheric Affairs
MONITORING POLITICAL, ECONOMIC AND DIPLOMATIC ISSUES AFFECTING THE WESTERN HEMISPHERE

Thursday, May 11, 2006
COHA Memorandum to the Press:

• Just another meeting or a pivotal gathering?
• Skepticism surrounds upcoming summit
• Will nations on both sides of the Atlantic be able to put aside their parochial political and economic interests in favor of meaningful collective goals?
• Will Europe sniffily react to the decision of Bolivian President Evo Morales to nationalize his country’s oil and gas industries?
• With a bit of luck, the world could witness a powerful economic and political alliance forged between Europe, Latin America and the Caribbean, while the U.S. would have to experience a stunning setback to its hopes for a FTAA
•  
  Beginning today, May 11, Austria, as the current EU president, will host the 4th Summit of Heads of State and Government of the European Union, Latin America and the Caribbean. As the countries of the Western Hemisphere continue their fitful quest to break away from Washington’s magnetic pull and make new friends and allies outside of the hemispheric ghetto to which they have been consigned by U.S. diplomacy, the Vienna gathering might be just the ticket. But most realists would say that there is only a remote possibility that such an outcome will occur.

The meeting comes at a particularly absorbing time for Latin America and the Caribbean. The mainland Latin American countries are essentially broken into three separate groups: those governments that fall within Washington’s sphere of influence (i.e., El Salvador and Guatemala, along with the other CAFTA countries), those staunchly opposed to the U.S. attitude of preeminence (i.e. Venezuela and Bolivia), and those in the process of figuring out with which side to align themselves (i.e., Peru, Chile and Mexico). The European Union thus opens a window of opportunity for Western Hemispheric nations to look for new friends, new alignments and new markets for their products.

Trade, Trade, Trade
Recent developments in Bolivia, the ongoing tensions between Venezuela and the U.S., as well as Latin America’s economic prospects will most likely be the three principle axes driving this year’s EU-LAC summit. Recently, Venezuelan president Hugo Chávez announced that his country would be pulling out of the Andean Community (a Lima-based regional bloc that also includes Peru, Ecuador, Bolivia and Colombia) if Bogotá and Lima do not reject a free trade agreement with Washington. Such trade agreement needs to be approved by the legislative body of each country; in addition, in Colombia’s case, it still also has to be signed by President Uribe. Interestingly, Caracas does not see its withdrawal from the Andes pact as a drastic measure that will bedevil either the pact or have particularly onerous repercussions on the EU. Recently, the Chinese news agency Xinhua quoted Venezuelan Deputy Foreign Minister Pavel Rondon as saying “the Venezuela-EU relationship will be intense and will continue without suffering problems [in spite of Venezuela’s decision to leave the Andean Community].”

In the meantime, there has been much discussion about whether the EU should itself begin to consider entering into a trade pact with Latin America. Currently, Brussels has signed such agreements only with Chile and Mexico. Latin America generally courts more binding trade agreements and a flow of new foreign investment from Europe. Deutsche Presse-Agenteur recently quoted a Mexican official as observing that: “Mexico has always been for trade agreements.” Peru also has expressed similar sentiments, suggesting that the Andean Community – with or without Venezuela – will push forward with a free trade linkage with Brussels. There have been rumors about a supposed letter from outgoing Peruvian President Alejandro Toledo to European Commission chief Manuel Barroso, in which the soon to be departing leader promised to make an Andean Community-EU agreement his top priority, after he arrived in Vienna.

Not everyone supports the current favored free trade model for Latin America though, as indicated by a February article in Mexico’s El Universal that featured researcher Alberto Arroyo Picard of the Universidad Autónoma Metropolitana. Professor Arroyo Picard has called for the renegotiation of the country’s free trade agreements. He went on to explain that Mexico’s average global trade with the EU stood at 6.6% in 2000, before the FTA went into effect. In November 2005, the number stood at 7.11%, only a 1% growth in six years. On the other hand, one can point to Argentina, a country whose trade with the EU is markedly improving. Latin America News Digest has reported that Argentina’s exports to the European Union (EU) increased 25 percent year-on-year to $1.232 bln (1.018 bln euro) in the first two months of 2006. The article goes on to explain that the EU was the largest destination for Argentine exports. In any case it will be up to EU members to decide whether more trade agreements with Latin America and the Caribbean is a direction that they are inclined to go.

Group vs. National Interest
Predictably, the meeting will scuffle over the issue of human rights, which will likely be broached by the Czech Republic. While the Czechs bleed copiously over all human rights derelictions, they do so particularly when it comes to Havana, even though Castro’s shortcomings are significantly less heinous than a whole raft of nations which almost methodically escape Prague’s notice. The latest round of scrapping, which stretches back to Havana’s woe-begotten support of the Stalinist suppression of the 1968 Prague Spring uprising, saw Czech diplomat Stanislav Kazecky expelled from Cuba in April after being accused by Havana of being a U.S. spy. Meanwhile, Prague proportionally responded by refusing to renew a Cuban diplomat’s visa.

It is widely expected that many bilateral meetings will take place among the scores of different heads of state attending the summit. Observers will carefully note whether Dutch Prime Minister Jan Peter Balkenende will meet with Surinamese president Ronald Venetiaan and if they will discuss the future of former Surinamese dictator and military strongman Desire Bouterse. The latter was tried in absentia by a Dutch court in 1999 for money laundering and drug trafficking and was condemned to serve 11 years in prison. On this occasion, Bouterse escaped punishment because under provisions of the Surinamese constitution, its citizens cannot be extradited for trial.

Another issue likely to gain prominence at the gathering is the ongoing dispute between Argentina and Uruguay over the latter’s plans to construct two pulp mills on the Uruguay river that forms the border between the two nations. The news agency MercoPress published an article on April 26 detailing how President Tabaré Vazquez of Uruguay will likely introduce the issue at the Vienna summit. The dispute is particularly relevant since the proposed plants will be constructed by European firms – Finland’s Botnia and Spain’s Ence – representing a very significant influx of investment for Vazquez’s cash-strapped economy. Argentina has objected to the plants on environmental grounds, and escalating protests have severely strained the MERCOSUR trade bloc. Buenos Aires recently sued Montevideo over the issue in the International Court of Justice in The Hague.

How to deal with Bolivia?
Regarding Bolivian President Evo Morales’ move to nationalize his country’s hydrocarbon industry, eyes at the Vienna summit will be riveted on how Spanish Prime Minister José Luis Rodriguez Zapatero will react. Spain’s petrochemical group Repsol YPF has a Bolivian subsidiary named Andina, which was one of the foreign multinationals just nationalized by the recently inaugurated Morales. Back in early April, the Bolivian press had quoted the country’s hydrocarbons’ minister, Andres Soliz Rada as saying that Andina would not be nationalized because it had debts of $177m (146.2m euros). The critical aspect here is that Bolivia-based resources are a vital source of revenue for Repsol; in essence, the future of the company could depend on the future of its Bolivian operations. Eighteen percent of Repsol’s total reserves are located in Bolivia. Zapatero previously had warned of potential “consequences” in the relations between Bolivia and Spain if Morales went ahead with the move, which, in any event, the Bolivian president did. Morales has since said that foreign companies have 180 days to accept the new contracts imposed by La Paz or they will have to leave the country. The Spanish media has reported that government officials will go to Bolivia to discuss Morales’ decisions, but it is doubtful, given Zapatero’s teeming ambitions to have Spain play a large role in Latin America, that any negative repercussions will ultimately play onto.

Britain’s BG Group and BP companies also maintain operations in Bolivia. A recent article by Bill Condie of Knight-Ridder explained that while BG’s current output in Bolivia is relatively small, the country accounts for 11 percent of BG’s proven and probable oil and gas reserves. BP is mainly involved in exploration but it does hold 30 percent of Empresa Petrolera Chaco. It is unknown if both BG and BP have met with Whitehall, and what actions, if any, Prime Minister Blair will carry out to protect British interests.

As for the EU, Javier Solana, the body’s high representative for foreign and security policy, has been quoted by the Spanish national radio RNE Radio 1 as saying that the events in Bolivia have caused him “great unease, great dissatisfaction.” Perhaps Solana was thinking that he already has sufficient issues to cope with as the EU tries to deal with Vladimir Putin and his unsavory manipulation of the Russian state-controlled gas company Gazprom.

An Issue to be discussed? The Caribbean – Bananas & Sugar
Both bananas and sugar are in particularly fragile conditions right now due to the price instability of the two commodities (in part, this is attributable to last year’s destructive hurricane season in the Caribbean and Central America), which rendered the local straitened economies even more vulnerable. The economies of the Caribbean island nations are especially dependent on sugar cultivation, and the EU’s decision to implement a 36% cut in the prices it is prepared to pay for the commodity over the next four years from African, Caribbean and Pacific states is highly controversial. The CMC news agency reported that Ian McDonald, chief executive officer of the Sugar Association of the Caribbean, declared that “the EU decision is an outrage because the price cut is brutal.”

Similar problems posed by economic struggles exist for the region’s hard-pressed banana producers. The Windward Islands’ Farmer Association has been actively attempting to rally its members around the issue of relatively high EU import tariffs on bananas, which currently stand at 176 euros per ton, in contrast to the original 75 euros. Brussels even attempted to push the price up to 230 euros per ton; however, the World Trade Organization found such an increase to be unfair in its August 1, 2005 decision that the tariff would remain at 176 euros. Despite the WTO mandate, at Vienna Caribbean nations could push their hosts to bring the tariff down to 75 euros once again. The controversy over bananas is no small matter: like sugar, the prosperity of many Caribbean countries’ economies is inseparable from the well being of the banana sector. In 2004, the EU’s 25 members imported a total of 3.87 million metric tons of bananas, which, according to Dr. Marshall Hall, Chairman of the Banana Exporters Association of Jamaica, as reported by the CMC, was responsible for “bring[ing] in about 25 million US dollars a year and…employing about 10,000 people.”

Certainly not United, but on their way
In spite of such setbacks, a new intercontinental arrangement could be in the making. As an example of further bi-regional integration, one can point to the Madrid-based Ibero-American Secretariat General, created in 2004. This institution already has Spain and Portugal as members, along with all of Latin America, and has as its Secretary-General, the famed Uruguayan economist Enrique Iglesias (former president of the Inter-American Development Bank). Meanwhile, the EU-LAC summits have become a predictable routine ever since they first began with the Rio summit in 1999. There is considerable potential for cooperation and development if both regions are able to come closer together, both in terms of institution building, trade and aspirations regarding cultural and societal matters.

This analysis was prepared by COHA Research Fellow Alex Sanchez
May 11, 2006
The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 223-4975, fax (202) 223-4979, or email coha@coha.org.

To subscribe to our free press releases, send an email to coha@coha.org with “subscribe” as the subject.

COHA Memorandum to the Press 06.29
Word Count: 2,000