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European Investments in Latin America and the Caribbean Can Help Diversify the Productive Structure and Move Towards More Sustainable Development

In the framework of her visit to Germany, ECLAC’s Executive Secretary, Alicia Bárcena, spoke at the Latin America-Caribbean Conference and met with authorities from several countries.

28 May 2019|Press Release

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Alicia Bárcena, ECLAC Executive Secretary (center) during her presentation at the Latin America-Caribbean Conference held in Berlin, Germany
Alicia Bárcena, ECLAC Executive Secretary (center) during her presentation at the Latin America-Caribbean Conference held in Berlin, Germany.
Photo: ECLAC

European and German investments in specific sectors of the economy of Latin America and the Caribbean – such as renewable energy, electromobility and automobiles, and the digital economy and telecommunications – have the potential to diversify the productive structure and contribute to more sustainable development patterns, Alicia Bárcena, ECLAC’s Executive Secretary, indicated this Tuesday, May 28, at a high-level event held in Berlin, Germany.

The senior authority of this United Nations regional commission spoke on the panel “Why should German CEOs invest in Latin America and the Caribbean?” at the Latin America-Caribbean Conference, organized by the Federal Foreign Office of Germany and where that country’s government launched its new cooperation initiative with the region.

Those attending the conference included Germany’s Federal Minister for Foreign Affairs, Heiko Maas; Foreign Affairs ministers and deputy ministers from nearly 30 Latin American and Caribbean countries, including Argentina, Barbados, the Bahamas, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Honduras, Jamaica, Mexico, Panama, Paraguay, Peru, Trinidad and Tobago and Uruguay; the United Nations High Commissioner for Human Rights, Michelle Bachelet; the President of the Inter-American Development Bank, Luis Alberto Moreno; and the Chairman of the Latin America Committee of German Business (LADW), Andreas Renschler; among other European and Latin American authorities and personalities.

In her presentation, the Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) indicated that multilateral cooperation is crucial to the development of nations, and in this area, Foreign Direct Investment (FDI) in the region by Europe, and Germany in particular, plays a key role in fostering productive integration and sustainable development.

Alicia Bárcena explained that the region finds itself increasingly integrated with the United States, China and Europe (in that order) and that Latin American and Caribbean countries are redefining and even diversifying strategies in these three directions to strengthen their insertion in the world. “Europe is the third-largest trading partner with lower foreign investment flows (where Spain, France and after that Germany predominate), but with strategic assets and investment and development practices that are very akin to proposals for the sustainable and inclusive development of the region,” she noted.

With regard to integration, Bárcena mentioned as an example three flagship proposals that are being carried out in the region to position Latin America and the Caribbean in greater balance vis-à-vis today’s three principal strategic blocs (China and Asia Pacific; North America, meaning the United States and Canada; and Europe, and in particular Germany). These are: in South America, the convergence between the Pacific Alliance and the Southern Common Market (MERCOSUR); the creation of an economic space between southern Mexico and the countries of northern Central America (El Salvador, Guatemala and Honduras); and ECLAC’s debt relief proposal for the Caribbean to create a resilience fund against climate change and financial shocks.

Alicia Bárcena indicated that FDI from the European Union (EU) can serve as a key element for addressing the shortfall in transportation, telecommunications, digital and energy-related infrastructure that the region suffers. In this area, she emphasized that “the successful conclusion of negotiations between the EU and MERCOSUR could be a game changer for Latin American integration and a ‘win-win’ agreement for the region and Europe. This would open up tremendous opportunities for productive integration, not only within the region, but also with Europe, through cumulation of origin. The support of Germany is crucial for achieving an agreement between the two sides,” she added.

When commenting on the study “CEO Agenda for Germany’s Economic Cooperation with Latin America and the Caribbean,” produced by the international consulting firm McKinsey and presented during the Conference, Bárcena indicated that although German investments in Latin America and the Caribbean have yet to reach the level of other EU countries, such as Spain, Italy and the United Kingdom, these capital flows from Germany rose steadily until just a few years ago (until 2015, according to ECLAC’s data). In 2017, FDI from Germany accounted for 6% of all FDI inflows to Latin America and the Caribbean and 19% of European FDI in Latin America and the Caribbean (according to ECLAC’s data).

German companies have invested in Latin America between $5 and $7 billion dollars per year, above all in the sectors of automobiles and auto parts, and in renewable energy. “If we analyze the investment projects, we find that the automotive industry is still the top sector for German companies’ announcements of new projects in the region (40% of announced FDI), followed by renewable energy projects (13% of announcements),” she explained.

“In this sense, German companies are present in sectors that are key to the development of Latin America, because of their technological contribution and the crucial role they can play in changing the energy mix, which is vital for moving towards a new development model,” she emphasized.

“In short, relations between Europe and Latin America and the Caribbean with regard to FDI are particularly robust and offer advantages to both. If the countries in the region are to tap the possibilities offered by these investments, they will need national policies to develop a production fabric – a network of goods and services providers – that will prompt favorable investment decisions by European transnationals, while also enabling the transfer of knowledge and technology to local territories,” Alicia Bárcena stated.

In the context of her participation in the Latin America-Caribbean Conference, ECLAC’s Executive Secretary held a bilateral meeting with the Foreign Minister of Honduras, María Dolores Agüero. The Minister extended an invitation to Alicia Bárcena to participate in the XVII Summit of Heads of State and Government of the Tuxtla Dialogue and Coordination Mechanism, which will take place next August in San Pedro Sula.

Alicia Bárcena also participated in an exchange with Germany’s Minister of State for Foreign Affairs, Niels Annen, and met with the Vice-Chair of the Management Board of the German cooperation agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Christoph Beier; Siemens’ CEO for Mexico, Central America and the Caribbean, Juan Ignacio Díaz; and the same company’s Vice President of Government Affairs, Torsten Ende.

Meanwhile, tomorrow, Wednesday, May 29, ECLAC’s most senior representative will be part of the Future Affairs conference: “Digital Revolution: Resetting Global Power Politics?”, organized by the German Federal Foreign Office, where she will introduce panel 3 on “Democracy & Digitization: Will Democracy Survive the Digital Revolution?”