EU and Latin America and the Caribbean, united to offer global solutions

In a world of constant trade tensions, wars on several continents, political volatilities, democratic frictions, and the ever-present weight of climate change, renewing relations between the EU and Latin America and the Caribbean brings fresh hope for global stability.

In September this year, high financial authorities from Europe, Latin America, and the Caribbean took a trip to Santiago de Compostela. Their goal was to take the relationship between Europe and Latin America and the Caribbean to a new level, in terms of trade, economy, cooperation, and geopolitics.

For the first time in history, and after eight years of intermittent and fragmented bilateral relations, the Ministers of Economy and Finance from the European Union and Latin America and the Caribbean met to lay the foundation stone of a new global alliance. This alliance aims to join forces and promote a world vision based on sustainability, democratic values, and cooperation.

To understand what happened in Santiago, we need to go back a year to Madrid. There, at CAF - Development Bank of Latin America and the Caribbean - we met with the Government of Spain to try to recalibrate the relations between the EU and the region. The Spanish presidency of the EU Council was approaching, and the idea of a meeting of Ministers of Economy and Finance from the EU with their counterparts from the region was just a nascent thought.

Bit by bit, with the leadership of Spain and CAF, the idea began to take shape. The first stop was the Brussels Summit of Heads of State, where the European Commission announced an investment agenda of 45 billion euros for the region, channeled through the Global Gateway. And the journey reached Santiago de Compostela, where we built new bridges for the relationship between two blocks that, given their historical, cultural, familial, and commercial ties, are destined to work more closely to face the major global challenges.

The Santiago meeting is a first step towards what, over time and with everyone's effort, could become a global alliance that safeguards the planet's sustainability. We must continue to act and promote a medium and long-term vision that transcends political cycles and focuses on overcoming the socio-economic gaps in the region and on the 2030 Agenda.

We can't be satisfied with just occasional meetings. That's why, in Santiago, we agreed on new mechanisms to follow up on European investments, including quarterly meetings to share best practices and consider the next steps to expand the investment agenda. The first of these meetings will take place in Brussels in the first quarter of 2024.

We must preserve this space for dialogue and check the process of those 45 billion euros that we want to be executed by 2027 through projects that impact the entire region. Today, we have half a thousand development banks worldwide, providing 12% of global financing and working more coordinated, as we experienced at the Finance in Common summit in Cartagena, Colombia. But it's not enough; we need to move much faster than the crisis.

So far, within the Global Gateway agenda, we have identified 136 investment projects in Latin America and the Caribbean. Out of this list, CAF has 70 initiatives that will contribute to reducing poverty and inequality, promoting a green and fair transition, and digital transformation.

Implementing the Global Gateway requires boldness, commitment, and an open mind, as well as recognizing the asymmetries between the two regions as a starting point. While we have a variety of powerful tools at our disposal, the climate, food, financial, and social emergencies demand new ways of doing things.

We need to use this new momentum to redefine the EU-Latin America and the Caribbean relationship. The past few years showed relationships based on fragmented interests, focusing only on certain issues or ties between specific countries. This created significant gaps in trade and sustainable development. Both blocks would benefit from a broader agenda that links the regions as a whole, rather than agreements between small groups of countries aligned on environmental, trade, and investment matters.

According to a recent Elcano report, expanding and harmonizing trade agreements between countries in the region and the EU would create an immense economic space: 1.1 billion people and a total GDP of more than 21 trillion euros, similar to that of the United States. Concluding the EU-Mercosur agreement would be a crucial step in the right direction.

To make this potential a reality, European politicians must see Latin America and the Caribbean not just as a source of raw materials, but as an equal partner in addressing global challenges. The region has a proven track record in designing innovative solutions: the United Nations Sustainable Development Goals, for instance, originated from the Rio+20 Summit and are a product of ALC countries' efforts to build a more equitable and resilient world.

The fight against climate change, for example, will require large-scale investment and rapid innovation, especially in new materials, modes of mobility, digital services, and natural resource management. Climate action also creates opportunities for cross-border technology transfer and strengthening the agro-industry. The Global Gateway program can continue to focus on these objectives, but we need to make progress before the next meeting of heads of state and government of Europe and Latin America and the Caribbean in 2025.

One of the financial tools on the table is debt-for-nature swaps, a beneficial option for Latin America and the Caribbean, one of the least polluting regions that will suffer the worst effects of global warming.

In parallel, we need to support national development banks. For example, CAF is already investing in the creation of the Blue Green Bank in Barbados, which will be a public development bank with a regional working vocation throughout the Caribbean. It's focused on preserving the health of the oceans, improving living conditions for populations along the coastal and island areas, and promoting sustainability in all production chains.

Another innovative tool is the Special Drawing Rights (SDRs), a global asset that we can give new uses with innovation, responsibility, and political will. We can consider options like using SDRs as a financing solution to tackle climate change. There's huge potential to redistribute these assets towards Latin America and the Caribbean innovatively, changing the equation to protect our environmental assets and accelerate the decarbonization process.

Additionally, the use of guarantees and insurance is also a tool for risk transfer and greater public and private leverage in projects with positive environmental externalities.

The new EU investment agenda in Latin America and the Caribbean has clear objectives and the necessary political will to move forward. It's time to act, doing our part in this project for the development and sustainability of Latin America, the Caribbean, and Europe. This is what our citizens and the planet demand of us.