Economy

The European Union is South America’s second largest trading partner. They have both strengthened their economic ties since the 1999 Rio Summit. 'In 2008, the EU imported 96.7 million euro’s in goods from South America, whereas the EU exported 79.8 million euro’s (Europa,b, 2006)'. The main EU exports are transport equipment, machinery and chemicals, where as its main import are agricultural and energy products from Latin America.

“Although the Latin American-Caribbean region represents almost 10% of the world's population, it only accounts for around 3% of the global GDP (Europa,b, 2008)”. In relation to this, the EU invests a lot to South America, and so exposed to foreign investment and attracts FDI (Foreign Direct Investment) from countries within Latin America such as Brazil, Chile and Venezuela.

According to the EU-Latin American/ Caribbean, Chile and Mexico concluded Free Trade Agreements (FTA) with the EU which focuses on trade and investment.  This idea of FTA has been proven to be one of the most effective ways to introduce foreign markets to U.S exporters. U.S. exports of manufactured goods to Chile increased by 19.5 percent during January to March 2004, from 570.9 million dollars to 682.3 million dollars.

The EU is very influential Within South America's development beyond trade and investment, providing with other Member States about $3 billion in aid in 2004. The European Investment Bank (EIB) also offers a loan to 16 South American Countries, supporting private sector projects such as mining, infrastructure, agri-business, etc.

Growing Trade and Investment Links:

Mexico:

In 1997, the European Union signed its first association agreement with Mexico, confirming the importance of its political progress and its relations with the EU. The “EU-Mexico Economic Partnership, Political Cooperation, and [Development] Cooperation Agreement” involves a free trade agreement and offers a greater compromise between government leaders, businesses and civil society. This partnership also includes long term institutional associations between industrial cooperation and research amenities. After the first three years of the EU-Mexico agreement came into effect in 2000, bilateral trade ascended, as it increased above 25 percent. Since 2003 94% of Mexico’s exports had entered the EU duty-free. There has also been an increase in investment flows because of this agreement and as a result there appear to be more than 7, 200 EU companies developing business in Mexico as well as companies in Mexico investing and enlarging their business into the EU. Mexico’s second largest trading partner is now the EU after the United States.

Mercosur:

Since the 1999 association agreement, the European Union has been in negotiations with Mercosur, which encompasses Argentina, Uruguay, Brazil and Paraguay. The EU is Mercosur’s second largest trading partner after the United States, but is their largest investor. It is ranked 8th among other trading partners, accounting for '3 percent of overall EU trade in 2007 (Europa,b)'.

Chile:

In 2005, the EU-Chile Association Agreement constructed a strategic partnership based on the three pillars: political dialogue, trade liberalisation and development cooperation. The EU aids Chile's innovation in businesses and increase economic development.

The Association Agreement includes limited trade barriers, resulting to access to free trade. It also provides for the “reciprocal opening of government and for protection of intellectual property rights (Eurunion 2006)”. The EU is Chile’s largest trading partner and foreign investor and in 2005, the EU imported 7.8 billion euro’s in goods from Chile and exported 3.9 billion euro’s in goods to Chile.