To improve regional integration, earlier this week, Colombia’s President Gustavo Petro and Venezuelan President Delcy Rodriguez announced that the two countries would be employing intelligence-sharing measures to tackle crime on their shared border.
Latin America is a cluster of countries, which, although geographically close, remain economically distant. While there have been numerous efforts like Mercosur and the Pacific Alliance to promote regional integration, very little has been achieved so far. While economic cooperation is in the best interest of all these countries, political and social challenges have become hurdles to ensuring more regional dependence and exchanges.
To improve regional integration, earlier this week, Colombia’s President Gustavo Petro and Venezuelan President Delcy Rodriguez announced that the two countries would be employing intelligence-sharing measures to tackle crime on their shared border. Both countries are facing extreme pressure from the US, as Trump has been pressing Venezuela to open its economy for foreign investments and Colombia to combat drug trafficking.
The two Latin American countries have also agreed to increase regional cooperation through increased trade and bilateral efforts, particularly in electricity provision, mainly to help western Venezuela, where power outages are common. The Presidents confirmed in a joint address that both countries would be cooperating on electricity as well as gas interconnection, with Rodriguez adding that gas interconnection will not only allow Venezuela to supply gas to Colombia, but also export it to other countries.
The shared 2,200-kilometre border and the surrounding region are a hub for more than $1 billion in annual trade. But it is also home to illegal activities like drug trafficking and smuggling, often carried out by armed groups. Therefore, intelligence sharing to curb such activities is a top priority for both countries, with Petro emphasising that the border must belong to both countries, and not to these criminal groups.
This can be reduced to a mere bilateral arrangement. However, it is important to note that the recent political instability in Venezuela has prompted countries across LatAm to look towards big powers for support and alliances. Thereby shrinking the hopes for inter-regional cooperation.
Regardless, these countries need regional blocs, if only to further their own economic interests by working together with other countries or regional blocs. Brazil, for example, expects a 13% jump in exports by 2038 should the free trade deal between the South American bloc Mercosur and the EU be fully enforced. Brazilian Vice President Geraldo Alckmin even said that industrial exports alone could rise 26% in the same period owing to this agreement.
As part of this deal, tariffs between the EU and Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay, will be phased out over the next 12 years. The EU is the LatAm region’s second-largest trading partner after China, totally $100 billion last year. The Brazilian administration continues to push trade negotiations with the US because it believes there is an opportunity for greater cooperation on both tariff and non-tariff matters. It seeks to strengthen the good chemistry that Trump and Brazilian President Lula da Silva developed last year.
Following Washington’s arrest of Venezuelan President Nicolas Maduro in January, Mercosur will discuss Venezuela’s possible re-entry into the union. Before being suspended in 2016 for breaching trade and human rights agreements, Venezuela was a full member of Mercosur.
With Rodriguez’s government receiving backing from Trump, Venezuela is now working towards attracting foreign investments to develop its gold, iron and bauxite mining endeavours. In April, the ruling party also approved a mining law, which will allow private and foreign investments into the sector. Henceforth, domestic, foreign, state-owned and private companies or consortia can exploit gold and other strategic minerals from the country’s rich mines. However, there has been considerable pushback from environmental groups and local communities, citing widespread ecological damage if mining activities were to increase.
LatAm is also making significant headway in the transition to green energy, with several new renewable energy projects and initiatives being sanctioned. These initiatives aim to make green policies more comprehensive and help the region build resilience by capitalising on its rich natural and human assets. With over half of global lithium reserves and a third of the world’s copper, LatAm has all the necessary critical minerals to facilitate this energy transition. The need of the hour is the knowledge and skill to harness these natural resources by developing and maintaining adequate infrastructure.
With Mexico’s Presidency of the Pacific Alliance, which is yet another LatAm regional bloc, this year’s agenda will include a review of rare earths as important resources to further industrialisation and regional integration in the bloc, particularly to prepare itself for the energy transition supply chains.
Demand for lithium, nickel, copper, cobalt and rare earth elements is rising due to electrification, energy storage, and digitisation. The area now has the chance to transition from extraction to deeper value chains that satisfy sustainability and traceability standards.
The Mexican Business Council for Foreign Trade, Investment and Technology (COMCE) suggested a cybersecurity-focused digital agenda and a regional circular economy platform that would speed the effective use of materials and establish standards to enable smooth integration.
In order to improve the growth of the capital market and the mobilisation of funds for regional and infrastructure projects, a crucial precondition for increasing investments in ethical mining and processing, Mexico will also make an effort to reestablish communication with the Pacific Alliance’s finance ministers.
Latin America understands the need for regional integration, but the recent political upheavals in Venezuela and Iran could influence countries with weaker economies to align with bigger powers, rather than form regional alliances. While most LatAm countries prefer to work with the US and China, these governments are not neglecting bilateral cooperation with one another. In fact, the LatAm blocs are also seeking out partnerships with other regional blocs like the EU. Regionalism is important to secure the interests of smaller economies and avoid compromising their sovereignty to larger powers. Therefore, despite their economic ties with global powers, the LatAm countries are enthusiastic to cooperate with each other to safeguard their political and economic interests.
