Olaf Scholz's trip to Latin America: progress in free trade and raw materials


Olaf Scholz's trip has opened new doors in South America from an economic policy point of view. Long-lost relations with Brazil, Argentina and Chile have been revived.

Hug in Brasilia: Luiz Inacio Lula da Silva meets Olaf Scholz

In the end there were still a few irritations. Because Chancellor Olaf Scholz (SPD) and Brazil's President Luiz Inácio Lula da Silva apparently did not agree on a common language when it came to the Russian war of aggression in Ukraine, the final press conference in Brasilia got a bit mixed up. The unusual dissonances were covered with hugs (see article picture), but still made some headlines. Aside from the Ukraine debate, the German delegation in Argentina, Chile and Brazil scored a few important points from a purely economic point of view. Scholz was able to push open or reopen some doors. It remains to be seen what will become of it.

Speed ​​of the free trade agreement

First, there is the EU-Mercosur Free Trade Agreement, which has been under negotiation for two decades. Lula da Silva said he was confident the deal could be finalized by mid-year. That's what the Chancellor, who is looking for new, old trading partners after the geopolitical reorganization, wanted to hear. Scholze had pushed the pace in Buenos Aires and Brasilia and was apparently heard. The EU has been negotiating an agreement with Mercosur – an economic association made up of Brazil, Argentina, Paraguay and Uruguay – since 1999. A breakthrough was achieved in 2019, but then the Europeans stopped ratification.

First stop was Buenos Aires: Here Scholz meets President Alberto Fernandez

“Lula wants to reduce the imbalance”

“The agreement between Mercosur and the European Union was blocked by Germany and France between 2019 and 2022 because of the predatory environmental policies of the Bolsonaro government,” Professor Roberto Goulart of the University of Brasilia said in an earlier conversation with DW. “With the change of government in Brazil, Lula put environmental policy at the top of his priorities. This was decisive for the German Chancellor and the other members of the European Union to restart negotiations on the agreement,” Goulart continued.

Now both sides are stepping up the pace, because the window of opportunity can quickly close again. However, Lula announced that she wanted to renegotiate some points. “The Brazilian government believes that the imbalance between Mercosur and the European Union needs to be reduced,” Goulart said. The Europeans will soon find out in more detail where the shoe pinches. From delegation circles in Brasilia it was heard that some environmental regulations were too harsh for Lula.

Chile's President Gabriel Boric and Chancellor Scholz in the “Museum of Remembrance and Human Rights”

German farmers cautious

This is exactly what causes some discomfort in the German Farmers' Association. “The trade policy of the federal government tends to prioritize questions of agricultural trade over trade in industrial products,” says a position paper by the association that DW has seen. In other words, German farmers fear they could become bargaining chips and lose out against a powerful Brazilian agri-industry with lower standards.

Mechanical engineering and industry are more important to Berlin. “The leap of faith that the new Brazilian government will also fully implement compliance with standards in the areas of animal hygiene, the use of pesticides and the question of land ownership is not that great,” said Udo Hemmerling, Deputy Secretary General of the German Farmers' Association (DBV) in the Conversation with DW. There have also been violations of these standards in the past.

Lithium mining in a mine in the Atacama Desert in Chile

Open doors in Argentina and Chile

Scholz was previously a guest in Argentina and Chile. The primary concern here was the supply of raw materials for the German economy. Both countries have lithium, which is needed for batteries in electric cars. In addition, Argentina also has rich gas deposits, so it could become interesting as a supplier after Russia's failure.

In Santiago, both countries signed a cooperation agreement in the mining sector. Mining Minister Marcela Hernando emphasized that the cooperation should focus on sustainability: “Both states agree that for the further development of this industry it is necessary to take concrete steps towards sustainable mining that respects the communities. “

This is compatible with the approach of the German Supply Chain Act, which is to guarantee sustainable production from the start. A start has been made, the difficult part is now to fill the whole paper with life. The cooperation should lead, among other things, in the areas of exploration, extraction, treatment and processing of raw materials through to efficient and sustainable mineral processing with environmental technologies in smelting works.