Guest blog post by Pedro M. Lopez
Those who have been to Latin America probably remember keywords such as the “tropics,” “music,” “steaks,” and “exotic fruit.” Terms such as “free trade,” “trade deficit” or “ trade agreement” are less likely to be associated with Latin America. When we buy the newest smoothie creation in Europe, we are buying what any Latin American has known as a “jugo natural,” or “fresco” their entire lives. The same goes for music. Latin American music & dance styles have been the rage for over a decade and Latin American music continues to break records in terms of streaming revenue across the planet. Songs and rhythms have been transposed into languages such as Bosnian, Croatian and Serbian. It would seem cultural and knowledge transfer is very much alive between Europe and Latin America, but is this activity also reflected in EU policy?
A report dated 11 September 2017 recorded the first “EU-Latin American and Caribbean Knowledge Week” in San Salvador. There might be work for the EU here if one looks at the scale of Chinese direct investment and trade planned from 2015 to 2019, a clear signal that China is more than able to pick up any ball the US or the EU may drop. According to Chinese president Xi Jinping, the plan is for USD500bn in trade and USD250bn in direct investment. If Europe aims to play a role in what experts project as the “convergence of advanced economies” with those of Latin American and Caribbean countries,” then the EU drastically needs to step up its game.
One promising treaty is the EU-SICA agreement between the EU and the Central American Integration System: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama signed in 2012. The SICA countries mainly export agricultural and fishery products such as coffee, plantains, pineapples, sugar and seafood. Surprisingly, the EU also imports certain industrial products, as well as microchips and sanitary instruments from Central America. In return, the SICA countries receive pharmaceutical products, petroleum-based products, vehicles and machinery. The informed eye realizes almost all of the products from the SICA countries are not readily available in Europe anyway, except sugar.
Yet the question remains: how do these carefully structured treaties match up to the revenue consistently generated in Europe, by European companies and consortiums with raw materials as basic as tropical fruit and melodies? It may be true that these agreements also give Latin American entrepreneurs and enterprises increased penetration of the EU market, which Latin Americans hope will lead to new market opportunities for agricultural exports, fishery and manufacturing, paired with tariff-free trade and lower product prices. These factors should in turn encourage foreign investment in the SICA region, but whether such agreements and incentives really capture the imagination of Latin Americans remains to be seen.
Back to cultural and knowledge transfer, as compared to classical trade talks and treaties. Where the music market is full of Latin American music and its endless number of styles, which are being merged with American and European influences, negotiations between Europe and Latin America are always characterized by conflicting approaches. The EU aims to negotiate agreements “from bloc to bloc” with its Latin American counterparts such as the Andean Community (Colombia, Peru and Ecuador), but only Colombia and Peru signed individual agreements in 2013. It took Ecuador until 2016 to sign a “Protocol of Accession.” To be fair: It is much less complex for China and the US to negotiate as single countries when dealing with loosely knit regional groups such as Mercosur and the Andean Community, than it is for a body the size of the EU.
Taking these different mentalities and structures into account, the future seems to lie in more flexible or perhaps more customizable agreements that, if possible, should lead to actual cooperation as opposed to high-end bartering. If it is true that the founders of “Innocent Smoothies” were once a couple of hung over students touring South America, it is also true that they are now owned by Coca Cola. With that kind of corporate backbone, it should be quite easy to share the processing, cooling and bottling technology that brought smoothies to Europe with beverage manufacturers in Latin America to help make smoothies (or simply jugos naturales) more readily available at lower prices for consumers in Middle and South America. The single largest Coca Cola bottling and distribution partner is Femsa, a Mexican multinational group operating in 11 countries, Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala, Mexico, Nicaragua, Panama, Venezuela as well as the Philippines. With a total revenue of approx. USD 8.6 billion for Femsa in 2016, it is hard to imagine Innocent not being interested in penetrating those markets and profiting from the input of millions of smoothie-savvy customers in those countries.
Music faces a similar situation, 2017 was the first year in which music streaming services outpaced physical music sales. Again, the transfer of culture is accelerating, but are the commercial realities and benefits reflected equitably on both sides of the Atlantic? Kind of, sort of. Streaming services such as Spotify may give larger audiences improved access, as was the case with the 2017 summer hit “Despacito.” Originally recorded by the Puerto Rican singer Luis Fonsi and re-mixed by Justin Bieber, the song was second only to Ed Sheeran with his string of hits last year. Despite almost a decade of steeply rising sales, Latin American music companies and distribution channels are still struggling with financial challenges, such as adequate payment solutions for regions in which online access and credit cards are still not part of daily life.
Both in the case of fruit juice and music, the appreciation is there, the understanding of the importance of such culture and knowledge transfers is there, but somehow, the tangible benefits are still more Europe’s than Latin America’s. If it is bottling and refrigeration technology that is missing at one level, then it is internet and payment system technology on the other. A look at specific needs as opposed to bloc interests seems to be of the essence here. This comparison within the Andean Community might be helpful: a list of the most popular dancing styles in Colombia yields names such as Bambuco, Mapalé, Vallenato, Joropo, Currulao, Salsa and Pasillo. Of these, only Pasillo is danced across the border in Ecuador. It is these finer points which the EU may need more patience with, also as a signal of respect and understanding for their Latin American partners.Guest contributor