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European Union enhances energy-engagement with Latin America

Updated: Feb 19, 2023

Chile concluded a free trade agreement with the EU that aims to enhance European access to key renewable energy inputs like lithium and copper as it seeks to replace Russian energy. Chile has agreed to drop tariffs on all imports except sugar and help boost EU investment in the country. The deal is one of the more substantive reflections of the increasing importance of Southern Cone's large lithium suppliers and the EU's increased focused on Latin America.

The deal is expected to boost Chilean imports up to €4.5bn annually for a 45% increase in the deal's first five years. The closer trade relations come as EU firms have raised FDI in the strategically significant mining country, with €53bn invested in 2020 alone. In return, Chile will secure more favorable access for its food and professional services exports for an expected 6% GDP increase as a result.

The agreement includes strict labor, environmental, gender, and human rights commitments which have stalled other deals with Mexico and Mercosur in the past. Despite these provisions, members of Boric's diverse left-wing coalition have criticized free trade itself and are likely to see the deal as a moderation and betrayal after the failed constitutional referendum in September. Despite formalizing the FTA, the deal is subject to the approval of all 27 member states, and a hurdle with the EU-Canada agreement still needs to be met.

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