An aerial view of the brine ponds and processing areas of the lithium mine of the Chilean company SQM (Sociedad Quimica Minera) in the Atacama Desert, Calama, Chile, on September 12, 2022.
Martin Bernetti | Afp | Getty Images
The strategic importance of lithium appears to have played a major role in the European Union's major deal with Brazil, Argentina and three other South American countries, analysts say.
After 25 years of negotiations, the EU and five Mercosur countries (an alliance that includes Paraguay, Uruguay and, recently, Bolivia) reached a much-anticipated trade agreement on December 6.
If ratified by the 27-nation bloc, the EU-Mercosur partnership will create one of the world's largest free trade zones, covering considered an area of over 700 million people and representing around 20% of the world's gross domestic product.
The European Commission, the EU's executive arm, said the trade agreement is designed to increase bilateral trade and investment, lower trade barriers and non-tariffs, create more stable rules and shared values. incentives, such as sustainable development.
Not everyone is in favor of the deal, however. France and Poland are among those who opposed the deal, warning that it could create unfair competition for European agriculture.
Analysts at Dutch bank ING said the importance of critical raw materials such as lithium appeared to “make fewer headlines” in coverage of the free trade agreement, despite the metal's importance to Europe's economic future.
“That's surprising, given that a) the EU is heavily dependent on China for critical raw materials, b) countries like Argentina, Bolivia and Brazil hold large reserves of some of these critical raw materials and c) EU demand for these products is expected. significant increase,” analysts at ING said in a research note published on Friday.
“It may be difficult to quantify the exact economic value of better access to these products through closer ties with Mercosur, but we believe that this particular element has a lot of strategic pressure for the EU (Commission) when they strike the agreement – especially as a multiplier. or finding and getting supplies is at the forefront of their minds,” they said.
Lithium, sometimes referred to as “white gold“Because of the light color and the high market value, yes considered as an integral part of the transition away from fossil fuels. It is commonly used in electric vehiclesmobile phones and rechargeable batteries for laptops.
Latin America is considered to supply around 35% of the world's lithium, according to the International Energy Agency, with Chile (26%) and Argentina (6%) in the lead. The region is thought to hold more than half of the world's lithium reserves, mainly in Argentina (21%) and Chile (11%).
Lithium 'essential for major industries'
President of the European Commission Ursula von der Leyen explained the EU-Mercosur trade deal as a “win-win deal” that will save EU companies 4 billion euros ($4.24 billion) of export duties each year.
At the same time, Kaja Kallas, the head of EU foreign policy, highlighted the importance of access to essential raw materials in her statement on the trade deal.
“For Europeans, it opens up a large area to trade freely with, including access to critical raw materials, and reduces the risk of competitors replacing us without it,” he said. Kallas Friday.
Aerial view of evaporation pools for lithium extraction at the Salar de Olaroz salt flat, near the town of Olaroz Chico, Jujuy province, Argentina, on July 1, 2024.
Luis Robayo Afp | Getty Images
For Federico Steinberg, a visiting fellow with the Europe, Russia, and Eurasia program at the Center for Strategic and International Studies, a prominent US think tank, three factors made an agreement after a quarter of a century of cooperation stop arrangement.
These were immunity boosters,” for example by Donald Trump're-election', the fact that Brazilian President Luiz Inácio Lula da Silva and Argentina's Javier Milei were strong advocates of agreement and 'important strategic issues on the EU side,' such as persistent concerns regarding the rapid expansion of Chinese trade and investment in Latin America.
Under the terms of the deal, Steinberg said European companies were likely to gain better access to public procurement markets, high-value service sectors and critical raw materials, such as lithium.
“In return, the European Union will reduce tariffs on agricultural products and other goods and send EUR 1.8 billion through the Global Gateway initiative to support Mercosur's green and digital transition,” Steinberg. said in a note published on Friday.
Belgian and French farmers block the Hensies/Crespin border between France and Belgium with their tractors during a demonstration against the free trade agreement between the EU and Mercosur countries called the French farmers' union “Coordination Rurale”, in Crespin, northern France on December 5, 2024.
Francois Lo Presti | Afp | Getty Images
While some in Europe remain unhappy about the proposed terms, the EU-Mercosur trade deal was warmly welcomed by the Federation of German Industries (BDI), an umbrella group of German business-related service representatives that employing approximately 8 million workers.
“The EU-Mercosur trade agreement provides a unique opportunity for the diversification of critical raw materials such as lithium and copper, which are essential for key industries such as electromobility and renewable energy,” said the BDI. said in a statement on December 6.
“In times of growing global trade, this trade agreement sends a clear and strategic message in support of free and rules-based trade,” they said.
