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Daniela Estrada

SANTIAGO, Apr 6 2010 (IPS) - Trade with the European Union has not significantly improved the situation of workers in Latin America, in spite of its volume having doubled between 1990 and 2007, according to a study by two Chilean academics.

The EU is the biggest investor in the region, with Spanish corporations leading the field, and is also Latin America’s second largest trading partner, after the United States, although China is rapidly catching up with the European bloc.

Latin America basically sells commodities to the EU, while a number of European companies participate in banking and privatised services such as electricity and gas, as well as the mining industry and other export sectors.

The first Latin American country to sign an Economic Partnership, Political Coordination and Cooperation Agreement with the European bloc was Mexico, in 1997, followed by Chile in 2002.

Negotiations with Mercosur (the Southern Common Market, made up of Argentina, Brazil, Paraguay and Uruguay, with Venezuela in the process of joining) began in 1999, but are currently stalled pending the outcome of the Doha Round of World Trade Organisation (WTO) talks.

The European bloc is also holding talks with Peru, Colombia and Central America.

The volume of trade between the two regions doubled over the period studied; however it grew more slowly than in the rest of the world, and the trend could in no way be described as a steadily rising line, says the book titled “Las relaciones económicas entre la Unión Europea y América Latina: Sus impactos en los mercados laborales (1990-2007)” (Economic Relations between the European Union and Latin America: Impacts on Labour Markets – 1990-2007), by Claudio Lara and Consuelo Silva.

The value of trade rose from 86 billion euros (116 billion dollars) in 2003 to over 157 billion euros (213 billion dollars) in 2007, according to the study, which was undertaken at the request of the Trade Union Confederation of the Americas (TUCA-CSA) and presented Apr. 1 in Santiago.

The EU’s main trading partners in Latin America are, in descending order, Brazil, Mexico, Argentina, Chile and Colombia, which together account for 80 percent of the total trade between the regions.

In spite of the growth in trade, Lara and Silva told IPS that the frequently repeated promises that more and better jobs would be brought about by the opening of the economy and the influx of foreign direct investment, have not been fulfilled.

Although it was not easy for the authors to identify specific labour impacts arising from ties with the EU, as opposed to relations with other economic blocs, they did arrive at several negative conclusions.

First, during the period analysed, employment fell significantly in industries like farming, forestry, fisheries, mining and manufacturing, in spite of considerable European investment in export sectors.

In contrast, there was a marked expansion of jobs in services and subcontracted industries, which provide less stable employment with fewer labour benefits and which tend to weaken the labour movement.

The book’s authors cite reports that European companies like Endesa, Edelnor and Unión Fenosa (all energy utilities) have engaged in anti-union practices.

Foreign investment enters the region mainly through company mergers or acquisitions, said Lara, the academic director of the master’s degree course in economics at the Latin American School of Postgraduate Studies in the private Universidad Arcis.

“When we looked at a country’s investment and savings rates, we found that the contribution of foreign investment was nearly zero, and was sometimes even negative,” he said.

The influx of European capital has encouraged a massive expansion in the region’s financial sector. This “financialisation” process threatens both the development of the real economy and job creation, Lara stressed.

Because of their interest in speculative gains, “these companies are carrying out constant readjustments, and they tend to go in for a great deal of outsourcing or subcontracting, resulting in labour flexibilisation and job insecurity,” he said.

European transnational corporations “operate like conglomerates,” with activities in different areas of the economy, and “a large proportion of their investments are funneled through tax havens in the Caribbean,” the economist said.

During the period studied, Latin American workers suffered losses in their real wages, which grew less than GDP and productivity.

Between 1995 and 2006, average real wages declined in five out of 11 countries studied. These were Argentina, Brazil, Panama, Paraguay and Uruguay, according to 2008 statistics from the International Labour Organisation (ILO) quoted in the book. In the other countries, wages stagnated or rose only slightly.

“In general, what the European companies do is set up shop in a country and adapt their policies to local realities,” without concerning themselves with whether or not labour conditions are precarious, Roberto Morales, the executive secretary of the Labour Studies Institute (FIEL) of the United Workers Federation of Chile, told IPS.

A March report by the non-governmental Observatory on Corporate Social Responsibility in Spain, based on opinion polls, concluded that “Spanish companies in Latin America should behave in a more socially responsible way, and have more respect for workers.”

The sixth biannual European Union-Latin America summit is slated for May in Spain.

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