To compete with China’s Belt and Road Initiative, the Global Gateway needs to be big on funding, green and digital on deployment and ethical on inspiration and can prove it in Latin America.
The European Union launched its global gateway initiative in December 2021, but its results have not yet lived up to the expectations it aroused. If it wants to compete with China’s Belt and Road Initiative (BRI), the Global Gateway must be bold, green, digital and ethical. The EU’s digital alliance in Latin America and the Caribbean (LAC) offers an opportunity for resources to have a truly transformative impact, a stated goal of the EU.
On March 14, the Vice President of the European Commission, Margrethe Vestager, and various Telecommunications Ministers from Latin America and the Caribbean established the Digital Alliance, one of the initiatives of the European Commission launched within the framework of the Global Gateway. The alliance will focus on three pillars: investments in connectivity, aimed at closing the gap in Internet access between the region and the EU, within and between the countries of the region; cybersecurity, where despite the great progress made in the region there are still significant gaps that threaten both citizens and companies and States; and digital rights, a field of enormous potential, as both regions share a people-centred approach to digital transformation.
The project has enormous strategic importance and great potential for the EU. The Russian invasion of Ukraine has given new relief to the Union’s relationship with Latin America and the Caribbean. The region comprises 33 countries that are key to sustaining a rules-based multilateral order and whose votes have been courted by China and Russia in the United Nations General Assembly. There are also huge investment opportunities in the green and digital sectors in Latin America and the Caribbean, making it an important region in the Union’s quest for strategic autonomy. However, relations between the two regions have experienced many ups and downs since the leaders first spoke of a “strategic partnership” at an EU-LAC summit in Rio in 1999. In recent years, the financial crisis in the EU , the disinterest of the United States in Latin America and the covid-19 pandemic have allowed China and, to a lesser extent, Russia to expand their presence in the region. While EU trade with LAC doubled between 2008 and 2018, China’s trade increased 10-fold thanks to its strategic approach through the BRI, which has added to China’s already significant FDI and loan flows to the region.
The EU intends to revitalize this relationship. But for the EU-LAC partnership to succeed, it is essential that these agreements and political declarations are accompanied by a meaningful investment package and agenda, as well as a clear roadmap for their implementation. Until now, the Union’s outreach to Latin America has focused on programs such as the Bella submarine cable, which connects Europe and the region, and the Copernicus Earth observation satellite system, which, while important, lack the scale needed to change the perception people have of the EU. For its part, the Global Gateway is far from mobilizing the 300,000 million euros in investments initially announced, and the 3,500 million euros earmarked for investments in Latin America are insufficient to alter the strategic balance in a region where the investment needed only for connectivity is estimated at $51 billion.
“The digital transition that the EU and the Latin American countries want to promote could be the catalyst for a change of pace in relations”
The digital transition that the EU and the countries of the region want to promote could be the catalyst for a change of pace in relations. But for this to be feasible, certain conditions must be met. First, for the Global Gateway to be attractive to Latin America and the Caribbean and to compete effectively with the Chinese BRI, it must rebalance its geographic focus to pay more attention to the region. According to known advances, 60% of the projects would focus on Sub-Saharan Africa, 20% on Latin America and another 20% on Asia. At the same time, it should focus its efforts more on digital initiatives: currently, energy and green transition initiatives account for 80% of projects, while digital initiatives barely account for 15% (and social initiatives for 5%).
In addition, the projects identified in the digital realm focus almost exclusively on connectivity issues, such as financing investments in fibre, cable, satellite and 5G. Closing the connectivity gaps is undoubtedly urgent, but it is not enough. Currently, more than 35% of Latin Americans do not have access to a fixed broadband Internet connection, and 20% do not have mobile broadband access – double the average for OECD countries. concentrating on the lowest income quintile and on rural and remote areas. However, the digital agenda in 2023 must be one of transformation, not just connectivity. Therefore, it must include issues such as cybersecurity, the digitization of public administrations and services (including health, migration, justice and taxation), training and education in key skills, the regulation of artificial intelligence and data governance. Together with the deployment of 5G and investment in digital, technical and soft skills, this would bring the region’s financing needs closer to USD 300 billion, which is equivalent to 3% of regional GDP.
To address these geographic and thematic imbalances, the region therefore needs a more ambitious European investment plan. The Global Gateway plans to mobilize private financial resources through the creation of co-financing mechanisms from development banks, in particular the European Investment Bank, CAF-Development Bank of Latin America, the Central American Bank for Economic Integration and the Inter-American Development Bank. . Despite the current meager forecasts, it should be possible to mobilize the necessary funding. After all, the EU is the largest foreign direct investor in Latin America, its telecommunications companies are global players, it plays a pioneering role in the digitization of banking, insurance, infrastructure, energy, public services, industry, agriculture and mining, and possesses world-class cybersecurity and hybrid threat capabilities. The launch of the digital alliance is expected to be accompanied by a business meeting of the main Euro-Latin American companies, which, if confirmed at a high level, is a promising sign.
The EU digital agenda is attractive to third parties compared to China’s BRI because it includes ecological, social and ethical components, making it an ally of the ecological transition and not a competitor. Many of its initiatives contribute both to the digital goals as well as ecological onessuch as the development of the “internet of things” for the design of smart cities, the use of big data and data in the cloud to control the temperature of the oceans and artificial intelligence applied to the protection of biodiversity.
The European approach to digitization, based on rights and people-focused, it should also appeal to Latin America and the Caribbean. The region is trying to align its approach with that of the EU, with special attention to social, gender and territorial inequalities and inclusion, which are not Chinese priorities. The cost of these inequalities is enormous. For example, achieving full gender parity in Latin America would expand the region’s GDP by $2.6 trillion, the equivalent of Brazil’s economy. Closing the Internet access gap and investing in training will contribute to reducing these inequalities in the region, especially among women and in rural areas, and will help the younger generations.
The Global Gateway has been criticized for overpromising and underdelivering. The Digital Alliance offers an opportunity to show the value of the Global Gateway and demonstrate that it can offer an alternative to the Digital Silk Road China.
