The war in Ukraine, the situation of strategic dispute with China and the need to access key raw materials to address the energy transition drove the European Union to revalue its link with Latin America. This was reflected in the last EU-Celac summit, where the EU relaunched its Global Gateway and promised investments of 45 billion euros for the region.
The president of Brazil, Lula Silvasaid that «rarely have I seen so much political and economic interest in our region from European countries», while the president of the European Commission, Ursula von der They readconsidered that «the strategic partnership between both regions is more important than ever.»
Argentina has several in the pipeline investment projects and also signed specific documents on energy and lithiumtwo topics that are of great strategic interest for the EU. Page 12 spoke with representatives of the EU delegation in Buenos Aires, who highlighted the special focus on entering the lithium and green hydrogen business. Furthermore, they warned that It is not clear that the heavy investment that a liquefaction plant would require to export LNG can be amortizedgiven the horizon of total abandonment of hydrocarbons in 2050 by Europe.
Renewed interest
«Putin’s unjustifiable invasion of Ukraine has caused a geopolitical shock in Europe. That has forced us to rethink a lot of things, including who our partners are. Furthermore, we see two fundamental transitions that we can only face through international cooperation: the fight against climate change and digital transformation«explains Eran Nagan, deputy ambassador of the EU in Argentina.
Regarding the main focuses of interest of the EU, Luca Pierantoni, head of the Cooperation section of the office, explained that «they are putting together investment platforms in three themes. «It’s about lithium, green hydrogen and connectivity, in the latter case with an ambitious idea that is the concept of digital inclusivity, which involves reducing the digital divide and expanding the existing network.»
«We do not know exactly how much economic and financial force we will be able to mobilize, but on several of these issues we are quite optimistic. The final numbers of how much investment will be directed to Argentina will depend a lot on the green hydrogen, where billions of euros are needed for the generation of renewable energy that sustains hydrogen production. So if something specific is done in this sector, the general numbers change. Each GW of power, for example, is 2,500 million euros of investment,» adds Pierantoni.
Lithium
Pierantoni indicates that in the lithium sector “the EU is currently absent in extraction. The only European project is that of Eramine in the Salar de Hombre Muerto, which should go into production in the coming months. The idea would be to expand the European presence, which is also important for Argentina, because it would allow it to diversify the actors that are investing. «Currently the predominant actor is China.»
Lithium is a key mineral to address the energy transition, hence the great interest that arouses in industrial powers. Now, as in any discussion around natural resources, questions arise about what impact it has on the industry and employment at the local level, the community acceptance and controls socio-environmental.
“We do not have to be naive, the extraction of lithium in itself is a quite complex process. It is not correct to think about making batteries overnight, but it is also not correct to think about only extracting the mineral and not leaving anything around. At an industrial level, the production of cathodes can be started –an input for batteries—and development of suppliers at the upstream level,” says Pierantoni.
The EU says it wants to expand in the lithium sector “in the European way”, in relation to attention to the environmental issue, which would differentiate it, according to his speech, from the type of advance that China has. On the other hand, Europe is also trying to advance research into more “chemical-intensive” lithium extraction techniques that allow reduce the water impact on the salt flat.
Connectivity and energy
“We are having a conversation with important actors, such as Telefónica, Ericsson and Nokia to see to what extent it is possible to imagine a joint investment plan. Then we will have to see to what extent there is a political will on the part of the Argentine government to accompany this and to what extent it is possible to imagine an agenda of loans with the European Investment Bank and a guarantee for private investment,” considers Pierantoni.
On the issue of energy, the understanding agreement signed around the LNG It sparked enthusiasm in the terminals of the oil sector. However, the European strategy on this point is still unclear. The possibility of Argentina becoming a gas exporter to Europe depends on the country having a liquefaction plantwhich requires a very large investment.
“In Europe we are making a faster-than-anticipated shift towards a sustainable energy matrix. The question is whether it makes sense to invest in a liquefaction plant in Bahía Blanca and transport liquefied gas from there to Europe, knowing that investments take time and that By 2050 the region will no longer use that energy source. For now, gas is a transition energy”says Eran Nagan.
For that reason, In the long term, the point of greatest interest in the energy agenda is green hydrogen, where Europe seeks to position itself as a seller of equipment and technology for the development of this sector, which is based on electricity generation through renewable energy to manufacture a “green” fuel.
Financial engineering
The way in which Europe seeks to reposition itself as an economic actor in Latin America and Argentina would be through investment from private companies, which would receive a guarantee from the EU.
“We are making guarantees available through major investment finance players, with the European Investment Bank and others. The idea is that the private sector invests and we guarantee the investment. Argentina has a high country risk, but it is an investment that we consider strategically a priority. In the actions we have taken until today, the private sector has not had such a relevant participation, with the EU being the main actor until now. In the future, the participation of the private sector will be central. Private parties have the financial capacity and know-how to develop the investments that are needed,” concludes Pierantoni.