Scholz calls for speedy EU-MERCOSUR free trade deal on first trip to South America By Reuters

© Reuters. PHOTO: German Chancellor Olaf Scholz speaks in front of the Bundestag’s lower house of parliament in Berlin, Germany on January 25, 2023. REUTERS/Fabrizio Bensch/File Photo

Sarah Marsh and Nicholas Miskulin

BUENOS AIRES (Reuters) – German Chancellor Olaf Scholz on Saturday called for a speedy conclusion to negotiations on a free trade agreement between the European Union and the South American trading bloc MERCOSUR during the first stop in Buenos Aires on his inaugural tour of the region.

In an effort to reduce Germany’s economic dependence on China, diversify its trade and strengthen relations with democracies around the world, Scholz visits Argentina, Chile and Brazil.

Berlin wants to reduce its dependence on China for minerals key to the energy transition, making resource-rich Latin America an important partner. The region’s potential for renewable energy production is another attractive feature.

“There is great potential to further deepen our trade relations, and the opportunities that could arise from the EU-MERCOSUR deal are obviously particularly significant,” Scholz said at a press conference along with Argentine President Alberto Fernandez.

Fernandez blamed European protectionism for delaying a deal agreed in principle in 2019 but not ratified by national parliaments. EU ambassadors said Brazil must take concrete steps to stop the rampant destruction of the Amazon rainforest (NASDAQ:).

Berlin hopes that fears can be dispelled after the election of Brazilian President Luiz Inacio Lula da Silva, who promised to revise the country’s climate policy. Scholz is due to meet him on Monday at the end of his three-day tour.

Russia’s invasion of Ukraine, which has caused an energy crisis in Germany due to its heavy dependence on Russian gas, has raised awareness of the need to reduce economic dependence on authoritarian states.

For Germany to reduce its dependence on China for minerals, it needs to embrace sectors it has shied away from, a German government spokesman said Friday.

“For example, mining lithium is a difficult task, especially in terms of the environment and social standards,” an official traveling with Scholz told reporters.

Argentina and Chile are at the top of South America’s “lithium triangle”, which contains the world’s largest deposit of ultra-light metal for batteries.

The chancellor is accompanied by about a dozen business leaders, including the heads of Europe’s largest manufacturer Aurubis AG (NAFG.DE) and the energy company Wintershall Dea AG Dea.

Fernandez said he and Scholz discussed the possibility of attracting German investment in the country’s vast shale gas reserves, lithium deposits and green hydrogen production.

Wintershall Dea, for example, is part of a consortium that announced in September it would invest about $700 million to develop a gas project off the coast of Argentina’s southernmost tip, Tierra del Fuego.

“Argentina has the potential to supply Europe with energy in the long term,” said chief executive Mario Meren.

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