The Brexit and the relations with Latin America and the Caribbean

It has been quite trendy lately – no, I am not talking about Leo’s Oscar: The UK is to vote in a popular referendum on June, 23rd 2016 on whether it wants to stay in the EU or leave it. The so-called “Brexit”, like Brangelina, is a popular telenovela. While I personally believe it is not so unlikely that Brits say “No” to Europe, redefining Britain’s relationships with the world would not be a piece of cake. While I agree that we have been misinformed about the case and that finding a detailed investigation on the financial benefits/disasters that an exit would trigger is as hard as finding brains in Kim Kardashian’s body – it probably exists but it is kept secret – the British Cabinet Office recently released a vague report on the possible outcomes of a Brexit. Well, my friends, it does not look very bright. Sure, the Cabinet Office follows orders from Prime Minister David Cameron – who is campaigning for a “Yes” to staying in the EU – but the report seems about fair: it concludes that it would take more than a decade for the UK to renegotiate its commercial relations and treaties with its most precious allies – that is the EU, the USA, Canada, India and China mostly. But: what would become of its relations with Latin America?

First, what needs to be understood here – and again that is a complex matter given the lack of public information – is that its effective withdrawal from the EU would at least take months, during which it would be hard – if not impossible – to engage in commercial negotiations with Latin America right away. Many LAC-countries have trade agreements with the EU as a whole (that includes the UK), but not with the UK specifically. Now, the first question that pops into one’s mind is as follows: would every single LAC country see enough benefits to sign agreements with the UK? The answer is yes, of course. But what about the content? Everything would have to be renegotiated (from custom taxes to intellectual rights). The strength of the EU is its overall weight all countries combined, but taken one by one, it is a different matter. The UK would have to make sacrifices, and after leaving the EU because there were too many sacrifices involved, how many of these same sacrifices would it be ready to make and demand from its partners? That sounds like a whole lot of sacrifices to me! The UK would not be able to impose one-sided rules, because let’s be frank: it would not weigh more than come of its LAC counterparts that are much bigger in size; besides, it would desperately be in search of partners. You can argue all you want – as Ian Duncan Smith (the work and pensions Secretary) puts it: “The in campaign’s whole strategy seems to be about basically saying we’re too small, we’re too little… This country is the greatest on Earth” – the UK really IS small (hear France say that it still is a grande nation, yeah right).

This, to my mind, has a lot to do with the post-colonial era, and in the British case, the Commonwealth. The Commonwealth is not really worth anything anymore to anyone except the UK itself, which seems to be holding on to it like a bear to Leo DiCaprio – against all odds, the bear dies in case you did not know. Even Canada wants to free itself from the Queen. And you think the whole world wants to “be in a relationship” with you at any cost? International relations are no Facebook status. Go explore the globe, Sir Smith, and you are most likely to face a shock. You actually do not need to go far: go to Scotland, which will probably opt out from the UK to join the EU in a few years by the way. See what I mean? Leaving the EU might also eventually mean the end of the UK – and the notion of Commonwealth.

Now, let’s jump to the relations with LAC countries and a bit of maths to prove my words:

10 biggest commercial partners of the UK in LA, values expressed in $US bln

Country Exportation Importation Balance of trade
Brazil 3.91 4.18 -0.27
Mexico 2.23 1.78 0.45
Chile 1.63 0.775 0.855
Colombia 0.535 1.5 -0.965
Argentina 0.598 0.822 -0.224
Peru 0.354 0.593 -0.239
Ecuador 0.401 0.221 0.18
Costa Rica 0.102 0.290 -0.188
Uruguay 0.184 0.125 0.059
Bolivia 0.0657 0.103 -0.0373
Total 10.0097 10.389 -0.3793

Source: Own conception based on figures and maps from the Observatory of Economic Complexity, year 2013

As we can see, in 2013 the UK had a total trade deficit of about $38M with its biggest LAC commercial partners. Although it does not seem to be much, it still represents nearly 1.86% of its total value of exports and imports combined in the region. While the balance trade is in the UK’s favour with Mexico and Chile, it is not with Brazil – its biggest partner in the region – Argentina and, above all, Colombia. Of course, none of these countries make it in the top ten of its worldwide partners – not even in the top twenty. There is no doubt that the EU is its biggest partner, and that it would remain so. The UK might rejoin the EFTA (just like it was a member before joining the EU) so that it would still be integrated into the European Economic Area, but the Brexit would still affect this partnership, making it necessary to strengthen its cooperation with some of its current partners.

Let’s take a look at the traded goods now: the UK exports mostly cars, medicaments, petroleum, and gold (“surprisingly” no manufactured foodstuffs make it very far), while it imports mostly the same goods in less quantity, which basically means that it imports a more diversified array of products than it exports. To put it in other words: it will have to export its surplus of cars, petroleum, gold and medicaments that would not be exported to there any longer: many LAC-countries have petroleum and gold, they can import more cars from Germany and the USA and medicaments from other European countries if they want, so to speak. The percentage of these British exportation goods in the country’s trade balance with the world does not even match the percentage of the same imported products in LAC-countries from Great Britain. In the meantime, the UK will still need the products that it imports from there. As a matter of fact, the loss of Britain as a partner would not be as catastrophic for LAC-countries as for the UK, both economically and politically: sure, LAC economies would have to go through the hassle of finding other partners, but it would be able to replace the UK while the latter figures out its new status. No one is irreplaceable – except Beyonce, although, a bit like the UK, she seems to be the only one to believe that.

Finally, there is a third element I can think of – and that is a more positive note for the UK. There is a reason why all agreements between the EU and LAC-countries have never really taken off despite clear commercial potential in both regions and the existence of bilateral agreements: the lack of understanding of each other culture, history and reality. The EU has this “I am developed and superior to you, so suck it and accept my terms” approach, whereas LAC-countries stubbornly refuse to negotiate with the EU block to block and hence as an equally mighty partner (they are not able to agree and speak as one voice), creating a de facto imbalance of power and blaming the EU for having more power as a whole than them as countries alone (to be fair they are not totally wrong). The UK would need to measure its actual weight as a country and not as part of a bigger ensemble. In that respect, it may greatly benefit from it because it would be something very appealing that the EU is not: it would be a country and would negotiate as such, not as a block.

So, apart from the fact that some of you Brits would eventually need to learn Spanish and Portuguese just like LAC-countries learn English – really, that is not a joke, I myself realized that my French would not take me anywhere near Latin or America – there will be short-term decisions to make: which partners can you really count on in that region as of now? The good thing is that you have not screwed them over too badly (well, still quite a bit). Pure economics is not everything: the attitude, I believe, plays a big part as well. The Brexit could be a chance to deepen ties between the UK and the developing economies of Latin America if addressed correctly, but not with people still thinking that Great Britain is the greatest nation of them all. This is exactly this attitude that the LAC region, which was once colonialized by Spain and Portugal among others, resents so much. That means the UK would need to swallow its pride. The world will not be a new playground for “colonial wannabee” ambitions, especially the LAC region: the UK would have to treat them as equals and with respect. And if in their minds that means lowering themselves, then so be it.

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