Europe should support Latin American integration

This week, EU Commission president Ursula von der Leyen is conducting a four-nation trip to Latin America to bolster political and trade ties that the European Union admits it has sometimes neglected. Von der Leyen will meet the presidents of Brazil, Argentina, Chile and Mexico on consecutive days. Her trip follows that of German chancellor Olaf Scholz earlier this year and comes a week before Brazilian president Luiz Inacio Lula da Silva travels to Paris for president Macron’s ‘Summit for a New Global Financial Pact’ between the global north and south.

South American leaders will be using these events to push for support of their recent proposals to reinvigorate regional integration of the Latin American economies, the topic of a summit convened by Lula in the Brazilian capital earlier this month.

President Lula clearly senses an opportunity for integration because of the political affinities of the region’s current governments and appears to want to test those leaders' willingness to cooperate through a revived Union of South American Nations, or UNASUR.

In his speech in Brasilia, Lula said the group should discuss creating a common unit of account to challenge the hegemony of the US dollar, as well as the creation of a common energy market and integration of the region’s defense and security. However, the South American economies must learn to walk in this direction before they can run.

There have been various efforts and initiatives aimed at regional integration throughout South American history. In 1819, Simón Bolívar promoted a vision of 'Gran Colombia', a political and economic union that would involve Venezuela, Colombia – including the territory that is now Panama – and Ecuador. To this day these states have continued to explore different approaches to pancontinental rapprochement – involving varying degrees of unification – mainly promoted through regional organisations.

Through these forums, regional trade agreements have played an important role in international development in South America since the early 1950s, but more than 70 years later the continent has still not attained the degree of economic integration found in Europe, Africa or the Caribbean. What is needed to make real progress?

The region shares a unique linguistic and cultural homogeneity. Politically however, South American countries are, for now, too disparate for integration along European lines.

However, the Organization for the Harmonization of Business Law in Africa (OHADA), a legal integration organisation that was created by the Treaty of Port-Louis, Republic of Mauritius in October 1993, is a model that can be usefully applied to South America.

Under the leadership of OHADA, pan-continental legal harmonisation – the creation of uniform laws that with appropriate country specific modifications can be adopted and used by each African nation – has proven to be a boon for business activity and foreign direct investment across Africa.

Crucially, the delineation of the OHADA framework was accompanied by the creation of the body that would oversee its practical application, the Association for the Unification of Law in Africa (UNIDA). This association, represented by a wide range of private sector stakeholders, promotes common initiatives and addresses technical challenges to the adoption and application of the uniform laws drafted by OHADA.

In South America and, more broadly speaking, Latin America as well, this role could be jointly played by UNASUR and The Community of Latin American and Caribbean States (CELAC). By replicating the roles played by OHADA and UNIDA in Africa, UNASUR and CELAC could harness the region’s existing civil law tradition to help implement a common legal and economic space that would open Latin America to global commerce while promoting regional political stability and economic development.

At present the Latin American region is simply not where it could (or should) be in terms of development, regional and international trade and foreign investment. Although the reasons for this are many, the costs, confusions and complexities of dealing with multiple national laws are a major factor.

The approach implemented through OHADA and UNIDA can effectively remove this problem. The program would consist of the drafting and promotion of a common set of commercial laws under the leadership of a strong regional sponsors would ultimately be adopted by the region’s countries.

Removing the current confusion of competing and conflicting individual national commercial laws would not only promote and deepen integration and cooperation between region’s national economies but enhance the block’s standing within the global economy.

In the current global competition for international investment and trade, replacing current legal barriers with uniform commercial laws that facilitate trade and investment across the Latin American is good sense and sound public policy.

Support in this sphere from better integrated regions across the world – including but not limited to the EU – will be crucial for Latin America to make meaningful progress in this direction.

David Syed is the head of Dentons' sovereign advisory practice