As Europe accelerates its push for a sustainable energy transition, the European Union (EU) is increasingly looking to Latin America for the critical raw materials necessary to meet its future needs. With supply shortages looming, particularly for lithium, the EU is deepening trade relations with Latin American nations, such as Chile and Brazil, to ensure the flow of key resources. These strategic partnerships have gained additional urgency amid the geopolitical instability triggered by Russia’s war on Ukraine, which highlighted the EU’s vulnerabilities in energy supply chains and prompted a reassessment of its resource sources.

Latin America as a Key Supplier of Critical Raw Materials

Latin America plays an indispensable role in supplying the EU with the raw materials essential for its green transition. Of the 34 critical raw materials identified by the EU, 25 are sourced from Latin American countries. Brazil is the leading supplier overall, while Chile is particularly crucial, providing a staggering 79% of the EU’s refined lithium. With lithium being a key material in electric vehicle batteries and renewable energy storage, Chile’s significance is set to increase as EU demand for lithium is expected to grow dramatically — by 12 times by 2030 and 21 times by 2050, according to the European Commission. This escalating demand highlights the growing reliance on Latin American countries to meet Europe’s raw material needs for its energy transition.

Strategic Trade Agreements to Secure Resource Flow

To formalize and strengthen its access to these critical resources, the EU has signed several important trade agreements with Latin American countries. One of the most significant is the upcoming trade agreement with Chile, set to come into effect in February 2025. This agreement will be the first to feature a dedicated chapter focused specifically on energy and raw materials, a clear recognition of the strategic importance of these resources for Europe’s energy transition. Additionally, in December 2024, the EU reached a preliminary agreement with Mercosur, a trade bloc that includes Argentina, Brazil, Paraguay, and Uruguay. This agreement aims to reduce export tariffs and remove restrictions, facilitating smoother trade and greater cooperation on critical raw materials between the EU and Latin America.

Environmental and Social Challenges of Resource Extraction

While Latin America offers immense economic opportunities through its critical raw materials, the extraction of these resources has raised significant environmental and social concerns. Mining operations, particularly for lithium, have been linked to a variety of environmental issues, such as water depletion and ecosystem disruption, as well as socio-ecological conflicts with local communities. According to a study by the German Institute for International and Security Affairs, over 40% of environmental conflicts in Latin America are tied to mineral extraction. While the EU’s agreements with Latin America emphasize the importance of sustainable mining practices and environmental impact assessments, concerns persist, particularly regarding the water-intensive nature of lithium extraction, which could exacerbate local water scarcity.

Balancing Economic Growth and Sustainability

The EU’s growing dependence on Latin America for critical raw materials presents substantial economic opportunities for the region, potentially boosting its mining sectors and contributing to broader economic development. However, these benefits must be weighed against the environmental and social costs of raw material extraction. As trade agreements advance, the EU and Latin American countries will need to collaborate closely to ensure that the supply of these critical resources does not come at the expense of the environment or local communities. Finding a balance between meeting the EU’s raw material needs and fostering sustainable development in Latin America will be crucial for the success of these partnerships.