ADDRESS BY EU-LAC FOUNDATION PRESIDENT BENITA FERRERO-WALDNER AT THE INTERNATIONAL BUSINESS FORUM LATIN AMERICA MEETS CENTRAL AND

EASTERN EUROPE IN VIENNA BRIDGING THE TWO WORDS THROUGH TRADE AND INVESTMENT Panel: Strengthened cooperation between Central and Eastern Europe and Latin America: perspectives, opportunities and prospects Vienna, Business Forum, 14 May 2012

PLEASE CHECK AGAINST DELIVERY UNICAMENTE SERA AUTENTICA LA VERSION PRONUNCIADA Dear Co-Speakers, Dear Ladies and Gentlemen, I am delighted to contribute to this panel discussion. Throughout the next fifteen minutes, I would like to carve out the benefits of closer political and especially economic cooperation between Latin America and the European Union. I will refer to the current state of the global economy, the impact of the crisis in our regions, differences as well as common challenges and opportunities for enhanced cooperation. In my role as President of the European Union-Latin America and the Caribbean Foundation, the EU-LAC Foundation, it will also be my pleasure to tell you what we can bring to the table to strengthen bi-regional business networks. Ladies and Gentlemen, The Heads of State and Heads of Government of the European Union and the countries of Latin America and the Caribbean launched the strategic partnership more than a decade ago. At the time, I was present as Austrias State Secretary for Foreign Affairs. Since then, our world has significantly changed, and todays challenges clearly transcend national boundaries. The wellbeing of our societies will largely depend on our capacity to adapt to these changes: at the national, regional and the global level. For our bi-regional relationship this means that we jointly need to target and seize the opportunities where they are. The strategic partnership between the EU and Latin American and the Caribbean relies on the three pillars of political dialogue, development cooperation and trade. With a GDP of five and a half trillion dollars and a population of 575 million consumers the regions importance must not be underestimated. It represents one of the key emerging markets of the world offering huge potential benefits for European companies in the near future. The global economic crisis and its implications The global economy has been facing a sustained period of turmoil with Europe at its very heart. But even though the impact varies greatly from region to region and from country to country, this crisis affects all economies and societies.

Europes economic downturn -with parts of the euro zone crushed by recession and mass unemployment- and its dilemma to ensure financial stability via budgetary discipline without compromising prospects for vital growth and job creation contrasts with the overall dynamism and resilience of Latin American economies. From a regional perspective, Latin American economies have performed well. Two thirds of them grew at rates above 3 per cent last year, and exports increased by 23 per cent during 2011. Unemployment rates dropped from 7.3 per cent in 2010 to an anticipated rate between 6.6 and 6.8 per cent in 2012, and levels of poverty have reached a historic low. Macroeconomic management has become increasingly sound. In 2011, Latin America and the Caribbean attracted more Foreign Direct Investment (FDI) than ever before -153 Billion US$, an amount likely to be exceeded this year.1 Brazil alone accounted for 43.8 per cent of the total flows into the region. This general picture merits a close-up view though. Let me start by quoting President Caldern of Mexico who at the last finance chiefs meeting of the G20 pointed out that we are all in the same boat and that the failure of a containment strategy will mean not only the implosion of the euro but a devastating crisis with consequences for the rest of the world. Ladies and gentlemen, The EU is Latin Americas second trading partner after the United States and followed by China2, and the leading foreign investor in the region.3 Brazil, in particular, features among the top ten trading partners of the EU.4 In the last decade, the EU invested an average of US$30 billion per year in the region. European investments are widely diverse and strongly relevant to strategic sectors, such as electricity and banking. EU transnational corporations are key also to investments in the manufacturing sector, the main mechanism for developing new productive capacity. Although the Economic Commission for Latin America and the Caribbeans (ECLAC) estimates that, in 2012, the FDI flows to Latin America and the Caribbean will maintain high levels, the organization at the same time warns that if the crisis in the euro zone worsens, especially the flow of European investments could be reversed. According to ECLAC, regional growth will suffer a slowdown to 3.7 per cent this year having reached 5.9 per cent in 2010. This is due to international economic turmoil, lower growth of the world and especially Europes economy and greater uncertainty and volatility in international financial markets. A deepening of the euro zone crisis would have dire consequences for Latin American and Caribbean economies, primarily through the real channel -exports, prices, foreign investment, remittances and tourism- and the financial channel, this means greater volatility, possible capital outflows and difficulties in accessing credit. As for investments, Latin America and the Caribbean and the European Union should promote cooperation in order to foster quality investments as a sustainable source of growth and development. Indeed, quality investment is one of the areas where the bi-regional partnership between the European Union and Latin America can generate real added value. The central theme of the

According to an ECLAC report from 2012, the main foreign direct investment recipients in the region were Brazil, Mexico, Chile, Colombia, Peru, Argentina, Venezuela and Uruguay. 2 Based on figures for 2010. 3 In spite of these figures, according to ECLAC, the Latin American and Caribbean region has increasingly lost relevance as a location for European transnational companies when compared to Asia and Eastern Europe. 4 Based on figures for 2011, Brazil is the 9th most important trade partner for the EU.

seventh EU-LAC Summit, in Santiago de Chile in January 2013, in reality the first EUCELAC Summit, reflects this idea. Both regions agreed on an Alliance for Sustainable Development: Promoting Social and Environmental Quality Investments. This clearly shows a strong convergence of interests between our regions. We agree that we need to do our utmost to pursue an economically, social and environmentally balanced development. The strife for sustainable growth Ladies and gentlemen, Our governments all strive for growth, sustainable development and job creation. As EU Commissioner for Trade, Karel de Gucht recently said, we need to recommit to policies of productivity, growth and economic integration within our own regions and in our relationship with each other. In order to generate sustainable growth it is necessary to boost competitiveness. On both sides of the Atlantic! As for the EU, I welcome the fact that the debate now openly tackles the question of austerity and growth, and that the fiscal compact is likely to be topped up with a growth compact. The International Monetary Fund (IMF) has made clear its view that the adjustment in European countries has often proven to be too harsh, as in periods of downturn, deficitcutting has a strong multiplier effect that pushes countries into unexpectedly deep recession. In my opinion, Europe needs to find the right balance and a healthy policy mix between austerity and sustainable public finances on the one hand, and higher growth rates to create jobs and wealth. Here, coherent and coordinated industrial policies for reinforced competitiveness are key. The main drivers of strong economic growth are competitive firms of all sizes. The European Commission has identified six areas to make progress towards the Europe 2020 goals, Europes growth strategy for the next decade. Structural changes in the economy, The innovativeness of industries, Sustainability and resource efficiency, Business environment, The single market, and Small and medium size enterprises.

Generally speaking, Latin American and Caribbean economies need to step up their game in terms of modernisation and productivity. European countries are well placed to contribute with quality investment and technology. In this context, a reinforced cooperation between our regions in the field of small and medium size enterprises is crucial and extremely promising, and will therefore also be one of the priorities of the EU-LAC foundation. In Europe, these companies play a decisive role for the competitiveness and the dynamism of our economies. Vice-President of the European Commission and European Commissioner for Industry and Entrepreneurship, Commissioner Antonio Tajani recently underlined the medium-term objective of the European Commission to establish a dialogue between small and medium size companies on innovation with the EUs partners across the world. Two days ago, I came back from a weeks trip to Brazil Sao Paulo, Brasilia and Rio de Janeiro- where I promoted the EU-LAC Foundation, but at the same time was invited to an interesting conference organised by the BNDES, Brazils Development Bank together with

ECLAC, UNIDO and ABDI, Brazils agency for industrial development on the topic of industrial policies, competitiveness and productivity. Whereas some, like Chief Economist and Senior Vice President of the World Bank, Justin Lin, strongly emphasized the comparative advantages governments need in their industrial policies, others highlighted important other factors, such as fiscal and trade policies, and referred to the overall context of economic policy. I highlighted that in my view, a field of cooperation between Brazil and the EU and therefore the EU-LAC Foundation- was competitiveness. In this regard, education, including vocational training, innovation, science and technology cooperation plays a key role. I came back feeling very stimulated by the incredible economic fervour and optimism of this huge economy for which the EU is the No. 1 trading and investment partner. Now, allow me to say a few words about the EU-LAC foundation. The EU-LAC Foundation The EU-LAC Foundation is a catalyst for increased mutual understanding. We will strengthen a multi-stakeholder and a multi-level dialogue across key areas of cooperation between the EU and Latin America and the Caribbean. Integration, trade, and connectivity, science, technology and investment are at the top of our agenda; and so is the promotion of closer cooperation between small and medium size enterprises as well as both regions participation in international investment and trade flows. Moreover, we will be active in the areas of social cohesion and inclusion, the fight against poverty and unemployment, sustainable development, climate change, and of course culture and education, including vocational training. Our objective is to connect the non-governmental sectors of Europe-Latin America and the Caribbean with each other and bring them closer to the agenda of the governments of both regions. The private sector is key in this regard. Dear business leaders, We want to invest in you so that you progressively own and invest in the strategic partnership. You are the agents of transformation to forge a strategic partnership with tangible results for our societies. The EU-LAC Foundation is composed of the governments of Latin America and the Caribbean and the Member States of the European Union as well as the EU institutions, all of which are represented in the Foundations Board of Governors. The Foundation was created in Madrid at the 6th EU-LAC Summit, almost exactly two years ago and after first discussion here in Vienna at the 4th EU-LAC Summit. It is based in Hamburg and took up its activities in November last year. We work with a limited number of strategic partners from both regions. Each of them represents a specific field of action relevant to the bi-regional partnership and will, in a nonexclusive way, take a leading role in executing activities related to their field of expertise. These are the Institut des Amriques in Paris, the Lombardy Region in Italy, Fundacin Global Democracia y Desarrollo (FUNGLODE) based in the Dominican Republic and the Economic Commission for Latin America and the Caribbean. The Lombardy Region is very experienced in facilitating partnerships among small and medium sized companies. They have a special focus on innovation, research and technology

transfer, and particularly in clustering industries that enhance competitiveness, for example, in Brazil and Mexico. Apart from these strategic partners we will build a quality network of committed allies from the public and private sector and civil society. I would also like to point out, ladies and gentlemen, that we are a young institution with limited resources albeit great aspirations. We are determined to match these. But to do so we do rely on the explicit political and financial commitment and support of our founding members. In parallel, we are also actively looking for external sponsors. We would be happy if some of the companies coming from the Austrian or other European business world would start using us as a platform and also support us financially. Dear friends, To conclude, I would like to repeat what I already said during my opening remarks. These are challenging times. Sustainable development is critical for all of us. Therefore, we need to build smart and creative partnerships. Let us seize the opportunity and start doing this here and now. Thank you very much for your attention.