Perspectives for EU-Latin America cooperation on critical raw materials

Critical raw materials (CRM) are integral to the manufacturing of batteries, electric vehicles, power grids, jet engines, advanced defence technologies – and semiconductors, which underpin artificial intelligence. Their availability directly affects energy security, the pace and feasibility of the green transition, and the operational readiness and technological superiority of the defence sector, which has gained importance due to Russia’s invasion of Ukraine, the perceived unreliability of the United States, and Europe’s policies of rearmament.

Adopted in 2024, the Critical Raw Materials Act (CRMA) represents the EU’s effort to institutionalise a coordinated approach to ensure a secure and sustainable supply of CRM for the industry, enhancing the EU’s resilience to external pressures, and reducing supply chain vulnerabilities. The CRMA lists 34 critical raw materials – based on their importance for the EU economy and the risk of supply disruption – of which a subset of 17 are classified as strategic raw materials (SRM). These SRM are deemed particularly essential for the green and digital transition, as well as for defence and aerospace applications. Of the 34 CRM identified by the EU Commission in 2024, 26 (15 out of 17 SRM) are needed for key renewable energy technologies. 

For most CRM the EU is dependent on imports from non-EU countries. For 10 of these materials, the EU is entirely reliant on external suppliers. Within the EU, there are currently no significant rare-earth mines, only limited extraction facilities for other CRM, and just a small number of processing plants. The refining and processing of CRM has become increasingly concentrated in a small number of countries. For example, in 2024 China accounted for approximately 90 per cent of refined rare-earth elements required for the production of permanent magnets, which are essential for electric vehicles, wind turbines, digital technologies, and artificial intelligence infrastructure. China also holds a dominant position in the processing of minerals critical to semiconductor manufacturing. 

The geopolitics of CRM has become increasingly shaped by export controls. As of October 2025, more than half of 20 energy-related strategic minerals were subject to some form of export restriction underscoring the strategic vulnerabilities associated with highly concentrated supply chains and highlighting how control over CRM processing can translate into broader industrial, technological, and geopolitical leverage. In response to these challenges, the RESourceEU Action Plan of December 2025 states that “the diversification of critical raw materials supply must become an EU top political priority over the coming years.” Building up processing and refining capacities within Europe or in reliable partner countries (“friendshoring”) is essential to reduce structural dependencies on highly concentrated refining hubs. 

FTAs and  the Supply of Critical Raw Materials from Latin America

Since 2021 the EU has signed 15 strategic partnerships on raw materials with resource-rich countries worldwide, including two with Latin American partners – Argentina and Chile – in 2023. Moreover, the RESourceEU Action Plan emphasises the launch of bilateral negotiations with Brazil as a strategic partner. 

Of the 34 CRM listed by the EU, 25 are extracted in Latin America, highlighting its strategic importance in the global resource landscape. The new Interim Trade Agreement (ITA) with Chile, in force since February 2025includes a chapter on energy and raw materials. As the world’s largest producer of copper and second-largest producer of lithium, Chile plays an important role in the EU’s CRM diversification strategy: the EU sources 14 per cent of its copper and 79 per cent of its lithium from Chile. The EU–Mercosur ITA, which was provisionally put into effect in May 2026, will reduce EU tariffs on both CRM and products derived from them.

EU data on CRM imports show that Argentina contributes 6 per cent of the EU’s lithium imports, while Brazil accounts for 12 per cent of the EU’s aluminium/bauxite, 13 per cent of its natural graphite, 82 per cent of its niobium, 8 per cent of its manganese, 9 per cent of its silicon metal, 7 per cent of its vanadium, and 16 per cent of its tantalum. Brazil has emerged as a pivotal actor in the geoeconomics of strategic and critical raw materials. The country ranks among the world’s top 10 producers of nickel, manganese, niobium, iron, and bauxite, while simultaneously expanding output of lithium, natural graphite, vanadium, copper, and rare earth elements where the country possesses the world’s second-largest reserves.

A Natural Fit for EU–Latin American Cooperation? Assessing the Constraints 

At first glance, cooperation between Latin American countries and the EU on CRM appears straightforward: Latin America possesses the resources that Europe needs. Upon closer inspection, however, the relationship proves more complex. What Europe ultimately requires is not merely CRM, but raw materials that have already been refined and processed for industrial use, or downstream products such as batteries. Access to extraction alone does little to reduce strategic dependencies if key stages of the value chain remain concentrated elsewhere. 

Hence, when it comes to CRM, Europe and Latin America face similar bottlenecks, despite important differences in resource endowments. Both regions remain heavily dependent on external partners – particularly China and, in the case of Latin America in the future, probably also the US – for the conversion of raw materials into industrial-grade inputs. Consequently, both Europe and Latin American countries share a strategic interest in diversifying their supply chains and reducing unilateral dependencies.

For Latin American countries, this is a crucial moment to leverage their mineral endowments to promote industrialisation through domestic processing and the development of higher segments of the value chain. According to the RESourceEU Action Plan, strategic partnerships on raw materials “aim to benefit both the EU and its partners through local beneficiation. The creation of local added value and jobs is essential, including by enabling third countries to reinforce their capacity beyond extraction.” This formulation signals a willingness to respond to the interests of partner countries. In the context of intensifying competition for CRM and SRM, such responsiveness is not merely a gesture of goodwill but a political necessity.

While the EU–Mercosur Agreement generally prohibits export taxes, the revisions adopted in December 2024 allow Brazil—unlike the other Mercosur members—to apply export duties to 23 CRM and 9 SRM. These export taxes can confer a competitive advantage on Brazilian industry in midstream processing and may incentivise European firms to establish production facilities in the country. A different approach is reflected in the EU–Chile agreement, which allows for a system of preferential pricing for lithium when the mineral is used to support domestic industrial development. However, the results have thus far been limited, illustrating the persistent structural challenges associated with moving up the CRM value chain. The considerable price volatility of CRM—as illustrated by the case of lithium—creates significant barriers to entry for new market participants. At the same time, many downstream products derived from these materials, such as batteries, are produced by firms that already possess substantial technological advantages and operate in markets characterised by significant overcapacity. 

The key question, therefore, is whether Latin America can move beyond the mere extraction of critical raw materials in terms of value creation – and, if so, whether this would help reduce Europe’s dependence and vulnerability. Much will depend on the extent to which Latin American countries are perceived in Europe as reliable partners, thereby encouraging the EU and European companies to engage in “friendshoring” in the region. Trade agreements and strategic partnerships can play an important role in fostering such trust, reinforced by previous investments and the strong presence of European companies in the Mercosur countries. Moreover, given favourable energy prices and the availability of renewable energy sources, friendshoring could in some cases be combined with “power shoring”, which refers to the relocation of energy-intensive industries to countries with low-cost clean energy.

---

Detlef Nolte

Research associate at the German Institute for Global and Area Studies - GIGA (Hamburg, Germany). He was Director of the Institute of Latin American Studies and Vice President of GIGA.

The opinions expressed in this blog are solely those of the author and do not reflect the opinions of the EULAS Network.