Germany seeks stronger Mercosur ties to diversify trade and secure raw materials

Germany is seeking to strengthen ties with the Mercosur trade bloc and secure greater access to Argentina’s natural resources as part of an effort to reduce its economic dependence on the United States and China.

German Foreign Minister Johann Wadephul attended the Mercosur summit in Paraguay on Tuesday before traveling to Argentina on Wednesday for talks aimed at expanding German companies’ access to the country’s natural resources, including lithium.

On Thursday, July 3, Wadephul continued his regional tour in Brazil, Mercosur’s largest economy.

Berlin hopes to increase exports to the South American bloc as it seeks to reduce its reliance on exports to the United States.

At the same time, the Trump administration is working to tighten its influence over Latin America. To that end, it is backing right-wing electoral candidates, including Flávio Bolsonaro in Brazil.

Washington is also expanding its military presence in the region under the stated objective of combating drug cartels and criminal gangs.

According to German Foreign Policy, Wadephul visited Paraguay, Argentina and Brazil this week. While in Paraguay, he also met Chilean President José Antonio Kast and Foreign Minister Francisco Pérez Mackenna.

The main focus of his trip was strengthening relations with Mercosur, the South American trade bloc with which the European Union signed a free trade agreement after more than 25 years of negotiations.

Although the European Parliament suspended the agreement on January 21 for legal review, the European Commission decided to provisionally apply its trade provisions from May 1.

On Tuesday, Wadephul attended the Mercosur summit in Asunción, Paraguay, where several disagreements among member states became apparent.

One unresolved issue is how export quotas for agricultural products allocated to Mercosur under the EU free trade agreement should be distributed among member countries.

Tensions have also emerged after Argentina signed a bilateral free trade agreement with the United States in February. The move is viewed as conflicting with Mercosur’s founding principles and risks undermining the bloc’s cohesion.

For Germany and the EU, Mercosur is regarded as a partial alternative to exports destined for the US market, making relations with the bloc strategically important.

Alongside expanding trade, another key objective is broadening Germany’s access to critical raw materials.

Argentina possesses some of the world’s largest lithium reserves. On Wednesday, Wadephul signed a memorandum of understanding intended to facilitate German companies’ access to the country’s raw material resources.

Australia is currently the largest investor in Argentina’s lithium sector, with Australian companies operating alongside firms from the US and the UK. China also maintains a significant presence in Argentina’s lithium industry.

Germany is attempting to differentiate itself from its competitors by pledging to help develop processing capacity within Argentina, a commitment Wadephul reiterated on Wednesday.

Under President Javier Milei, Argentina’s economy has shifted increasingly toward raw material exports, while its industrial sector has come under mounting pressure.

Expanding domestic processing of those resources could help alleviate some of those challenges. Representatives of Germany’s commodities industry accompanied Wadephul during the visit.