[Jung Ing-gyo Column: Trade-Off] Be More Strategic... Become a 'Friend of South America'

South America, the World's Leading Supplier of Strategic Minerals and Agricultural Products
A Boom in "Value" on the Back of Infinite Growth Potential
China’s Influence Grows, but South America Seeks to Mitigate Its Risks
The Need for Strat

President Lee Jae-myung made a tour from July 24 to August 3, 2026, spending 11 days and 7 nights visiting San Francisco, USA, three South American countries (Brazil, Chile, Argentina), and finally returning to Korea via Germany. While his visit to the United States drew attention for discussions on artificial intelligence (AI) and cutting-edge industry cooperation with global Big Tech (large information technology companies), the true core and strategic turning point of this trip was unmistakably the visit to the three South American nations. South America is the world’s largest supplier of core strategic minerals such as lithium, copper, and rare earth elements, as well as agricultural products, making it an enormous market with unlimited growth potential. Amid the fundamental reorganization of global supply chains caused by the United States’ unilateral imposition of tariffs and the intensification of U.S.-China tensions, diversifying sources of critical resources and expanding into the South American market present both crucial opportunities and formidable challenges for the Korean economy.

President Lee Jae-myung, who made a state visit to Brazil, is greeting President Luis Inacio Lula da Silva with a hug at the welcome ceremony held in front of the presidential residence in Brasilia on the 27th of last month (local time). Photo by Yonhap News

At the center of South America’s trade geography stands ‘MERCOSUR,' the mega trade bloc. Launched in 1991 when Argentina, Brazil, Paraguay, and Uruguay signed the Treaty of Asunción, MERCOSUR’s strategic value as a global resource and food supply base is continuously rising. Korea, along with the European Union (EU) and China, began pursuing a free trade agreement (FTA) with MERCOSUR more than 20 years ago. However, progress has been repeatedly stalled due to complex entanglements over agricultural market opening, environmental and labor standards, and internal political interests. In particular, a lack of leadership and divisions within Brazil, the region’s economic powerhouse, further sapped the momentum for negotiations.

Recently, the fact that the EU and MERCOSUR have entered into signature and ratification proceedings for the first time in 25 years starkly illustrates the state of the global trade war. The EU leadership has defined this agreement as a crucial tool for securing economic security and strategic autonomy in response to risks stemming from China and the United States. Even as countries like Brazil and Paraguay ratify the agreement domestically, fierce opposition from the European agricultural sector—particularly in France and Poland—and a request from the European Parliament for legal review by the European Court of Justice (CJEU) continue to obstruct its formal implementation.

What is clear, nevertheless, is that South America's strategic importance in the race for global resources and energy transition has reached an all-time high. The government’s achievements in resource diplomacy and expansion of key mineral supply chains during President Lee's visit are timely and significant. However, on the ground, South America is now entering a phase of structural realignment as Chinese influence, having deeply taken root amidst prolonged U.S.-China conflict, is challenged. China, faced with U.S. tariff pressure, has rapidly shifted its sourcing of agricultural products away from the United States toward Latin America, primarily Brazil. Beyond mere purchasing, China has taken direct control of the entire commercialization process—including procurement from local farmers, storage, distribution, and logistics—effectively managing and dominating the agri-food supply chain in Latin America. This so-called 'Chinese-style' market access approach is both intensifying and expanding day by day.

Even more concerning is the 'lock-in effect' of trade routes established through infrastructure investment. Chinese capital now dominates major Latin American ports and transport infrastructure, such as the major terminal expansion at the Port of Santos in Brazil and the Chancay mega-port project in Peru, along with key roads and railways. By directly upgrading and expanding such facilities, China has dramatically improved logistics speed and price competitiveness in South America—an area long hampered by high distribution costs. Once built, massive logistics infrastructure leads to powerful structural lock-in that will not revert to its prior state, even if the U.S.-China trade war later subsides.

Furthermore, China is extending its cooperation beyond resource imports to encompass core minerals, secondary batteries, energy transition, telecommunications, urban mobility, and more—covering Latin America’s entire spectrum of critical social overhead capital (SOC). U.S. policy uncertainty, driven by 'America First' priorities and changes in administration, has led many South American countries to see the United States as an 'unreliable partner.' By contrast, China is binding these nations to its trade network, leveraging its massive market capacity, abundant capital, and soft diplomacy. U.S. tariff pressure is pushing South America away, while China’s capital and technology are pulling it in—a bidirectional force at play.

However, China's growing closeness with South America is far from flawless. Fierce backlash is rising locally in South America, as an influx of unregulated, low-priced Chinese products raises fears of domestic industrial and job destruction. The Chinese authorities themselves, concerned about advanced technology leaks, have shown their own limits by delaying local production approvals for domestic tech leaders such as BYD and Geely. Additionally, issues such as overreliance on raw materials, mounting debt, Amazon deforestation controversies, and ongoing U.S. security pushback all represent persistent risks.

Yonhap News Agency

Yonhap News Agency

In the end, this geopolitical evolution in South America is a true 'double-edged sword' for Korea. China’s preemptive moves in resources, logistics, electric vehicles, and telecommunications markets in South America constitute a significant threat to Korea’s advanced industries. Yet, it is also clear that South American nations feel uneasy about excessive dependence on China and are actively looking to hedge these risks. This is precisely the strategic niche that Korea must seize.

Above all, Korea must swiftly conclude ongoing FTA negotiations—the top trade agenda in relation to the South American region. Korea must take a proactive stance in upgrading the Korea-Chile FTA, which took effect in 2004, and should leverage the momentum from summits with Brazil and Argentina to accelerate talks with MERCOSUR. Using the EU-MERCOSUR FTA as a model, Korea should urgently devise a strategy to bring South American partners to the negotiating table. The growing Chinese influence in South America threatens to diminish prospects for an FTA with MERCOSUR.

Korea must position itself outside the great power competition as the most trusted 'third, neutral, and innovative partner' for South American nations. It is time to pursue a mutually beneficial trade diplomacy that goes beyond extractive resource deals and combines measures to foster local industry, promote technology cooperation, and build eco-friendly infrastructure. The diplomatic opening created by President Lee’s visit should be followed up with meticulous implementation strategies so that these results lead to long-term, multifaceted economic security alliances with South America, rather than one-off achievements.

Chung Inkyo, Professor of International Trade at Inha University (former Chief Trade Negotiator)

This content was produced with the assistance of AI translation services.