President Lee Jae-myung secures crude oil imports and lithium supply chains with Argentina; Mercosur negotiations to resume

South American supply chains unlocked as Mercosur talks resume

President Lee Jae-myung, on an official state visit to Argentina, held a summit with President Javier Milei and agreed to formally begin importing Argentine crude oil starting next year. Building on this meeting, both sides finalized a plan to resume negotiations within the year for a trade agreement with Mercosur, South America’s largest economic community led by Brazil, Argentina, and Korea. Negotiations with Mercosur, which began in 2018, had stalled since the 7th round of talks in 2021 due to issues such as sanitary and phytosanitary measures. Through this summit diplomacy, the long-blocked channel for trade negotiations between the two sides has been reopened after nearly five years.

The Ministry of Trade, Industry and Energy and the Argentine Ministry of Economy concluded a Memorandum of Understanding (MOU) for critical mineral supply chain cooperation and finalized a Double Taxation Avoidance Agreement. Concrete economic outcomes followed. Utilizing this agreement, POSCO plans to push forward with a joint investment of $270 million in Argentina’s lithium business, securing tax benefits. During the visit to Chile, immediate contracts worth $4.95 million were signed at a Korea-Chile business partnership event hosted by KOTRA. The government’s economic security strategy—aimed at enhancing resource self-sufficiency and diversifying global supply chains—is translating into visible action.

From resource acquisition to building future industry infrastructure

This tour of three South American nations is significantly aimed at stably securing key minerals, energy resources, and lithium—a core ingredient for the EV and battery industries. As a world-class lithium producer, Argentina has established an institutional framework allowing Korean companies to directly develop mines and invest in processing facilities. Moving beyond the past method of simply importing minerals, a vertically integrated model has been established that involves injecting capital locally to share profits. This is evaluated as a favorable development for Korean companies, allowing them to maintain stable production bases amid intensifying trade friction between the U.S. and China.

In terms of energy security, the move holds significant meaning for diversifying crude oil import sources. By reducing dependence on Middle Eastern oil and securing South American crude, the nation can mitigate the risk of oil shocks triggered by geopolitical crises. Furthermore, as economic cooperation with South American nations expands, opportunities for Korean construction and plant companies operating in the region are expected to naturally increase. Resource diplomacy is evolving from simple material procurement into a multifaceted investment strategy that expands the infrastructure for future industries.

Economic ripple effects and outlook of resource diplomacy

Supply chain diversification is no longer a choice but a mandatory task directly linked to national security. Building institutional cooperation frameworks with South America serves as a key driver guaranteeing the survival of our industries in the competition for global economic hegemony.

The formalization of cooperation systems for critical mineral supply chains with Argentina and Chile will significantly enhance the cost competitiveness of next-generation industries, such as battery materials and electric vehicles. As uncertainty in raw material supply is resolved, domestic battery companies can establish stable production plans and increase factory utilization rates. This serves as a decisive defensive shield against demand volatility in the global EV market. Ultimately, a positive structure is created where private sector risks are reduced and the large-scale investment payback period is shortened.

Concluding his South American tour, President Lee Jae-myung headed to Frankfurt, Germany, to wrap up his 11-day schedule with a luncheon meeting with local Korean residents. The key challenge going forward will be whether the concrete economic outcomes derived during the tour will translate into actual investment and increased trade volume through follow-up working-level contacts. For the signed MOUs to prove effective and for corporate investments to gain momentum, continuous follow-up measures at the government level are essential. The institutional foundation for new supply chains established by the government in South America is expected to serve as a solid catalyst driving Korea’s economic growth and export expansion.