The chances for an EU-Mercosur free trade agreement are sinking

Environmentalists in Europe are calling for tougher rules in the agreement for Amazon protection. At the same time, doubts are growing as to whether Brazil can meet its own environmental targets at all. In addition, President Lula is increasingly losing his appeal as an integration figure in South America because of his foreign policy.

by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung


The last few days have been bad news for everyone who has been hoping since the beginning of the year that the agreement between the EU and the South American Mercosur states would be concluded after all. With the change of president in Brazil from the right-wing populist Jair Bolsonaro to the left-wing Luiz Inácio Lula da Silva, the world’s largest free trade zone seemed to have a chance after all.

But now the good prospects have clouded over considerably – both in South America and in Europe.

In Germany – until now one of the most important supporters of the agreement in the EU – opposition to the agreement is growing in the government. For the Greens, the EU Commission’s proposed forest protection addendum to the Mercosur treaty is not enough. The Federal Ministry of Economics of Robert Habeck (The Greens) considers the proposal not far-reaching enough. Backed up by scientific studies, the ministry now wants concrete forest protection targets and instruments with which their failure can be sanctioned.

The chances that the Brazilians, as well as the other Mercosur governments in Uruguay, Paraguay and Argentina, will accept such a declaration are nil. Why should they let the Europeans, who cut down their own forests a long time ago, tell them how to deal with their own forest?

Lula has just presented a new industrial policy in Brazil. Under no circumstances does the government want to allow European companies to bid for public contracts. But for the Europeans, this is an important part of the free trade agreement. The Lula government – and this is no different in Argentina – wants to use public procurement to promote its own medium-sized industry.

At the same time, after six months in office, it is clear that Lula’s government is having great difficulty implementing the announced environmental and Amazon agenda as planned. On the one hand, the agrarian lobby and right-of-center politicians dominate Congress and are doing everything they can to thwart Lula’s indigenous and Amazon policies. At the same time, even Lula’s own coalition is far from unanimous on whether oil drilling should be allowed in the Amazon delta or whether a subsidy program for cars should be relaunched.

Moreover, Lula’s foreign policy is also coming under criticism in South America. He has just invited Venezuela’s dictator Nicolás Maduro to the South America summit and praised him as a flawless democrat. Presidents Gabriel Boric (Chile) and Luis Lacalle Pou (Uruguay) strongly disagreed. Lula is thus putting Brazil’s traditional leadership role in South America at risk.

Lula’s involvement as president of by far the largest economy in the region would be important in giving the EU-Mercosur agreement on the South American side the push it needs.

In Europe, Lula’s solidarity with dictators such as Xi, Putin, and Maduro is increasingly being criticized, as is his criticism of the United States and Europe. For example, he criticizes the North as the culprit for Venezuela’s or Argentina’s crises.

For opponents of the agreement with South America in Europe, these are all arguments against the agreement. So it will be more difficult than expected with the free trade agreement. But the window of opportunity for an agreement is still open until the end of the year. A lot can still change between now and then.

© Pixabay/Dusan_Cvetanovic

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