Leaders from the Mercosur nations convened for their annual summit, with uncertainties looming over the fate of a crucial trade agreement with the European Union (EU) and the future of the South American common market. The primary goal had been to announce a free trade agreement with the EU, potentially opening up markets for a combined population of 732 million people.
However, the recent change of government in Argentina, occurring just three days after the summit, has disrupted the finalization of the trade deal. The incoming president, Javier Milei, a radical libertarian, has expressed skepticism about Mercosur's purpose.
Brazilian President Luiz Inacio Lula da Silva, who hosted the summit in Rio de Janeiro, expressed frustration over his inability to seal the deal. He cited his discussions with various EU leaders, including French President Emmanuel Macron, in urging for less protectionism. Nevertheless, Lula acknowledged the strong resistance from Europe.
A joint statement from Mercosur and the EU indicated that negotiations are ongoing. Brazilian diplomats remain hopeful that Argentina, under Milei's leadership, will continue the trade talks with the EU. Milei's designated Foreign Minister, Diana Mondino, has conveyed similar intentions during her visit to Brasilia and an interview with Reuters.
Trade experts, however, warn that the window of opportunity to finalize the EU-Mercosur deal is narrowing, and the European Parliament's ratification faces potential obstacles due to upcoming elections in Europe. Recent criticism from Macron, following his meeting with Lula in Dubai, may further galvanize opposition to the agreement, initially reached in 2019 but subsequently delayed due to European demands related to environmental safeguards.
Oliver Stuenkel, a professor at the Getulio Vargas Foundation in Sao Paulo, is skeptical about the deal's ratification in Europe, where opponents might exploit Milei's radical ideas, particularly concerning climate issues, to block the agreement.
On the campaign trail, Milei threatened to exit Mercosur, which could disrupt the common market with Brazil, Uruguay, and Paraguay. However, Mondino, his foreign policy advisor, has affirmed that Argentina does not intend to leave the bloc.
Former Brazilian Foreign Trade Secretary Welber Barral emphasized that despite its imperfections, Mercosur is likely to persist. He noted that while it is an incomplete customs union and regional trade progress has been slow, the political costs of abandoning Mercosur remain high.
Marcel van Hattem, a conservative lawmaker and critic of Mercosur in Brazil's Congress, suggested that if Mercosur reverts to its original purpose of promoting free movement and free markets, as advocated by Milei, it could not only survive but also become beneficial for its member countries.
The combined economies of Mercosur represent a substantial $2.86 trillion in gross domestic product, and trade among the four member countries has grown tenfold since the bloc's establishment in 1991.
While the EU trade deal remains uncertain, Mercosur is set to sign a trade and investment agreement with Singapore, marking the first such accord by the South American group in 12 years and its first with an Asian nation.
