The heads of state of Mercosur will meet this Saturday in the Brazilian city of Foz do Iguaçu in a tense and uncertain summit after the final signing of the free trade agreement with the European Union was postponed to the last minute. The doubts of Italy, which asked to delay the signing until January, were added to the refusal of France and Poland and left Luiz Inácio Lula da Silva without the final touch with which he wanted to crown Brazil’s presidency in the South American bloc. The Brazilian president will hand over to Paraguay this Saturday with the feeling of another lost opportunity in an agreement negotiated for 26 years. His peers are calling for other alliances to be sought and a softening of a bloc within which internal discontent is growing.
“The ball is in the European court,” agree Brazilian and Paraguayan sources asked about the agreement between Mercosur and the EU. South American countries have accepted safeguards for European farmers and European products which make it possible to suspend the tariff advantages of Mercosur countries (Argentina, Brazil, Paraguay and Uruguay) in the event of detection of “serious distortions” for certain European sectors considered particularly sensitive, such as beef, poultry or sugar. “The agreement is beneficial for everyone, but even more so for Europeans,” we hear, in an annoyed tone, in the corridors of Foz do Iguaçu.
Faced with the EU’s new setback, Lula threatened on Wednesday to definitively close the door to a negotiation that would create the largest free trade zone in the world, with 700 million consumers. However, after speaking with the Italian Prime Minister, Giorgia Meloni, who asked her to be patient, she clarified that she would communicate this request to the other member states so that they can give a common response.
In the early hours of Thursday and Friday, European Commission President Ursula von der Leyen expressed confidence in her ability to lead the way and sign the agreement with Latin American countries in January. “After 26 years of negotiations, waiting three more weeks is tolerable,” he joked. The German conservative and the President of the European Council, Antonio Costa, already had their suitcases and plane tickets to Foz do Iguaçu. Although his team played against time to try to offer compensation to Meloni so that he would agree to green light the deal, they were unable to do so. For the Italian, it is ultimately a political calculation. His country, with a good industry, is one of the most beneficiaries of the EU agreement, but with the farmers’ protests and the balance within the government coalition, saying yes was not so easy.
It is now a question of seeing what can be offered to Meloni so that she can then sell it at home as a big victory in exchange for a signing with Mercosur. Several European diplomatic sources are convinced that with the approval of the new guarantees for European products and farmers, and with some concessions to Meloni, the agreement will be concluded. The problem is that in the current situation, with such a turbulent global geopolitical situation, a month is a long time. And the situation can be reversed quickly.
The risk is not only that Meloni ends up saying no (the agreement must be obtained by a majority in the EU and without Italy the accounts will not work) but also that the Mercosur governments get tired, get angry at the ugly diplomacy that Europe has once again done to them and start moving more quickly towards China or the United States.
Asia, in the spotlight
When they started talking in 1999, the EU’s participation in Mercosur’s foreign trade was close to 30%. Today it has fallen by almost half. China, on the other hand, accounted for less than 10% and is now the South American bloc’s main trading partner.
Mercosur foreign ministers called on Friday to open new doors for South American products at the meeting ahead of the heads of state summit. In September they signed an agreement with the members of EFTA (Iceland, Principality of Liechtenstein, Kingdom of Norway and Swiss Confederation) and the Brazilian Minister of Foreign Affairs, Mauro Vieira, had already predicted that, without an agreement with the EU, Mercosur would give priority to other possible partners such as Canada, the United Kingdom, Japan, Malaysia, Indonesia and Vietnam. His Paraguayan counterpart, Rubén Ramírez Lezcano, announced that during the six months of his country’s presidency, emphasis will be placed on accelerating advanced negotiations with the United Arab Emirates.
Lula delayed the Mercosur summit by a month to finalize the negotiations and this new snub hurts him more than anyone else. The Brazilian leader has been the most active voice in South America in favor of trade integration with Europe that has economic and strategic objectives in the face of Donald Trump’s chaotic tariff policy. Despite his age, 80, Lula intends to run for a fourth term in next year’s presidential elections.
The summit will reveal the important internal differences that exist between its members. Argentina is leading the offensive to modify the statutes of Mercosur which prevent the conclusion of bilateral free trade agreements with the outside world. In defiance of the bloc, they negotiate a trade agreement with the United States. Uruguay followed the same path and last month began the process of joining the Trans-Pacific Agreement which would open the doors to a dozen countries representing 15% of global GDP, including Australia, Canada, Chile, Japan and Mexico.
“Although we are a bloc of partner and brother countries, we cannot ignore that the needs of each State Party do not always coincide,” declared the head of Uruguayan diplomacy, Mario Lubetkin. Paraguay’s foreign minister called for internal changes to make Mercosur “work for everyone.” Without a great success to highlight, Mercosur’s lack of common direction is accentuated.
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