Lula: Brazil 'will not give in' on public procurement in EU-Mercosur deal

Brazilian President Luiz Inácio Lula da Silva declared Thursday that Brazil "will not give in" in talks over public procurement rules in the ongoing free-trade agreement negotiations between Mercosur and the European Union.

"We are not going to give in on government purchases, because [if we do] we are going to kill the possibility of growth for small and medium-sized Brazilian companies," said the veteran leftist at an Industry Day event held at the headquarters of a powerful São Paulo trade group

Because of this resistance, "we will take a little longer to close the agreement but, just as France fervently defends its agricultural products, we are going to defend small industry." Lula said, applauded by businessmen at the Federation of Industries of the State of São Paulo (Federação das Indústrias do Estado de São Paulo, FIESP) event.

The statements come after a regional visit last week by 15 European lawmakers. The European Union wants to try and close the agreement, which has been stalled since 2019 in large part due to the policies of then-president Jair Bolsonaro, considered anti-environmental by the EU.

Argentina has also been lukewarm on the deal since the 2019 arrival to power of President Alberto Fernández, but his government is not expected to retain power in this October’s election.

Lula unfroze the talks after taking office, and the president himself has expressed his intention to sign this year, when Brazil assumes the rotating presidency of the South American bloc, which it is part of along with Argentina, Uruguay and Paraguay.

On the other side, the leadership of the EU will be in the hands of Spain, which is also interested in signing the negotiations.

But there are still a number of rough edges to be ironed out, such as rules around public procurement. The agreement between the trade blocs would allow EU and Mercosur companies to participate in tenders for public-sector purchases under the same conditions as local companies. But there are exceptions, on issues like food, health and defence, that Brazil wants to keep in place.

"We will not give up" on government procurement, because it is "an instrument of industrial policy," Lula said, raising his voice.

The EU has also emphasised environmental protection as a condition for concluding the agreement. In particular, compliance with an internal rule that prohibits the entry of products from deforested areas.