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WORLD | 10-03-2023 10:39

Spain: European Union closer than ever to unlock Mercosur trade deal

Spain is confident that the European Union can finally unlock a free-trade agreement with a group of South American countries, including Brazil and Argentina, and push forward a process that has dragged on for decades.

Spain is confident that the European Union can finally unlock a free-trade agreement with a group of South American countries, including Brazil and Argentina, and push forward a process that has dragged on for decades.

The European Commission shared an initial list of environmental commitments with Mercosur members – Brazil, Argentina, Paraguay and Uruguay – during a trip to the region this week, Spain's trade secretary, Xiana Méndez, said in an interview with Bloomberg News.

The draft text calls on the South American bloc to comply with preservation commitments, she said.

The EU is Mercosur's biggest trading partner and the biggest foreign investor in the region, and a pact would cover a market of 780 million people. After a political agreement was reached in 2019, the trade pact, which needs ratification, stalled due to concerns over Brazil's commitments to protect the Amazon rainforest under the government of former president Jair Bolsonaro.

Méndez said he believes they will finally be able to sign the trade deal with Mercosur because the reasons for not going ahead with the pact were environmental and now this document will address them.

Sharing drafts with commitments is the first concrete step in more than three years to pave the way for creating one of the world's largest free trade zones, at a time when Europe is struggling to reduce its dependence on Russian commodities.

A potential deal still faces hurdles and at least one member state, France, is unhappy with the initial environmental commitments as not ambitious enough, according to people familiar with the matter who spoke on condition of anonymity.

As part of the initial commitments, Mercosur members would have to comply with international conventions on environmental protection and labour standards, including limiting deforestation and protecting indigenous communities, Méndez said.

The two blocs could agree on binding commitments during a summit of European and Latin American leaders in July, which would pave the way for final approval by the European Council and the EU parliament, Méndez said.

 

Window of opportunity

Méndez referred to Luiz Inácio Lula da Silva's government and pointed out that it opens a wonderful window of opportunity to move forward on something that has been stalled since the summer of 2019.

For his part, Lula, now in his third term as president, has said Brazil will work to sign the agreement this year.

Méndez warned that reopening talks to make substantive changes could again delay the deal, which would save both regions around four billion euros in tariffs each year, according to the commission.

by Alonso Soto & Thomas Gualtieri, Bloomberg

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