EU fears losing influence in Latin America as trade deals falter

The President of the European Commission has pledged a strengthened trade policy to combat China’s global influence. But when Ursula von der Leyen announced her plans, she made no mention of the stalled trade pact with Latin America’s largest trading bloc.

Von der Leyen said in Strasbourg this month that she would submit trade agreements with Mexico, Chile and New Zealand for ratification by the European Parliament and member states and continue talks with Australia and India. But the sweeping 2019 pact with the South American Mercosur bloc was ignored. Mercosur includes Brazil and Argentina, two of the largest economies in a region where China’s trade and investment has grown significantly over the past two decades.

Brussels awaits the results of Brazil’s presidential election in October and urges Brasília to sign a separate commitment to protect the Amazon before ratifying the Mercosur deal. Polls suggest leftist Luiz Inácio Lula da Silva will beat right-wing populist Jair Bolsonaro, who has strained relations with most EU leaders over his failure to curb deforestation and support indigenous rights.

But the lack of progress is worrying Josep Borrell, EU foreign policy chief. In July, the Spaniard prepared a confidential document for foreign ministers, seen by the Financial Times, charting the need for a “qualitative leap in relations” with Latin America and the Caribbean within 18 months.

It warned of a “sense of withdrawal from the EU”. The lack of trade agreements “undermined the EU’s credibility”, while “China’s presence and influence in the region has grown exponentially”.

Ursula von der Leyen spoke in Strasbourg earlier this month. Brussels awaits results of Brazilian presidential election in October before ratifying Mercosur deal © Yves Herman/Reuters

While Lula generally prefers closer ties with the EU, one of his closest allies told the Financial Times that a new Lula government would try to renegotiate parts of the Mercosur deal.

Lula, who served as president for two terms from 2003 to 2010, sees the partnership with the EU as “strategic for Brazil and Latin America,” said Celso Amorim, his foreign minister at the time.

But Amorim, who advised Lula on foreign policy after his resignation, said a Lula government would likely want “some adjustments” to the text of the pact and was concerned about areas such as intellectual property protection and government procurement. “We want to make sure that nothing stands in the way of Brazil’s technical or industrial development,” he said. “We don’t just want to remain a producer of raw materials.”

Any changes must be approved by the Mercosur partners of Brazil, Argentina, Uruguay and Paraguay, as well as the 27 EU Member States.

A Lula government, Amorim added, was open to changes Europeans wanted to tighten climate and human rights provisions “as long as it doesn’t disrupt Brazilian sovereignty”.

Latin America, a major copper and lithium producer, is also a source of minerals vital to the EU’s green energy transition © Anita Pouchard Serra/Bloomberg

Lula suggested last month that the EU-Mercosur treaty was unfavorable for Brazil in some areas. “Negotiations should be something where everyone wins. . . what we want in the discussion with Europe is that we don’t give in to our interest in reindustrialisation [Brazil]’ he told foreign journalists.

However, an EU official said reopening an agreement that took years to conclude would be a “nightmare”, especially as many member states have become more skeptical about signing new trade deals since 2019.

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Pedro Migue da Costa e Silva, Brazil’s ambassador to the EU, said Brazil has signed all relevant international treaties: “You should not hold the agreement hostage because you have these other problems,” he said in an interview.

Brasília could talk about signing a joint agreement to curb deforestation, but it must be “balanced and equitable,” he said, pointing out that his country had other suitors. “The strategic partnership we have entered into with the EU has been inactive. Latin America is off the map for the EU.”

The stalled Mercosur deal isn’t the only wrinkle in the EU’s trade relations with Latin America.

A trade and partnership agreement with Mexico has not been ratified for four years due to concerns in Europe over environmental and labor rights. Chile is still waiting for signature after Paris blocked the EU deal over French farmers’ concerns over increased chicken imports.

EU trade commissioner Valdis Dombrovskis will travel to Latin America later this year. An EU official said, on condition of anonymity, that the war in Ukraine had shown that the EU needed a wider range of allies, especially the democratic countries of Latin America.

“If you want to win votes in the UN, you can’t just rely on the EU, the US, Canada, South Korea and Japan. We need to work with many more countries.”

Latin America, a major copper and lithium producer, is also a source of minerals vital to the EU’s green energy transition.

“Africa has already been leased to China because they have been more strategic than democracies. We cannot allow the same to happen to Latin America,” the official said.

Javi López, a Spanish socialist who chairs the European Parliament delegation for Latin America, claimed that an election victory in Lula would be an indispensable opportunity to forge better relations.

“We are good friends, but we need to invest time and political capital if we want to be allies,” he said, adding that there has been no EU-Latin America summit in seven years.

“The Amazon is being used as an excuse to stop trading. Some [EU] countries protect their agricultural industries.”

The committee said the deals with Mexico and Chile could be submitted to member states and the European Parliament for ratification this year. Regarding the Mercosur Pact, it added: “We look forward to working with the Brazilian authorities, as well as with the other Mercosur countries, to bring the ongoing process to a successful conclusion.”

Jacky

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