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Brazilian elections: Lula’s victory to revive EU-Mercosur agreement

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Euractiv | 31 October 2022

Brazilian elections: Lula’s victory to revive EU-Mercosur agreement

By Hugo Struna and Paul Messad

The much-criticised free trade agreement between the EU and the four Latin American countries in Mercosur is currently at a standstill but could be revived if Socialist Luiz Inácio Lula da Silva wins the Brazilian presidential elections on Sunday (30 October).

While the agreement was supported by incumbent Brazilian President Jaïr Bolsonaro, it has been blocked by European countries due to increased deforestation in the Amazon resulting from Bolsonaro’s policies.

France vetoed the deal in August 2019, followed by Germany in August 2020, before European parliamentarians voted against it in October of the same year. Since then, their positions have not changed.

But with the upcoming Brazilian elections, the agreement could be resurrected, especially if Bolsonaro’s rival, often simply referred to as Lula, wins.

An agreement within six months

Reuters reported that the former president (2003-2010), who is running for a third term, said he wanted to reach an agreement “within six months” if elected on Sunday. He has more or less maintained this position throughout the election campaign.

“He already said it during his previous term: for him, Brazil will pay its debt with soybeans,” Greens/EFA MEP Claude Gruffat told EURACTIV France. The environmentalist admits that Lula’s accession to power may accelerate the ratification process.

Gruffat travelled to Brazil at the end of July with his colleagues Michèle Rivasi and Anna Cavazzini to condemn the agreement’s devastating effects on the environment and human rights.

Under the EU-Mercosur agreement, the EU will export its cars, clothes and medicines to Brazil in exchange for agricultural goods.

According to the Commission, “EU exporters will benefit from the progressive reduction of tariffs, which will eventually save European companies more than €4 billion per year”.

Major economic benefits

If Lula makes a point of reviving the negotiation process, it is because of the economic benefits for Mercosur countries – Brazil, Argentina, Paraguay and Uruguay.

“Brazil wants to be competitive with wealthy countries,” said Gruffat. “They [Brazil] hope to raise the standard of living of middle management in society.”

“You can’t blame them,” added Manon Aubry, co-chair of the Left group in the European Parliament, contacted by EURACTIV France.

She admitted that “the EU, on the other hand, has a responsibility to drive a new model as the world’s leading economic power.”

Nearly 99,000 tonnes of beef could be exported to Europe due to lower tariffs. Ecological associations condemn the environmental disaster, and farmers complain of unfair competition.

On the other hand, Maxime Combes, economist and coordinator of the Stop CETA-Mercosur network, believes that Bolsonaro’s re-election would leave negotiations at a standstill: “If he is elected, he will want to go further with his pro-agribusiness policies, which will cause more deforestation.”

Under these circumstances, Combes said he did not see “see how the Commission could move forward, given European countries’ stances”.

Lula’s victory would therefore be good news for the Commission, which has supported the project for 20 years. Reuters said officials approached the Brazilian government this summer to resume negotiations.

To satisfy the environmental expectations of European leaders, the executive is planning an additional protocol containing supplementary environmental commitments. Nothing binding, however.

Renew MEP Marie-Pierre Vedrenne told EURACTIV France that the Commission is reportedly waiting for the Brazilian election outcome before disclosing its position.

Guarantees on the car industry

However, Lula does not consider the protocol to be sufficient. According to Combes, the candidate “would also like guarantees on industrial aspects and intellectual property”.

“It’s not common knowledge, but Lula is sensitive to issues related to the car and aeronautics industry. It is bound to his history, his commitments, and it is not irrelevant to the left,” added the economist.

Yet another risk looms for the EU. While Bolsonaro has hardened relations with China, his socialist rival could reopen the dialogue.

For the agreement’s supporters, quick ratification would avoid throwing Brazil into China’s arms.

In essence, this is what the head of EU diplomacy, Josep Borrell, said, calling on member states to speed up the process before “other actors intervene”.

France sticks to its position

If both parties agree, the document still needs to be validated by all member states, which could take some time.

To speed up the process, the Commission could split the agreement by isolating the trade section, which is the exclusive competence of the EU, thus avoiding any involvement of national parliaments. The text would only be validated by the European Parliament and the Council of the EU by a qualified majority.

Farmers unions and associations opposing the treaty have criticised this option as “undemocratic”.

The manoeuvre is nevertheless legal if the Commission has the unanimous agreement of member states.

The agreement suspended until after the elections

In the meantime, the resumption of negotiations is conditional on the weekend’s election results.

“For the moment, it is hard to predict what position we will take,” said Marie-Pierre Vedrenne, a centrist politician.

Aubry thinks that “Lula’s election will not change the position of our political group”.

As for Gruffat, an agreement signed under Lula’s presidency will better respect the rights of indigenous peoples, which have been abused under Bolsonaro.

The Spanish presidency of the EU in the second half of 2023 will also be crucial as Madrid keeps close ties with Latin America and could play a key role in dragging the agreement across the finish line.

 source: Euractiv