Mercosur Trade Bloc Meeting

By Lucinda Elliott, Lisandra Paraguassu and Anthony Boadle

Date: Thursday in Montevideo, Uruguay
Context: Potential announcement of long-delayed EU trade deal

South America's Mercosur trade bloc will convene in Uruguay, with the possibility of finalizing a long-awaited trade agreement with the European Union (EU). This deal has received support from most South American countries, notably backed by Germany and Spain. However, France opposes the deal due to concerns about agricultural imports impacting its robust farming sector.

Last week, negotiators from both EU and Mercosur met in Brazil to continue discussions. The hope is that delegations might travel to Montevideo if a deal emerges from this week’s virtual talks. Ursula von der Leyen, President of the European Commission, may attend the Dec. 5-6 summit, despite caution from sources that no formal signing might take place.

Brazil's secretary of economic affairs, Mauricio Lyrio, indicated that significant progress has been made and pending issues are being presented to leaders for resolution.

Obstacles:
The primary hurdle remains the EU’s internal political climate, compounded by France's efforts to build a blocking minority against the deal, needing support from at least three countries representing over 35% of the EU's population. In contrast, Germany and Spain lead a coalition advocating for the trade agreement, aiming to reduce reliance on China and prepare for potential tariffs from the U.S.

A previous agreement reached in 2019 has yet to be ratified due to EU requirements concerning deforestation and climate change commitments. Observers remain skeptical, noting that even with a new agreement, formal ratification could take additional months due to translation and review requirements.

Argentina's Javier Milei:
The summit may also serve as the debut for Argentina's libertarian President Javier Milei, who has suggested withdrawing from Mercosur unless permitted to establish bilateral trade agreements, especially with the U.S. Milei's approach could potentially shift depending on the outcome of the EU-Mercosur discussions.

If the trade deal proceeds, it may bolster arguments for maintaining Mercosur unity, while its failure could empower Milei's inclination towards pursuing separate trade agreements.