Will the agreement between Mercosur and the European Union be signed?

This Thursday (15) the tour of the president of the European Commission, Ursula Von der Leyen, through Latin America ended. A recurrent subject was the free trade agreement between Mercosur and the European Union, a project that had been going on for more than two decades at a slow pace and was quickly resumed after Luiz Inácio Lula da Silva returned to the Planalto Palace.

Von der Leyen expressed several times during the week the intention to ratify the agreement by the end of the year.

The presidents of Brazil and Argentina, Alberto Fernández, weighed in on the need to trim asymmetries, eliminate the idea of ​​imposing sanctions in case of non-compliance with environmental goals — new demands were motivated by the increase in deforestation in the Amazon Forest in recent years, especially under Bolsonaro’s management — and preventing European companies from participating in public tenders in Mercosur countries on equal terms with local companies, which, according to the Brazilian government, would harm local small and medium-sized companies.

During Von der Leyen’s voyage, the National Assembly of France passed a resolution against ratification of the agreement. It does not have the power of law, but it represents a political setback in the negotiations, a few days before Lula lands in Paris, where he will meet French President Emmanuel Macron on June 22nd and 23rd. There is strong opposition to the deal from French and Irish farmers, who fear greater competition from increased beef imports to Europe.

In addition, the French claim the adoption of the Paris Climate Agreement as a parameter for the same health and environmental requirements that affect European producers to be imposed on imported products, in addition to the inclusion of sanction mechanisms.

Between the good intentions and the obstacles, will the agreement be ratified? O Brazil in fact heard from career diplomat Cesário Melantonio Neto, senior adviser to the World Economic Forum and former ambassador of Brazil to Greece, Cuba, Turkey, Egypt and Iran, and the professor of International Relations at ESPM Denilde Holzhacker, specialist in the Americas. He is optimistic about the ratification of the agreement. She views the scenario more cautiously.

“Ursula’s visit was very productive. I think we should sign by the end of the year”, says Césario Neto. According to him, a rapprochement with Europe would be important for Brazil to balance between China and the United States, which are Brazil’s two main partners in the commercial sphere, and two poles that seem more and more antagonistic from a geopolitical and economic point of view. security.

But the diplomat explains that Europeans are also very interested in ratification. “With the war in Ukraine, the European Union was kind of squeezed between the US and Russia, supported by China. So she needs third ways.”

Difficulties of the Lula government

If ratification is in the interest of both parties, why are there so many obstacles? What do Europeans, in particular the French, fear? Holzkacker thinks that Europeans fear that Brazil will not comply with environmental rules, and in this case the problem is not restricted to the history of deforestation during the Jair Bolsonaro administration.

“In the Lula government, despite the effort in the speech, the political forces in Congress are still tied to a view that environmental issues are not so important. The emptiness of the Ministries of the Environment and Indigenous Peoples reflects the government’s difficulty in implementing its policies”.

The professor explains that, out of respect for a tradition of Brazilian foreign policy, the government does not intend to assume commitments that may imply the need for drastic changes for which the necessary environment does not yet exist. This would be the background for Lula to have positioned himself so emphatically against sanctions. “The Brazilian government is going to make a counterproposal and we’re going to see where the boundaries between the proposal and the counterproposal are,” she says.

In any case, the fact that Brazil does not accept to submit to sanctions does not mean that we will remain inert on the environmental issue. “The extent to which the government shows that it will assume these commitments, that it will reduce deforestation, is an important point to gain the confidence of Europeans. We need that confidence before signing such a tough agreement, with rules that are so difficult for most Brazilian companies and exporters”, he says, referring to the additional protocol on environmental issues, created last March by the Europeans.

In addition to the environmental struggle, we have European cattle ranchers fearful of the increase in beef imports to Europe. We also have the Brazilian government bothered by the item on government procurement, which would authorize European companies to participate in public tenders in Mercosur countries on equal terms with local companies, as this would harm small and medium-sized companies in Brazil. Do these fears make sense? Can they prevent the ratification of the agreement?

50/50

“Yes, they can,” answers Holzhacker. “If the Brazilian government decides not to accept the point about government purchases, it would be necessary to reopen the agreement, which would lead to a renegotiation of all parties and could make the approval unfeasible”. From the point of view of negotiations on the additional protocol, she explains that the Europeans are waiting for Mercosur’s counterproposal and that there may be advances in the coming weeks. Regarding her perspectives regarding the ratification of the agreement, she replies: “I think the chances are 50%”.

Attentive to diplomatic movements, former ambassador Cesário Neto recalls that senior figures in German politics have been to Brazil recently, such as Prime Minister Olaf Scholz, Minister of Foreign Affairs, Annalena Baerbock, and Minister of Labor, Hubertus Heil. He sees this as a positive signal regarding the political will to ratify the agreement, which should be added to the fact that Lula is traveling to France next week. “If Paris and Berlin agree, we sign the agreement. They are the two largest economies in Europe”.

Renewable energy

During her tour of Latin America, Ursula Von der Leyen announced and signed agreements to increase cooperation in clean energy and sustainable raw materials, such as lithium — an ultralight metal for electric vehicle batteries — and green hydrogen, which is derived from water and extracted using renewable electrical energy to break down the molecule and separate hydrogen gas from oxygen — currently, hydrogen extraction is done mainly from fossil sources, such as natural gas, oil and coal.

When she was with Lula, the president of the European Commission announced the investment of 2 billion euros to support the production of this type of green hydrogen in Brazil, and to promote energy efficiency in Brazilian industry. While passing through Chile, he signed a fund to finance projects for the production and use of renewable hydrogen, which combines a donation of 16.5 million euros from the European Union Investment Facility for Latin America and the Caribbean (UE-LACIF) with 200 million euros in loans from the European Investment Bank.

According to her, this type of agreement is a breakthrough because the global demand for green hydrogen is growing. “Just to give an example, the EU decided that by 2030 it will not only produce 10 million domestic tons of green hydrogen, but will also import 10 million a year. And we need friendly countries that produce it”.

Editing: Rodrigo Durão Coelho