Lula win revives EU trade hopes for Latin America – POLITICO

« This is the result we were all hoping for. » Centre-left MEP Kathleen Van Brempt captured the mood in Brussels on Monday as the EU breathed a diplomatic sigh of relief after left winger Luiz Inácio « Lula » da Silva won the second round of the Brazilian presidential election.

Brussels has big ambitions in Latin America. The European Union must diversify its trade flows away from Russia and — to a lesser extent — China. As incumbent President Jair Bolsonaro is set to leave power, the EU is now keen to rekindle its ties with Brazil on climate change, deforestation and trade.

« I look forward to working with you to tackle pressing global challenges, from food security to trade and climate change, » said European Commission President Ursula von der Leyen. tweeted at Lula on Monday morning.

But Brussels may have to wait in line. Russia wants to trade and China will also compete for influence in the region, especially after relations between Brazil and Beijing deteriorated under Bolsonaro. Chinese Foreign Ministry spokesman Zhao Lijian hailed Lula’s victory on Monday, saying China is willing to elevate the comprehensive strategic partnership with Brazil to a new level.

The most concrete way for the EU to get its foot in the door is to finally settle the final details of the trade agreement between the EU and the Latin American bloc of Mercosur — composed of Brazil, Argentina, Uruguay and Paraguay.

This closer cooperation would not only facilitate trade between economies on both sides of the Atlantic, but is also essential for Brussels to be less dependent on Chinese raw materials for its green transition.

The Mercosur pact was politically sealed in 2019 but has effectively been frozen since then, mainly due to the rampant deforestation of Brazil’s Amazon rainforest under Bolsonaro, which has appalled the EU and French President Emmanuel Macron in particular. Free traders have also pointed to more protectionist concerns, particularly in France, which have held back progress on the deal over fears of opening the floodgates to imports of Brazilian beef.

Lula’s election could be key to allaying these environmental concerns and unlocking the Mercosur deal. In a huge victory for the global fight against climate change, he made it clear that he wants to tackle deforestation in the Amazon.

On the EU side, the political stars are also aligned. A range of trade-friendly countries — Czechs, Swedes and Spaniards — lead the rotating Council Presidency this year and next and have already said they want to get the deal back on track.

There may be trouble ahead

To push the deal through the European Parliament, Brussels plans to negotiate an additional document on environmental protections with the Mercosur bloc in an attempt to assuage climate concerns.

But how far these additional demands should go is already a sensitive discussion within the European Commission, and will likely prove even more contentious when discussed with the European Parliament, EU countries and Mercosur countries.

« We won’t nail him to the door of the Berlaymont, » said a senior EU official, referring to the European Commission building in Brussels. « We have to play it safe. » The official stressed that the EU should come up with something that is « more acceptable to the other side ».

Van Brempt, the Socialist MEP on the Trade Committee, warned against too much flexibility from Brussels. If the Commission wants this deal passed by Parliament, additional environmental commitments by Mercosur countries cannot be empty promises, she said. If Brazil or the other countries fail to deliver on their promises, they should risk trade sanctions, under new EU policy to ensure trade deals are green.

If Mercosur countries have additional demands to make, so be it, Van Brempt argued. « We have to get this deal right, » she said. “Trade is a key part of our geopolitical orientation. For this, renewed cooperation with Brazil is essential.

For his part, Lula has already declared that he wishes to renegotiate certain aspects of the agreement with Mercosur in favor of the industrial development of Brazil. Strengthening Brazilian industry was one of his main promises during the campaign.

« In the first six months, we will conclude the agreement with the European Union, » Lula said in September. This, he said, must be « an agreement that takes into account the need for Brazil to industrialize again ».

Camille Gijs contributed reporting from Prague.