Election of Javier Milei in Argentina derails EU – Mercosur trade agreement, possibly for years

By Hans von der Burchard 

Argentina has thrown a wrench into the works of EU efforts to reach a Mercosur free-trade agreement next week.

Brazil told the EU that sealing the trade deal next week won’t be possible as the approval of Argentina’s incoming government will be required on outstanding issues such as a policy to curb deforestation, according to two officials close to the negotiations who were granted anonymity to discuss a sensitive topic. One official said it could be years before an agreement is reached.

Argentina’s president-elect Javier Milei.

The EU had hoped to finalize a trade agreement with the Mercosur countries — Brazil, Uruguay, Paraguay and Argentina — in time for a December 7 summit of South American leaders in Brazil. The four countries represent the majority of South America’s population. Earlier, the EU reached separate trade agreements with Colombia, Ecuador, Peru and Chile.

But Argentina has notified Brazil, the current president of Mercosur, that it will not be able to make new commitments in the negotiations and that it intends to leave decisions to Javier Milei, an anarcho-capitalist outsider who won Argentina’s presidential election in November.

As a result of Argentina’s decision, a potential round of negotiations set for Rio de Janeiro during the Mercosur meeting was canceled, according to the CNN Brasil report. A visit by European Commission President Ursula von der Leyen to the Mercosur gathering on Thursday was also scrubbed, the report said.

An EU delegation led by Valdis Dombrovskis, the European Commission vice president for trade, won’t travel to Rio de Janeiro for the Mercosur summit on December 7, the Buenos Aires Times reported, citing people familiar with the situation.

Milei’s victory stunned many in the EU who fear that it spells further trouble for talks on what would be a landmark trade accord. During his presidential campaign, Milei threatened to quit Mercosur. He called Mercosur a “phenomenal failure” and described it as a “customs union of poor quality that creates trade distortions and hurts its members.”

French President Emmanuel Macron, meanwhile, said that the environmental concessions obtained by the EU in the Mercosur negotiations fall short of what’s needed.

“I cannot ask our farmers, our industrialists in France and everywhere else in Europe to make efforts toward decarbonization, while suddenly removing all tariffs to bring in goods that aren’t subjected to these rules,” Macron told reporters Saturday after meeting with Brazil’s President Luiz Inacio Lula da Silva at the COP28 climate conference in Dubai, Bloomberg reported. “A few sentences were added at the beginning and at the end of the text to please France — but this isn’t working,” Macron said.

Von der Leyen, who also was at the COP28 meeting in Dubai, maintained hope for an EU-Mercosur agreement. “The EU and Mercosur are engaged in intense and constructive discussions with a view to finalizing a political, cooperation and trade agreement,” the European Commission said in a statement. “Substantial progress has been made in the past months,” it said.

“Negotiations will continue in a constructive spirit with an ambition to conclude as swiftly as possible,” the Commission said.

Brazil’s Lula is set to meet with German Chancellor Olaf Scholz on Monday in Berlin for bilateral consultations. Germany is a strong promoter of the Mercosur deal.
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Credit: Politico