In Mercosur, Lula wants to expand external partnerships

Upon assuming the temporary presidency of Mercosur, President Luiz Inácio Lula da Silva said, this Tuesday (4th), that he has an ambitious external agenda for the bloc, in expanding markets for the export of local products. He reaffirmed that the Mercosur free trade agreement with the European Union (EU) is unacceptable and that he is committed to concluding a balanced treaty that ensures the necessary space for the adoption of public policies “in favor of productive integration and reindustrialization ”.

“The Additional Instrument presented by the European Union in March of this year is unacceptable. Strategic partners do not negotiate based on distrust and the threat of sanctions. It is imperative that Mercosur presents a quick and forceful response”, he said, during the 62nd Summit of Heads of State of Mercosur and Associated States, in Puerto Iguazú, Argentina. The EU sent additives to be added to the agreement, with the forecast of imposing fines in case of non-compliance with environmental obligations.

“We have no interest in agreements that condemn us to the eternal role of exporters of raw materials, ores and oil. We need policies that contemplate deep regional integration, based on qualified work and the production of science, technology and innovation. This requires more integration, the articulation of productive processes and the interconnection of energy, roads and communications”, added the president.

Lula has also been defending changes in points of the free trade agreement on government purchases, which, according to him, could harm small and medium-sized companies in the country. “It is inadmissible to give up the purchasing power of the State – one of the few instruments of industrial policy that we have left”, he said today.

When opening the meeting, the president of Argentina, Alberto Fernández, also criticized aspects of the agreement and said that Mercosur “was the one that gave in the most”, despite being the bloc with the least economic development. For the Argentine, the agreement presents a partial vision of sustainable development, without considering its three dimensions – environmental, economic and social – and the integration between them.

Approved in 2019, after 20 years of negotiations, the Mercosur-EU agreement needs to be ratified by the parliaments of all countries in both blocs to enter into force. The negotiation involves 31 countries and may face resistance.

The president added that he wants to review and advance the agreements being negotiated with Canada, South Korea and Singapore and “explore new negotiating fronts” with partners such as China, Indonesia, Vietnam and countries in Central America and the Caribbean. “The proliferation of unilateral barriers to trade perpetuates inequalities and harms developing countries,” said Lula.

For him, combating the resurgence of protectionism in the world also implies rescuing Mercosur’s leading role in the World Trade Organization (WTO).

Work schedule

Brazil received from the Argentine government the temporary presidency of the South American economic bloc, with a mandate until the end of 2023, with the promise to improve the Common External Tariff and “avoid that non-tariff barriers compromise the fluidity of trade”.

Founded in 1991, Mercosur brings together Argentina, Brazil, Paraguay and Uruguay. Together, these countries account for 67% of the territory of South America, equivalent to 11.9 million square kilometers. The 270 million inhabitants of the bloc’s countries are equivalent to 62% of the South American population. Mercosur countries accounted for 67% of Gross Domestic Product 9GDP, sum of goods and services0 in South America in 2021.

The volume of trade within the bloc, in 2022, was US$ 46 billion. Most of Brazilian exports to the group of neighboring countries are industrialized products, such as vehicles and auto parts. Mercosur’s exchange of goods with the world reached US$ 727 billion, with a surplus of US$ 69 billion. For Lula, this trade falls short of the bloc’s potential.

“Our trade is characterized by the significant presence of higher value-added products. This is an asset that needs to be valued and expanded. We have an unfinished agenda with two sectors still excluded from free trade: automotive and sugar. And we will also seek to complete the eighth round of liberalization of trade in services. We have significant reserves of strategic minerals, such as lithium and cobalt, which are essential for state-of-the-art industrial projects,” he said.

The president also defended the adoption of a common currency to carry out compensation operations between countries, reducing costs. “I am talking about a specific reference currency for regional trade, which will not eliminate the respective national currencies”, he highlighted.

According to him, there is also room to expand and improve trade agreements with Chile, Colombia, Ecuador and Peru. Furthermore, Brazil will work towards the approval of Bolivia as a full member of Mercosur.

Lula also wants to mobilize resources from national banks and regional development organizations, such as CAF, Fonplata and the IDB, to finance physical and digital infrastructure projects. He is going to propose to the National Congress that Brazil make new contributions to the Mercosur Structural Convergence Fund (Focem). In 2023, Brazil paid off its debt of almost US$ 100 million with Focem.

Brazil’s presidency in the bloc, throughout the second semester, will still have as priorities the citizen agenda, as well as the increase of transparency and social participation. For Lula, the institutional improvement of Mercosur will involve the reinvigoration of Parlasur, the Institute of Public Policies on Human Rights, the Social Institute and the Permanent Court of Mercosur.

“It is necessary to recover a citizenship and inclusive agenda, with a human face, that generates tangible benefits for broad sectors of our societies. Our integration must be solidary and awaken the feeling of belonging. Our integration must also be feminine, black, indigenous, peasant and working”, she said, citing the Brazilian contribution with the sanction of the law on equal pay between men and women.

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