EU – MERCOSUR: Paraguay Threatens To Break Off Negotiations

Paraguayan President Santiago Peña, who has held office since May 2023, has threatened to shut down negotiations between the EU and MERCOSUR, South America’s common market.

Starting December 6, in order of priority, he will preside over this South American bloc. The Paraguayan leader seems determined to find other interlocutors for economic agreements: “I asked the president (of Brazil – ed.) Lula to close negotiations. If he does not close the negotiations, I will not continue them in the next six months. I will dedicate myself to concluding agreements with other regions of the world, and I am confident that we will reach an agreement very quickly,” Pena explained, referring to Singapore and the UAE.

The European Union would also like to conclude an agreement, negotiations on which have been dragging on for many years, by the end of 2023. For this purpose, European Commission President Ursula von der Leyen visited Mexico, Chile, Argentina, and Brazil in June. These four countries, along with Uruguay and Paraguay, are part of MERCOSUR, which began negotiations with Brussels in the early years of the new millennium with the goal of reaching an agreement in 2019 to remove trade barriers and facilitate trade between Europe and South America. However, the agreement itself was not ratified. In particular, Lula and other South American leaders did not like the demands for new environmental pledges requested by Brussels, which explained that “trade policy must go hand in hand with environmental policy.” For this reason, in 2022 the European Commission wanted to introduce additional restrictions that would allow possible trade sanctions to be applied to those who do not comply with climate commitments.

Another, less obvious cause for concern relates to European countries with significant agricultural production that fear competition from low-cost products (particularly beef) from South America. Lula also spoke out on this issue, noting that protectionism is actually hidden behind environmental arguments.