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News > Latin America

Mercosur-EU Trade Deal Will Weaken Regional Economy: Expert

  • Brazilian President Michel Temer (L) greets Argentine President Mauricio Macri (R) at Mercosur's 51st Summit.

    Brazilian President Michel Temer (L) greets Argentine President Mauricio Macri (R) at Mercosur's 51st Summit. | Photo: EFE

Published 28 December 2017

Mercosur's pro-tempore president wants to prioritize a free trade agreement with the European Union.

Paraguayan Foreign Minister Eladio Loizaga said Wednesday that finalizing a free trade agreement between Mercosur and the European Union would be his priority during its pro-tempore presidency of the South American economic bloc.

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Talks for a free trade agreement between Mercosur and the EU first took place in 1999, but stopped after no agreement was reached. Negotiations resumed in 2010, but it wasn't until May 2016 that the two blocs exchanged proposals. The last round of negotiations took place on Dec. 5 in Brussels. However, as Paraguay's Foreign Minister recognized, some "adjustments" are still pending.

For officials, unresolved issues remain in the agricultural and service sectors, but popular sectors in Mercosur countries identify deeper problems.

Europe wants to limit South American exports, particularly in the cattle industry, as France, Ireland and Poland fear that an increase in agricultural imports could hamper their own participation in the European market. On the other side, Mercosur countries voice concerns over the procedures for public works contracts and mechanisms for resolving investment disputes.

Other problems remain. The free entry of European manufactured products pose a real threat to Mercosur's incipient industries.

Economics professor and international relations adviser for Argentina's General Confederation of Labor, Marita Gonzalez, claims the treaty would result in "a greater reprimarization of the economy," which is a return to production of primary, non-manufactured, goods. This in turn would "weaken Mercosur as an integration economy," as Gonzalez explained that Argentina could start buying from Europe what it previously bought from Brazil.

Felisa Miceli, former head of Argentina's National Bank, foresees higher rates of unemployment. "This indiscriminate commercial liberalization means the massive closure of companies and businesses," Miceli said.

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Brazilian public health experts have warned that the free trade agreement with the EU would have a negative impact on Brazilians' right to healthcare, particularly in access to HIV and Hepatitis C treatment. Researchers estimate that the intellectual property provisions in the agreement would "represent an additional expenditure of nearly US$444 million by the Brazilian Ministry of Health."  

Mercosur has recently witnessed a political and economic shift after Brazil's parliamentary coup that placed Michel Temer in power, Mauricio Macri's victory in Argentina's last presidential election and Venezuela's suspension from the bloc. The neoliberal turn provided new possibilities for finalizing an agreement, but this window might close as Brazil heads for national elections in October 2018. 

With a total population of over 290 million people that places it as the fourth largest consumer market, Mercosur is highly appealing for European companies.

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