EU-Mercosur trade deal in danger

Deforestation in Brazil, vote in Argentina are putting the future of the deal at risk, analysts warn

Brazil’s backsliding on Amazon conservation under right-wing President Jair Bolsonaro and a likely Peronist return to power in Argentina could delay or even derail ratification of an EU-Mercosur trade agreement that took two decades to negotiate.

Deforestation in Brazil more than tripled in July over the year, data from Brazil’s INPE space research agency shows. The populist's plans to develop the Amazon and moves to weaken rainforest protection have alarmed environmentalists and given ammunition to European opponents of the trade deal with the South American common market.

French President Emmanuel Macron already warned in June he would not sign the accord concluded last month with Brazil, Argentina, Uruguay and Paraguay if Bolsonaro pulled Brazil out of the Paris climate accord. Meanwhile, Germany and Norway have suspended donations to a $1.2bn fund to back sustainable projects in the Amazon after the government shut down the steering committee that selects projects and planned to use it to compensate farmers who had land expropriated in protected areas. In response, Bolsonaro retorted that Brazil had nothing to learn from European nations and did not need the money.

Hence, European diplomats and analysts said Bolsonaro’s stance on the Amazon will fuel now even stronger opposition to the Mercosur agreement, which has already faced protests.

“There are a growing number of voices particularly in France and Germany saying that unless this policy changes the EU should no longer ratify the deal,” Oliver Stuenkel, international affairs expert at the Getulio Vargas Foundation in Sao Paulo, told Reuters.

Nevertheless, last week's primaries in Argentina put the EU-Mercosur deal under a new cloud of uncertainty as Peronist candidate Alberto Fernandez emerged as the odd-on favorite to win the presidential election in October.

He has said he wants to renegotiate parts of the trade deal that do not suit Argentina. That could unravel the agreement given the rising resistance in Europe.

“If Fernandez is elected and wants to renegotiate parts of the accord, it would have to be reopened entirely. We would be back to square one,” a European diplomat in Brazil said on condition of anonymity due to the sensitivity of the matter.

While Fernandez is a moderate Peronist, his running mate is former Argentine President Cristina Fernandez Kirchner, a protectionist who is no fan of the EU deal.

“The pressure on him to not just accept and wave though this agreement is quite significant,” said Stuenkel.

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