Scholz visits South America: a new impulse to Mercosur-EU Free Trade Agreement?
German chancellor Olaf Scholz visited Argentina, Chile and Brazil last week in a trip which had the EU-Mercosur free trade agreement on top of his agenda.
Both Alberto Fernández and Lula da Silva showed great enthusiasm in revitalising negotiations towards an agreement between the two trade blocs. As we anticipated last week, Brazil’s role is going to be vital in order to achieve any modernisation in Mercosur’s relations with the world. Therefore, Scholz meeting with Lula is a necessary first step if seeking to finally conclude this 20-year negotiation process.
In the cited joint statement between Brazil and Germany, both acknowledge the importance of ‘speeding up the conclusion of the negotiation’. Nevertheless, according to German media, Lula suggested that some points should be revised, especially regarding agriculture and small businesses.
In spite of all the enthusiasm shown by these leaders, there are still some major issues that should be dealt with before even thinking of an actual implementation of the agreement. According to DW, although Europe’s environmental concerns have been well received by Lula’s government, the Brazilian president still finds some regulations too hard. On the other hand, the European agribusiness sector is deeply concerned about the possibility of the agreement being implemented, since Argentina’s and Brazil’s commodities are considerably more competitive.
In addition to the discussions on Mercosur-EU relations, Scholz’s visits to Argentina and Chile showed German interests in these countries’ natural resources, with a view towards green transition and sustainable development. One of the main areas of interest of Germany in both countries is lithium reserves, which is key to Germany’s emerging industry of electric vehicles. In fact, Argentina and Germany signed a memorandum of agreement which aims at ensuring German access to Argentine lithium reserves.
What should we expect?
We should keep watching negotiations in the following months, but they are likely to be extremely tough due to protectionist pressures and Mercosur’s internal difficulties. For a deeper analysis, this article by Andres Malamud is recommended.
With regard to lithium, we can expect trade to grow considerably, which will likely benefit both Germany and South American countries, which need to diversify their mineral exports, since the vast majority of lithium produced goes to China.
*photo taken from Euractiv.