Brazil celebrates historic Mercosur-EU trade deal

The Brazilian government and business leaders celebrated a historic free trade agreement between Mercosur and the EU when negotiations concluded on Friday in Brussels.

Composed of active members Argentina, Brazil, Paraguay and Uruguay, the Mercosur trading bloc had been in free trade negotiations with the EU for some 20 years.

“The agreement marks a historic milestone in the relationship between Mercosur and the European Union, which together account for around 25% of world GDP and a market of 780mn people. In the face of tensions and uncertainties in international trade, the conclusion of the agreement underscores the two blocs' commitment to economic openness and the strengthening of competitiveness,” the Brazilian government said in a statement.

Earlier attempts to strike a trade deal had always failed due to sensitive areas such as agriculture and industrial production.

Since the business-friendly Jair Bolsonaro (pictured, to the right of French President Emmanuel Macron at the G20 Summit in Osaka) became Brazil's president in January, he has quickly moved the country's trade agenda towards free trade as a way to spur economic growth.

The goal of the Bolsonaro administration is to forge closer ties with developed nations, representing a major shift from the previous administrations under the leftist workers party (PT), which focused on close relationships with other developing nations.

Reaction

"I see the news as fantastic for the Brazilian food industry, mostly for grains and meat producers, but for the local mining and metals chain nothing changes at the moment," Pedro Galdi, an investment analyst at Mirae Asset Management, told BNamericas.

The trade deal is likely to have positive economic impact in the medium-term but in the short term it is not expected to alleviate the problems of Brazil's sluggish economy, which contracted in Q1.

“Trade deals take years to provide a real impact in the economy, so we need to evaluate this with calm to check the real effects on the economy. The Brazilian government intends to export products with more aggregated value, not only commodities, but we need to remember that various sectors of our industry are not so competitive and a free trade deal also has side effects,” Alex Agostini, chief economist at local rating agency Austin Rating, told BNamericas.

Technologhy

A senior official at Brazil's science, technology, innovation and communications ministry (MCTIC), who for the past years has been directly involved in the negotiations with the EU, told BNamericas that the most pressing technology and electronics terms of the trade agreement were settled a month ago.

According to the official, who asked not to be named, MCTIC and Argentine representatives met with their European counterparts last month in Buenos Aires to iron out the last details of the deal's ICT aspects.

There was concern on the Brazilian side to reconcile the terms of the deal with Brazil's science framework, which was approved in 2016 and entered into effect last year.

From the European side, the most problematic issue was always certain national preference requirements related to procurement and equipment purchases that are established in the Brazilian science framework.

A “middle-ground” compromise ended up being reached after concessions from both sides.

Pedro Ozores and Frederico Barbosa contributed to this article.