The mammoth 2019 international trade pact between the European Union and the South American Mercosur bloc has stalled in its progress. Mercosur includes Brazil and Argentina, two of the biggest economies in Latin America. The future of the trade deal hinges on the result of Brazil’s October presidential election. This is because the EU insists that Brazil sign a separate commitment to protect the Amazon rainforest before it ratifies the Mercosur deal.

The election has come down to a runoff between a former president, the left-wing Luiz Inácio Lula da Silva, and the incumbent president, the right-wing Jair Bolsonaro. At the time of writing, the head-to-head vote has not yet occurred. Lula, as he is commonly known, leads in the polls, but Bolsonaro outperformed his polls in the first round of voting.

The Bolsonaro problem
Under Bolsonaro, Brazil has had strained relations with most EU leaders. Bolsonaro’s critics are many and he has done and said a lot to displease both Brazilians and foreign interests. The principal sticking point here is his failure to—or possibly his refusal to—rein in deforestation and support indigenous rights. The Eu is concerned its failure to complete trade deals undermines its credibility. This is particularly worrying in Latin America given the People’s Republic of China’s growing presence in the region.

Despite its desire to solidify some trade pacts fast, the EU cannot overlook certain practices under the Bolsonaro regime. That said, a Lula victory wouldn’t magically solve everything. While Lula is more favorable to the EU, he would likely want to renegotiate parts of the deal. And any changes would need to be agreed by the other Mercosur partners: Argentina, Uruguay, and Paraguay, as well as the 27 EU member states. A Lula administration would likely align with EU goals of strengthening provisions on climate and human rights.

Latin American resources
Latin America is a massive copper and lithium producer, making the region a key source of minerals vital for the EU’s green energy transition. But as bad as the EU wants a beneficial and environmentally sustainable deal with Mercosur, renegotiating this agreement that took years to negotiate in the first place would be a headache, to say the least. While a Lula victory would be preferable to many EU officials, there’s still a lot of hard work to do on the Mercosur deal, regardless of the outcome of Brazil’s elections.


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