EU-Mercosur talks speed up before Milei takes office -trade experts

2/2 © Reuters. Argentine president-elect Javier Milei addresses supporters after winning Argentina's runoff presidential election, in Buenos Aires, Argentina November 19, 2023. REUTERS/Agustin Marcarian 2/2

By Anthony Boadle and Lucinda Elliott

BRASILIA/BUENOS AIRES (Reuters) -Far-right libertarian Javier Milei's presidential election win in Argentina will not derail the EU-Mercosur trade agreement and could hasten the conclusion of negotiations before he takes office on Dec. 10, diplomats and trade experts said on Monday.

Having secured victory, Milei is expected to tone down his campaign criticism of the South American common market and Brazil's Leftist President Luiz Inacio Lula da Silva, with no disruption in Mercosur trade foreseen, they said.

Milei's attacks raised doubts about the future of the four-nation Mercosur, which would fall apart if Argentina pulled out, and led negotiators to try to do more to overcome differences and have weekly video conference meetings.

"Lula will probably be even more keen to get it done now," a European diplomat with knowledge of the negotiations said.

A trade treaty was agreed in principle in 2019 after two decades of talks, but additional environmental commitments demanded by the EU led Brazil and Argentina to seek new concessions that prolonged negotiations.

Brazilian negotiators said there were few details left to negotiate and they plan to announce the deal at a Mercosur summit on Dec. 7 in Rio de Janeiro that was brought forward to be held before Argentina's change of government.

"The talks are moving ahead fast," said a Brazilian official involved in the negotiations. He and two other Finance Ministry sources said there was still concern over what Milei will do, but they expect him to soften his campaign rhetoric in office. The Brazilian officials spoke on condition of anonymity.

Welber Barral, a former Brazilian trade secretary who was in Buenos Aires to follow Sunday's presidential runoff vote, said he did not see Milei following through on his threats to withdraw from the trade bloc formed by Argentina, Brazil, Paraguay and Uruguay.

"The opening of markets is part of Milei's discourse, so he will probably support the EU agreement, in spite of his criticism of Mercosur," Barral said.

Pragmatism will prevail on both sides, Barral added, as trade relations are too important. Argentina is Brazil's largest market for manufactured goods, mainly cars and car parts.

Milei's likely foreign minister, Diana Mondino, said in an interview with Reuters before the vote that while Mercosur must be modified, it should not be "eliminated" as Milei has previously suggested. Mondino also said Argentina will seek to increase trade with Brazil.

'WORK TOGETHER'

Milei has labeled Lula an "angry communist" and received support during the campaign from the Brazilian leader's predecessor, far-right former President Jair Bolsonaro.

But on Sunday night, Lula wished Argentina's new government success and, without mentioning Milei by name, said Brazil was ready to "work together with our Argentine brothers."

Their ideological differences will make for bumpy relations. Bolsonaro congratulated Milei on Monday by video conference and accepted an invitation to attend his inauguration, son Eduardo Bolsonaro said on social media.

Oliver Stuenkel, a professor of international relations at the Getulio Vargas Foundation in Sao Paulo, expects Milei to continue attacking Lula occasionally, but said Brazil's experienced president will not respond.

Relations will most likely return to what they were between Argentina's current Peronist President Alberto Fernandez and Brazil's Bolsonaro, who were not on speaking terms, he said.

"There was no formal rupture and bureaucrats kept talking, and trade ties largely continued normally, but there was no political space for new initiatives that would require support from the presidential palaces," Stuenkel said.

While Milei is pro-trade, he is a climate change denialist and that could be a hurdle for ratification in Europe of the EU-Mercosur trade pact if he becomes a target for European environmentalists and protectionists, Stuenkel said.