Argentina's outgoing government rejects EU-Mercosur trade deal, but incoming administration backs it

Argentina’s outgoing government said Monday it won't support the signing of a long-delayed trade deal between the European Union and the South American bloc Mercosur during a summit this week in Brazil even thought the incoming Argentine government has expressed support for the deal.

Foreign Minister Santiago Cafiero said the agreement as currently written would restrict Argentinian exports. "It is a bad agreement that has a negative impact on manufacturing and agricultural exports,” Cafiero said in an interview with a local radio station, excerpts of which were later released by the Argentine Foreign Ministry.

Argentina’s position goes against that of neighbor Brazil, which holds the presidency of Mercosur, and Spain, which holds the presidency of the EU. Both have expressed a desire to move forward with the trade treaty during the summit Thursday in Rio de Janeiro.

The Argentine opposition may be short-lived, though. The incoming administration of Argentina’s President-elect Javier Milei has already made clear it supports the agreement. Milei takes office Sunday.

“We have no objections; it is frankly desirable that it goes through,” incoming Foreign Minister Diana Mondino said at a conference for the Industrial Organization of Argentina, a manufacturing trade group. “Much better to have it than not to have it.”

Mondino said she realized there are objections to the agreement from certain sectors but expressed hope that Fernández would push to sign the agreement this week.

Brazilian President Luiz Inácio Lula da Silva. who met with German Chancellor Olaf Scholz on Monday in Berlin, expressed hope that there could still be a breakthrough on the deal this week. “I’m not giving up,” Lula said.

A basic agreement between the sides was reached in 2019 that was supposed to be the first step in sealing the agreement. But it was never implemented amid fierce resistance on both sides of the Atlantic, including demands for protection of the rainforest in South America and concern over an influx of cheap goods in some European countries.

Argentina has warned the country’s manufacturing sector would be negatively affected.

“Throughout our administration, we always proposed that the discussion on the agreement should be reopened because it did not reflect a balance where both blocs would benefit,” Cafiero said.

Argentina won’t be the only obstacle though. Paraguay, which is taking over the rotating presidency of the Mercosur this week, appears to be leaning against the deal. Paraguay President Santiago Peña told local media Monday that some European nations are placing overly strict environmental requirements on the deal.

“We are already looking in another direction,” Peña said. “Environmental issues are what dominate the commercial discussion, and we believe that stems from a lack of understanding about our model for development,” Peña said, adding that European nations are “trying to impose measures that we think are not suitable for our own development.”