Argentina asks the European Union to renegotiate a trade agreement with Mercosur

Argentine President Alberto Fernández has called on the European Union to renegotiate a landmark trade deal with South America, saying it is unbalanced and poses a threat to the auto industry in Brazil and Argentina.

“What we have to do is talk to see how we can reach an agreement on a more realistic basis,” Fernández said during the Financial Times’ Global Boardroom conference.

Asked how long this process could take, he replied that “as long as those involved want. It’s like tango. Tango is danced by a couple, and you need both people to want to dance, otherwise it’s very difficult.”

The trade agreement between the European Union and the Mercosur bloc —Argentina, Brazil, Paraguay and Uruguay– was closed in early 2019, after nearly two decades of negotiation. But its implementation has been delayed amid European objections to Brazil’s poor record in preserving the Amazon rainforest under the leadership of far-right President Jair Bolsonaro.

The election as Bolsonaro’s successor, in October, of Luiz Inácio Lula da Silva, who pledged to preserve the Amazon, raised hopes that the agreement between the European Union and Mercosur could finally receive final approval, after a long delay. . Xiana Mendéz, Spain’s foreign trade minister, told the Financial Times last month that she believed the new president would support the deal. “It’s a very balanced pact,” she said. “We do not favor a reopening of negotiations.”

But Fernández told the Financial Times conference that the environment “is not the reason we don’t have the deal, it’s an excuse.”

“The real reason is that for Brazil and Argentina [como] car producers, the only car producers in South America, the deal is a problem because it makes things difficult for us if European competition comes to South America,” he said.

At the same time, South American nations face “a pile of hurdles” in selling their agricultural exports to Europe, with countries such as France, Ireland and Poland opposing ending farm subsidies and allowing Argentine competition, he said. added.

“Neither Lula nor I are against the agreement with the European Union”, explained Fernández. “You have to keep in mind what the form of this agreement is, because it has problems […] related to market imbalances”.

As discussions continue on the trade deal signed with Europe a long time ago, Argentina is doing impressive business with China, its second largest trading partner after Brazil. Beijing last month agreed to expand a credit line to the Argentine central bank to US$ 25 billion (R$ 130.5 billion), helping to reinforce the South American country’s scarce foreign exchange reserves.

China has also built a space observation station in the province of Neuquén, Patagonia, which according to Washington’s Center for Strategic and International Studies operates with little Argentine supervision and could be used for military intelligence gathering.

Fernández rejected the argument that Argentina had to choose between the United States and China, saying he had no desire to recreate the Cold War era. “Argentina has to do what’s best for Argentina,” he said. “The United States is very concerned about what China can do in Latin America, but China can do exactly what the United States can do: it can come and invest.”

Argentina is building a naval base in Ushuaia, in southern Patagonia, to support vessels patrolling the South Atlantic and Antarctica, but Fernández described news that China was involved in the project as “fantasy”. “Nothing like it exists,” he said. “In Argentina, there cannot be Chinese, American or French military bases… because we are a sovereign nation.”

The South American nation faces daunting economic challenges. Inflation is close to 100% a year, its access to international financial markets is largely blocked after a moratorium in 2020, and exchange controls have pushed the dollar’s black market value to nearly double its official rate.

Fernández said the Argentine economy was “strange” because, despite high inflation and “impossible to pay” debt levels, the country also registered foreign investment and record exports in the first half of the year, unemployment is low and consumption is on the rise.

“If you cling to the image of an inflationary Argentina … an indebted Argentina, you would say that Argentina is a mess,” said Fernandez. “But there is also all this data that indicates sustained growth and enormous potential.”

The solution to the South American nation’s long-term economic woes, he said, was to add value to its commodities. “Argentina must stop being an exporter of raw materials and become an industrial nation.”

Argentina is holding presidential and legislative elections next October and polls show Fernandez’s Peronist party trailing the conservative opposition. The president has said in the past that he would like to run again, but his approval ratings are low and he told the Financial Times conference he was “completely engrossed” with the government.

Its powerful vice president, Cristina Fernández de Kirchner, said on Tuesday that she would not run for a new term after being convicted of corruption, a verdict she plans to appeal.

“I’m not thinking about re-election, believe me,” President Fernández said. “I’m thinking about how to solve all the problems[do país]I want to end my mandate having sown opportunities in Argentina for the person who succeeds me”.

Additional reporting by Andy Bounds in Brussels. Translated by Luiz Roberto Gonçalves