EU–Mercosur deal, promoted and celebrated by Brazil's President Luiz Inácio Lula da Silva, is neoliberal or even ‘neocolonial’ and it is harmful to Mercosur, says former IMF director

Promoted and celebrated by President Luiz Inácio Lula da Silva, the trade agreement between Mercosur and the European Union may not be beneficial for Brazil, according to economist Paulo Nogueira Batista Jr., former vice president of the Brics New Development Bank and former executive director at the International Monetary Fund representing Brazil and ten other countries. In his view, the deal places Brazil in a disadvantageous position vis-à-vis Europe.

“The agreement is neoliberal, or even neocolonial. It helps entrench a pattern in which Brazil exports primary commodities to the European Union and imports industrial goods. It is anti-industrial for Brazil. It opens the Brazilian market in stages, ultimately leading to full tariff liberalization for European corporations, especially German ones, that are structurally far more competitive than our industries,” Batista Jr. said in an interview with Radio BdF on Tuesday (13).

According to the economist, signing the pact runs counter to the industrialization policy defended by Lula’s government and may have spillover effects across other key sectors of Brazil’s economy.

“It is a deindustrializing agreement and, beyond that, it limits policy space in other areas, such as government procurement and taxation of critical exports. It is an agreement that should not have been concluded; it started from a very unfavorable baseline negotiated under the Bolsonaro government. Lula’s administration managed some minor adjustments, but did not change its neoliberal and neocolonial essence,” he said.

Batista Jr. argues that, regarding the EU agreement, there is little left to do. However, he urges a different stance in ongoing negotiations with other countries, including European nations outside the EU, as well as Canada and South Korea.

“What is not irreversible, but is moving in the same direction, is the negotiation and signing of other neoliberal agreements of this kind, most of them initiated under the Temer and Bolsonaro governments. If this continues, one of the legacies of Lula’s government in the medium and long term will be Brazil’s entanglement in a web of broad market-opening agreements, when openness should be selective, led by us, not locked into international treaties,” he warned.

Despite his criticism, the economist says the priority now is to defend the government and Lula’s re-election bid, given that the alternatives on offer have made clear they would bow to foreign interests.

“More than ever, we need to defend Lula’s candidacy. I’ve made these criticisms, but from now until the elections, what matters most for Brazil’s future is not electing one of Donald Trump’s vassals, current vassals who would be vassals in office. That would put us in a much worse situation than today,” he said, recalling an article he published in Brasil de Fato titled We Are Running an Existential Risk.