EU chief jets in to South America as Mercosur trade deal hopes rise

European Commission President Ursula von der Leyen arrived in Uruguay on Thursday, aiming to finalize a long-delayed trade deal between the European Union and South America's Mercosur bloc that includes farming powerhouses Brazil and Argentina.

"The finish line of the EU-Mercosur agreement is in sight. Let's work, let's cross it. The largest trade and investment partnership the world has ever seen. Both regions will benefit," von der Leyen said in a post on X.

Mercosur will meet in Montevideo on Thursday amid signs the bloc - also including Paraguay and Uruguay - will use the event to back the trade deal, though it has had several false dawns, including a 2019 signed agreement that failed to get ratified by nations in Europe.

Three sources involved in the talks said the deal was done, and would be announced on Friday by Mercosur heads of state and von der Leyen after both sides were able to work out final details around environmental issues and government purchases.

"Everything went as we expected. We worked out an agreement that was enough for both sides," said one of the people, a South American source involved in the negotiations who asked not to be named as the deal was not yet public.

However, von der Leyen, just days into her second term, faces stern opposition at home to the deal, which would be the largest struck by the EU in terms of tariff reductions. EU countries as a whole and the European Parliament would have to approve any trade deal agreed.

European farmers have repeatedly protested against the deal, saying it will lead to cheap imports of South American commodities, notably beef, which is not subject to the same green and food safety standards as in the EU.

EU DIVIDED

France has been the most vociferous critic of the proposed agreement.

Though distracted by a political crisis after the collapse of Prime Minister Michel Barnier's short-lived government, President Emmanuel Macron's office issued a statement on Thursday saying the planned EU-Mercosur deal was "unacceptable".

However, other EU members such as Germany insist the EU-Mercosur deal is vital for the bloc as it looks to diversify its trade after the near-closure of the Russian market and amid discomfort about Europe's reliance on China.

They also see Mercosur as a potentially reliable source of critical minerals such as electric battery metal lithium, required for Europe's green transition.

South American negotiators remain optimistic that the EU will eventually give its approval and that France will not be able to rally a blocking minority.

"The EU has had a mandate to negotiate it for the last 20 years. The ratification is another process, later, they will have to work on it themselves," one of the sources said.