By Analía Rojas | 2024-12-12

BUENOS AIRES -- A recent free trade agreement between Mercosur and the European Union (EU), coupled with Yamandú Orsi's election as Uruguay's president, has dealt a significant blow to China's efforts to undermine the South American bloc and Beijing's push for nation-to-nation trade agreements.

On December 6, the EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay) announced the conclusion of negotiations for a long-awaited free trade agreement after 25 years of discussions.

The pact still requires approval from European national parliaments and a comprehensive legal review, a process that could take at least two years.

"The failure of this agreement would have left South America more vulnerable to Chinese influence, which is already significant and growing," wrote Josep Borrell, former vice president of the European Commission, in an article published on December 7 in the Spanish newspaper El País.

China views Latin America as a strategic partner and wants to leverage investments in infrastructure and access to critical resources there, said Borrell.

While Beijing promotes a narrative of "mutual benefits," these arrangements often skew in China's favor.

From Borrell's perspective, the EU-Mercosur agreement offers an opportunity for Latin America to diversify strategic alliances with Europe, particularly at a time when "the Chinese market may not hold the same promise it once did."

European Commission Vice President and former Estonian prime minister Kaja Kallas emphasized in mid-November the importance of ratifying the EU-Mercosur trade agreement to prevent China from further expanding its influence in Latin America.

Speaking at a European Parliament hearing, Kallas highlighted the geopolitical stakes. "If we don't do a trade agreement with [Mercosur], then this void will be filled really by China," she said.

Similarly, European Commissioner for Trade Maroš Šefčovič warned on November 4 that Europe is losing its longstanding position in the region.

"For decades and decades we've been [the] number one trading partner in Latin America. We are not anymore. ... It's China," he said in the European Parliament.

"We just simply need to do better, to be more present, to be more politically attractive and to be a better partner for these very, very important countries," Šefčovič added.

Potent benefits for Latin America and EU

The pending EU-Mercosur agreement, which would affect 800 million inhabitants of Europe and Latin America if finalized, is seen by observers as a significant expansion of market access and a step toward setting global standards in areas like sustainable development, technological innovation and governance.

China has expressed strong interest in Mercosur, particularly in sectors like agriculture, minerals and infrastructure, with its Belt and Road Initiative serving as a key financing tool for bilateral agreements.

However, this growing influence has sparked concerns over potential economic dependence on Beijing and the risk of undermining Mercosur's cohesion.

By prioritizing the unity of Mercosur over agreements sought by individual Latin American countries, the bloc strengthens its position on the global stage.

It also sends a clear message to Beijing, say commentators: Mercosur will not sacrifice its regional integration for short-term, selective gains.

China has been pushing to deepen trade ties with Mercosur countries through bilateral agreements, similar to those it has signed with other Latin American nations like Chile, Peru, Costa Rica, Ecuador and Nicaragua.

However, the experience of other Latin American countries, where trade pacts with China have led to dependence, has served as a cautionary tale for several Mercosur members, who have opted for group negotiations instead of individual talks with China.

Orsi, the incoming Uruguayan president set to take office in March, has also emphasized his commitment to supporting regional unity against China's "divide and conquer" strategy of negotiations with individual countries.

His stance differs from that of predecessor Luis Lacalle Pou. In December 2023, Lacalle Pou asked Mercosur partners to allow Sino-Uruguayan talks on a free trade pact.

As the global trade landscape evolves and China intensifies its efforts to expand its influence, Mercosur's decision to prioritize regional unity over individual agreements with Beijing reflects a broader commitment to collective prosperity and autonomy, according to analysts.