If you want to sell more electric cars in Brazil, you have to let us raise cows on deforested land. It sounds brutal, but the message sent by the Brazilian government to the European Union would be this in summary. The Latin American country, together with Argentina, Paraguay and Uruguay, has been negotiating for over two decades with Brussels to conclude Mercosur, a trade agreement considered of vital importance for the 27 of the European bloc.
In mid-September, the Brazilian government had already asked the EU in a letter to suspend the law on deforestation, now the message is being reinforced by undermining one of the key points of the treaty: the opportunity for European car manufacturers to sell their vehicles without duties in the four Latin American states that are protagonists of the agreement. This is another piece of an endless tug-of-war in which each party fears the “invasion” of products from the other continent, but at the same time is eager to strengthen exports of its key products.
Brazil’s Obstacles to European Electric Cars
The Mercosur free trade zone, which would affect about 800 million people, finds another obstacle to its conclusion. According to revelations provided by diplomats to the portal PoliticalBrazil needs to limit imports of electric cars to avoid a large-scale invasion, while the European Union insists that beef imports only come from cows that have not been raised on deforested land. Ahead of the G20 in Rio de Janeiro, Brazil is leading the Mercosur negotiations and is calling for safeguard measures to ensure that imports of electric vehicles do not exceed a certain threshold. A move similar to that adopted by Brussels to defend itself from the invasion of Chinese electric cars and protect the European car industry.
Brazil aims to develop its own electric cars
Faced with increased duties imposed by the EU, the United States and Canada, Beijing is looking with interest at alternative markets such as Brazil, Mexico and Morocco. The South American country, rich in mineral resources essential for the transition to electric, is now aiming to direct its automotive industry towards electric, to free itself from the yoke of imports. A slow and progressive job, but one that Lula aims to start with import duties that are gradually increasing and should reach 35% in 2026. Mercosur in its current version would break the wall that Brasilia is trying to create around its automotive sector.
Critical raw materials concentrated in Latin America
Latin America is attractive to European industries, thanks to the wealth and variety of critical raw materials, which these countries would now like to exploit more independently. Brazil, for example, is rich in niobium, a metal used to strengthen steel. It also boasts deposits of nickel, graphite and rare earths. Also in the Latin American continent there is one of the most important deposits of lithium, shared between Argentina and Bolivia (members of Mercorsur) and Chile, with which Brussels has stipulated a specific trade agreement.
From Brazil to Germany via Italian coffee: everyone against the EU law to save forests
The three countries together hold more than half of the reserves of the precious metal essential for electric cars. When Brazil last week asked for a suspension of the EU regulation on deforestation, German Chancellor Olaf Scholz immediately rushed to ask for a postponement. Germany understood that the request was about the issue of electric car exports, a crucial element for Berlin given the deep crisis underway for the giant Volkswagen.
The “blackmail” of the cows
The regulation aims to stop imports into the European market of a series of products that are the result of deforestation. The target is the extensive Brazilian pastures that have caused the deforestation of large parts of the Amazon forest. A phenomenon that shows no signs of abating. The move by Brussels was intended to help curb the Amazon massacre, but is encountering a lot of resistance. After a quarter of a century of negotiations, all parties want to close the Mercosur agreement. Lula would like to play this card by the G20 scheduled for Rio in November, while for Von der Leyen it would be a victory to start her second term on the right foot. It is therefore very likely that Brussels will put aside its environmentalist ambitions in order to succeed and export its electric vehicles overseas.
