Mercosur and the EU after the scandal: Lula opens the window for parliamentary ratification

Brazilian President Luiz Inacio Lula da Silva is using the political window that opened after media reports of a possible financial scandal around Senator Flavio Bolsonaro, the far right’s presidential candidate, to finalise a set of technical side letters on enforcement, the monitoring of deforestation in the Amazon and agricultural safeguard clauses, which European parliaments demand as a condition for a vote on the partnership agreement between Mercosur and the European Union. The agreement, signed in Asuncion on January 17, has been provisionally applied since May 1, but full ratification in the 27 EU member states and the five Mercosur members remains uncertain until the autumn parliamentary cycle.

For Serbia, which in February 2026 signed a protocol with Argentina on cheaper quota-based imports of beef and which through the Chamber of Commerce of Serbia is developing trade ties with Brazil in IT and pharmaceuticals, the fate of the Mercosur-EU agreement has indirect implications. If the agreement is fully ratified, Brussels will be more open to new bilateral agreements that could cheapen access to the Latin American market for Serbian exporters, particularly in foodstuffs and pharmaceuticals. According to the Statistical Office of Serbia, Serbian exports to Mercosur reached 78 million euros in 2025, with the potential to double under the new conditions.

The scandal around Senator Flavio Bolsonaro, son of former president Jair Bolsonaro, broke in May when Brazilian prosecutors published documentation on concealed assets allegedly exceeding 40 million reais. The younger Bolsonaro had until then been the far right’s main presidential candidate for the October 2026 election, on a platform that explicitly rejected the Mercosur-EU agreement on the grounds that Europe “imposes environmental standards insufficiently aligned with the interests of Brazilian agriculture.” After the scandal, Lula gained a seven percentage point lead in the polls, political space that opens the option for the government to take the initiative.

Three side letters awaiting Lula’s signature

Lula’s administration is preparing three technical side letters to supplement the partnership agreement, with the aim of easing the path for European parliaments to vote. The first letter defines concrete enforcement mechanisms for the labour rights and environmental protection clauses, with a procedure for suspending trade benefits if the Mercosur side breaches obligations. The second letter sets out a system for monitoring deforestation through satellite surveillance coordinated by the European Space Agency, with regular reports to Brussels every six months. The third letter introduces special safeguard clauses for French, Irish and Polish farmers, who during 2024 and 2025 led the main opposition to the deal.

Anabel Gonzalez, non-resident senior fellow at the Peterson Institute for International Economics in Washington and former foreign trade minister of Costa Rica, in a short analysis for The Financial Times said that “side-letter supplementation of the agreement through three technical letters could open the path for ratification in the Bundestag and in France’s National Assembly by the end of the year.” On Gonzalez’s estimate, if Lula manages to finalise the side-letter supplements before the Brazilian elections in October, the agreement will become politically insulated from the election outcome, because it will already be part of a European ratification process that cannot be reversed.

Brussels welcomes, Paris seeks additional guarantees, Berlin backs

Brussels, through Trade Commissioner Maros Sefcovic, welcomed Lula’s initiative with the formulation that “side-letter supplementation is a mature and constructive step towards full ratification, which is in the strategic interest of both sides.” European Commission President Ursula von der Leyen, who defended the agreement in person during her parliamentary campaign for a second mandate, signalled that the Commission, in its June package of proposals, will specify how the additional clauses will be used in practice.

Paris under President Emmanuel Macron and Prime Minister Sebastien Lecornu is seeking additional guarantees for French farmers, who at the end of 2024 led the main demonstrations against the agreement, with a demand that the French parliament vote on the arrangement as a whole, not piece by piece. Berlin under Friedrich Merz strongly supports the deal, with the wording that “expanding European trade ties with Mercosur is a strategic obligation in the context of Chinese economic influence in Latin America.” Italy under Giorgia Meloni keeps a mild ambivalence, with a protectionist position towards Italian farmers but public support for the European line.

The next concrete date is the Mercosur meeting

The next concrete date is the Mercosur Council meeting at presidential level in Brazil on July 4, where technical side letters from the European side will be finalised and the agreement prepared for the next phase of parliamentary ratification in the European Union. That phase could begin in October with votes in the Bundestag and in France’s National Assembly. Belgrade will, through the Chamber of Commerce of Serbia, organise in September a business forum with Argentine and Brazilian partners in Belgrade, focused on new contracts in pharmaceuticals and IT services.

What do you think, how much will the Mercosur-EU arrangement affect Serbian exports to Latin America, and which sphere could benefit most?