The EU and Mercosur are arriving at a “political accord” on raw materials, which involves a framework for cooperation on joint investments in lithium, nickel and rare earths projects, European Commission President Ursula von der Leyen said Jan. 16.
Such an accord will ensure “strategic independence in a world where minerals are tending to become instruments of coercion,” von der Leyen told journalists in Rio de Janeiro after a meeting with Brazilian President Luiz Inacio Lula da Silva to discuss details of the broader EU-Mercosur trade accord, which was formally agreed upon Jan. 9 by a majority of nations involved. The EU hopes to gain access to the four-country bloc’s agriculture and metals sectors. The Mercosur countries seek to work around US trade restrictions and counter China’s growing influence.
The formal signing of the accord is to take place Jan. 17 in Asuncion, Paraguay, one of the four member countries of the Latin American southern cone common market, along with Argentina and Uruguay.
With the accord, EU import tariffs on Mercosur mineral products, including critical minerals, copper, aluminum, ferroalloys and steel products, should be eliminated within 10 years. Brazilian iron ore already enters the EU at a zero tariff.
Both von der Leyen and Lula stressed the importance of establishing new strategic supply chains in the areas of energy and digital transition, involving new investments to support sustainable development within the ambit of the EU-Mercosur accord.
Lula indicated that this will incentivize new EU investments in Mercosur.
“But we [in Mercosur] will not limit ourselves to being eternal exporters of commodities; we want to produce and sell higher value-added industrial goods,” he said.
The Brazilian mining institute Ibram noted in a Jan. 15 statement that the 2023-24 renegotiation of the EU-Mercosur accord will allow Brazil to proceed with a policy proposed by its government late in 2025 and currently under consideration by the country’s congress, which stipulates that at least 80% of the country’s rare earths production should be processed into value-added products within the country, rather than exported in raw material form.
The idea will now be to attract EU investment in processing rare earths within Brazil, Ibram said. Brazil holds the world’s second-largest reserves of rare earths, after China, but it currently has only one producer.
Lula told journalists that further accords are envisaged in the future between Mercosur and Canada, Vietnam, Mexico, Japan and China, following recent accords struck with the European Free Trade Association and Singapore.
Author: Diana Kinch