MercoPress. South Atlantic News Agency

“EU approach on trade accord with Mercosur is simply unacceptable,” Paraguayan President elect Peña

Peña's comments on trade talks are the strongest since winning election in April, underscore rising tensions between the European block and Mercosur

Paraguay President-elect Santiago Peña has said that Mercosur and the European Union should put on hold talks over a free trade agreement since the current environmental demands from the EU are “unacceptable.”

Peña takes office next week and said EU's proposals would hinder major soy exporter Paraguay’s economic development. Paraguay is the weakest economy of the four Mercosur member states next to Brazil, Argentina and Uruguay.

Peña's comments on trade talks, the strongest since winning election in April, underscore rising tensions as the European block and Mercosur race to finalize a deal, long delayed due to doubts over Brazil’s climate action commitments.

The European Commission, EU’s executive, said it was “fully committed to push the EU-Mercosur Agreement towards the finish line before the end of the year”. It has been on the negotiating table for over twenty years.

Mercosur countries, home to huge swathes of the Amazon, the Chaco forest and key wetlands, are major exporters of soy, corn and beef. They have increasingly pushed back against environmental demands from the EU, saying they amount to European protectionism and would hurt local production.

“This approach from the EU is simply unacceptable,” said Peña, 44, who represents the ruling conservative Colorado party. “What the European Union has to do is come clean about whether or not it wants to move forward with a free trade agreement. Today I question whether they have that genuine interest.”

Mercosur officials are working on a counter-proposal before meeting with EU negotiators. There are some hopes of reaching an agreement later this year on the trade deal.

“From our point of view, negotiations should be closed and the decision simply made: Do we want this to happen or do we not want this to happen?” Peña asked.

The European Commission said its proposals were meant to address sustainability concerns, including on deforestation. It said it was waiting to see alternative ideas from Mercosur.

Pena anticipated he was not planning any new taxes on the agricultural sector, the economic engine in the world’s No. 3 soybean exporter. He said some taxes on international trade could even be eliminated to boost competitiveness and exports.

“Paraguay has to consolidate the model it has today of low taxes to attract investment and create jobs,” he said. “Probably in the future with a more formalized economy… we could think of some adjustments in some rates.”

The President-elect also said current agriculture minister Santiago Bertoni, who has the support of the country’s soybean chamber, had done a “good job” and could remain in office.