What Brazil’s Election Means for Latin American Trade

On October 30, 2022, Luiz Inacio Lula da Silva, known to his supporters as Lula, defeated the incumbent right-wing president Jair Bolsonaro in Brazil’s presidential election. Lula, a man often described as a leftist, vowed to unite a divided country after a bitter election and a tumultuous presidency of Bolsonaro. Despite his leftist leanings, centrists and moderates across the globe have celebrated Lula’s victory. There are two main reasons for this.

The Amazon

Under Bolsonaro, deforestation in the Amazon, which has always been a problem, ramped up considerably. Ecologists worry that we may reach a tipping point from which the Amazon cannot recover. Virgin rainforests such as the Amazon are carbon sinks and are crucial if we’re going to have any chance at limiting global heating to 1.5 degrees Celsius. Lula has vowed to protect the Amazon and has invited international cooperation to do so. He’s also pledged to pursue positive global trade instead of trade deals that “condemn our country to be an eternal exporter of raw materials”.

International trade

This quote may sound like Lula is going to drive a hard bargain with foreign partners, and he may well do that. But crucially, Lula is willing to bargain at all. Bolsonaro didn’t seem willing to take any action to protect the Amazon, which made it impossible for foreign partners to negotiate with him in good conscience.

The European Union seems particularly pleased with Lula’s victory. The EU needs more trade partners to fill the void caused by Russia’s invasion of Ukraine and the EU’s retaliatory sanctions. They may also be looking to decrease their dependence on the People’s Republic of China. European Commission President Ursula von der Leyen tweeted about her anticipation for working with Lula.

But the EU is not the only potential trade partner for Brazil. Both Russia and China are looking to increase their influence in the region. Under Bolsonaro, Brazil’s relations with China soured, so it’s little surprise that Chinese foreign ministry spokesperson Zhao Lijian publicly welcomed Lula’s victory.

The Mercosur bloc

Luckily for the EU, they already have the groundwork laid for a deal. There is a trade deal agreement between the EU and the Latin American Mercosur bloc, which comprises Brazil, Argentina, Uruguay, and Paraguay. The Mercosur pact was agreed upon at a political level in 2019, but it has been effectively put on pause since then. This is largely because of Amazonian deforestation.

Lula has the power to assuage those environmental concerns, and more importantly, he seems intent on doing so. This could be the key to unlocking the Mercosur deal. The various countries within the EU also seem to be on the same page. Czechia, Spain, and Sweden are at the helm of the EU’s rotating Council presidency and they’ve already stated they want to get the deal back on track.

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