The Mercosur-EU Trade Deal Fails to Launch

Welcome back to Foreign Policy’s Latin America Brief.

The highlights this week: The EU-Mercosur trade deal fails to launch, Nicaragua cracks down on beauty queens, and an indictment says Cuba penetrated the senior levels of the U.S. government.

Want to chat Latin American politics in a more interactive format after Javier Milei’s Sunday inauguration as Argentina’s new president? Join me on Monday at 1 p.m. EST, where I will be answering questions as part of a Reddit AMA at r/worldnews.

On Thursday, the presidents of countries in the Mercosur customs union of Argentina, Brazil, Paraguay, and Uruguay—as well as new member Bolivia—held a long-awaited summit in Rio de Janeiro. Expectations had been building all year that the event would result in the signing of an over-20-years-in-the-making trade deal between Mercosur and the European Union (EU), which would have created one of the world’s largest free trade zones.

Spanish Prime Minister Pedro Sánchez, whose country holds the rotating presidency of the Council of the European Union, and Brazilian President Luiz Inácio Lula da Silva had both aimed to get the deal across the finish line. The two discussed as much in a meeting at the United Nations climate conference known as COP28 last week. But in more recent days, both Argentine President Alberto Fernández and French President Emmanuel Macron publicly voiced their opposition to the tentative agreement. By Monday, the EU’s top trade official had canceled his trip to Rio.

The Mercosur-EU deal is now off the table for the foreseeable future—and maybe forever. The non-result left officials with an unsatisfying lack of closure after months of intense talks and served Lula a major foreign-policy defeat. The meeting in Rio shifted to cover Bolivia’s entry into the bloc, made official Thursday, as well as a trade and investment agreement Mercosur signed with Singapore—its first such deal with an Asian country.

In the end, the apparent death knell for the Mercosur-EU deal didn’t come from the person most observers expected: Argentine President-elect Javier Milei, a libertarian who had bashed Mercosur—and threatened to leave the bloc—during his campaign. In a pragmatic shift, Milei said days after his Nov. 19 election victory that he generally supported a free trade agreement. His future foreign minister also announced that Argentina will remain in Mercosur.

Rather, it was Fernández who surprised observers by withdrawing his support for the deal. Brazilian and Argentine media reported that Fernández did not want to deliver a fresh agreement into the hands of an administration run by a political opponent.

Macron, meanwhile, saw in Fernández’s reservations an opening to revive his own. Many in France are concerned that the country’s farmers would stand to lose from the trade deal. It is an issue that is particularly sensitive ahead of European Parliament elections next year, Eurasia Group analyst Julia Thomson told Foreign Policy: Macron’s main opponent, the far-right Marine Le Pen, “accuses Macron of trampling on the French national interests to advance free trade and globalization.”

But France was also resolute that Mercosur commit to strict environmental standards that included incorporating countries’ targets under the Paris climate agreement into the trade deal. The bloc had chafed at these demands, arguing that they went far beyond those of a standard trade deal and that Brazil, home to most of the Amazon basin, had made robust environmental commitments in other international fora.

The Mercosur-EU deal was set to be one of the world’s most demanding in terms of environmental regulation. It sought to combine two EU foreign-policy goals: improving global environmental standards and forging closer ties to Latin America. It functioned as “the first test” in Europe’s efforts to “find the correct balance between geopolitics and ecopolitics,” scholars Detlef Nolte and Miriam Gomes Saraiva wrote in a 2021 article.

But the combination may have been too ambitious. Developing countries have often preferred to hash out their environmental commitments in U.N. settings, such as at COP28, where negotiations acknowledge that poorer countries have different climate responsibilities than the wealthy ones that have contributed disproportionally to climate change and have more resources to fight it.

The uproar over the EU-Mercosur trade deal is far from the only case in which developing countries have pushed back on EU impositions of environmental standards: Brazil and India have complained about a European carbon border tax that began taking effect this year.

Argentine international relations scholar Esteban Actis of the National University of Rosario told Foreign Policy that the energy spent negotiating the Mercosur-EU deal should be judged in terms of its opportunity cost. When South American diplomats spent years deliberating details with European officials, they were not moving forward “on an internal agenda with a ton of matters that are still pending”—such as encouraging South American countries to trade more with each other, an area in which they underperform.

Actis posted on X, formerly Twitter, that the EU-Mercosur deal was “[t]he costliest (non)agreement in history. Economic costs of more than 20 years of negotiation, the opportunity, reputational, and climate (carbon footprint) costs. They are difficult to quantify but they are enormous in relation to the concrete results (0).”

Sunday, Dec. 10: Javier Milei is inaugurated as president of Argentina.

Sunday, Dec. 17: Chile holds a referendum on a new draft constitution.

Maduro’s machinations. Last Sunday, Venezuelan President Nicolás Maduro held a nationwide referendum on whether voters support the country’s claim over a large chunk of neighboring Guyana. Many Venezuelans contend the region in question—known as the Esequibo—belongs to Venezuela. The vote was seen as a way for Maduro to drum up nationalist sentiment ahead of an expected presidential election next year in which polls suggest he would fare poorly.

Voters overwhelmingly backed Venezuela’s claim on Sunday, with 95 percent voting in approval, according to official results. Election officials in the country said over half of eligible voters cast ballots, but observers disputed those figures and reported that turnout was low. Instead of shoring up support for Maduro, the event seemed to demonstrate his inability to mobilize voters. Still, continuing his saber-rattling over the Esequibo, Maduro on Tuesday ordered Venezuela’s national oil company to begin drilling in the territory.

The U.S. and Brazilian militaries have publicly announced that they have stepped up monitoring of Caracas’s actions, and Brazil reinforced its troops on its border with Venezuela. Lula, a committed interlocutor to Venezuela’s government in the past, appeared to have lost patience with Maduro as he discussed the matter with journalists at COP28, saying a conflict was in no one’s interest.

In the meantime, Venezuelan authorities on Wednesday ordered the arrest of several high-profile opposition figures—indicating that the Maduro government’s new electoral strategy could be to eliminate opponents. Doing so risks triggering the snapback of U.S. oil sanctions on the country, which were lifted just over a month ago in exchange for a promise of a free vote.

Fujimori freed. Almost exactly one year after Dina Boluarte took power as Peru’s president, the country’s top court delivered a verdict long-sought by the Peruvian right: freeing former President Alberto Fujimori from prison. Fujimori had been jailed since 2005 and convicted since 2007 on charges of directing death squads to carry out killings in the 1990s, when his government was engaged in combat with Maoist Shining Path insurgents.

The possibility that Fujimori could be freed by humanitarian pardon due to a degenerative illness—he breathes using supplemental oxygen—has been kicked back and forth in Peruvian and international courts for years. After Peru’s then-president granted the pardon in 2017, the country’s Supreme Court ruled that it could not be enacted because the Inter-American Court of Human Rights (IACHR) has ruled firmly against it. The court’s decisions are binding for Peru, a signatory member. The IACHR maintains its opposition to Fujimori’s release, but on Wednesday night, Fujimori left prison due to his poor health.

The IACHR as well as the U.N. human rights office condemned the decision. The latter called Fujimori’s release “a concerning setback for accountability” in Peru. The Peruvian court’s decision to defy an international ruling comes as Peru seeks to join the Organization for Economic Cooperation and Development.

Miss Nicaragua Sheynnis Palacios speaks during the 72nd Miss Universe competition in San Salvador, El Salvador, on Nov. 18.

Miss Nicaragua Sheynnis Palacios speaks during the 72nd Miss Universe competition in San Salvador, El Salvador, on Nov. 18.

Miss Nicaragua Sheynnis Palacios speaks during the 72nd Miss Universe competition in San Salvador, El Salvador, on Nov. 18.Alex Peña/Getty Images

Beauty queen “coup.” Nicaragua’s crackdown on dissent has now extended to beauty queens. As Nicaraguan contestant Sheynnis Palacios prepared to take the stage for the final round of the global Miss Universe contest last month—which crowned her as winner­—photos of her participating in 2018 anti-government protests in the country surfaced on social media.

Nicaraguan media reported that soon thereafter, the government ordered an airline to block Palacios from boarding a flight to the country. The contest occurred in El Salvador; from there, Palacios flew to New York. To celebrate her victory, Nicaraguans paraded through the streets of the capital, Managua, in the first mass marches of any kind since 2018.

Nicaragua’s government responded by forcing artists to paint over a mural of Palacios, detaining a TikToker who defended her, and filing charges against the organizers of the local Miss Universe franchise for supposedly plotting to overthrow the government. Palacios’s Facebook account, which contained the protest photos, has been taken down, and she has not commented publicly about the political uproar that followed her victory.

Besides Mercosur, the other major trade bloc in South America is the Pacific Alliance. Which of the following countries is not a member?

The fourth member of the alliance is Colombia.

U.S. Attorney General Merrick Garland speaks at the U.S. Department of Justice in Washington on Dec. 4. Garland announced that Victor Manuel Rocha, the former U.S. ambassador to Bolivia, has been charged with acting illegally as a foreign agent for the government of Cuba.

U.S. Attorney General Merrick Garland speaks at the U.S. Department of Justice in Washington on Dec. 4. Garland announced that Victor Manuel Rocha, the former U.S. ambassador to Bolivia, has been charged with acting illegally as a foreign agent for the government of Cuba.

U.S. Attorney General Merrick Garland speaks at the U.S. Department of Justice in Washington on Dec. 4. Garland announced that Victor Manuel Rocha, the former U.S. ambassador to Bolivia, has been charged with acting illegally as a foreign agent for the government of Cuba.Drew Angerer/Getty Images

On Monday, the U.S. Department of Justice announced explosive charges against a retired U.S. diplomat whom it said had been spying for Cuba for decades. His case may amount to one of the biggest intelligence breaches in U.S. foreign service history.

The Colombian-born Manuel Rocha, 73, served as U.S. ambassador to Bolivia, a member of the National Security Council, an advisor to the U.S. military’s Southern Command, and a deputy at the Swiss-housed U.S. outpost in Havana when the countries did not maintain formal diplomatic relations.

The indictment against Rocha said that after the FBI gained reasons to suspect him by November 2022, it set up a sting operation in which an FBI agent posed as a Cuban intelligence operative and then recorded Rocha boasting about his accomplishments serving Cuba in a series of meetings. Rocha’s service for Cuba over the years was a “grand slam,” the indictment quoted him as saying.

“If, as he bragged, he did enormous damage, I think he was in a position, from what we know about his assignments, to do just that,” former CIA counterintelligence chief James Olson told Foreign Policy.

The State Department said it is assessing the impact of Rocha’s alleged actions on U.S. national security. He was stationed in Cuba during a period when the Cuban government shot down two planes operated by a Miami organization of Cuban exiles. Off-script comments Rocha made in 2002 about leftist Bolivian politician Evo Morales—when he was a candidate for president—were seen as giving Morales a political boost, and he went on to win a future election. Rocha is currently in detention ahead of his arraignment, which is expected later this month.

To Olson, now a professor emeritus at Texas A&M University and the author of To Catch a Spy: The Art of Counterintelligence, Rocha’s case underscores both the sophistication of Cuban intelligence and the need for U.S. counterintelligence operations to go on the offensive and advertise more openly that they’re willing to pay and protect sources who offer the U.S. government valuable information. While it was not clear how U.S. authorities started investigating Rocha, “I suspect that the FBI had a source,” Olson said.

For Foreign Policy’s podcast I Spy, Olson recounted in detail his own experience of learning in 1987 via a walk-in source at the U.S. Embassy in Vienna that Cuba had been running 38 double agents against the United States. In the 2000s, an analyst from the U.S. Defense Intelligence Agency and a senior State Department official and his wife were also discovered to have been spying for Cuba.

“We’ve underestimated the Cubans over the years, and we’ve paid a horrible price for that,” Olson added. “Pound for pound, they’re a very, very formidable adversary”—and those intelligence capabilities have helped the Cuban government survive as long as it has.

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