The European Union and Mercosur will not be able to close their free trade negotiations next week because Argentina's incoming government has to approve the outstanding issues, Brazilian officials and diplomats said on Saturday.
"Given the transition in Argentina, we are handing the subject to the new government, which has indicated they want a deal," the Brazilian foreign ministry spokesman said.
A European official with knowledge of the talks said Argentina was no longer open to finalizing the deal on Mercosur.
Argentine negotiators who were due to travel to Brasilia for final push to close the deal canceled their trip, a Brazilian government trade official told Reuters.
Another Brazilian official said the announcement of final agreement will not happen at the annual presidential summit on Dec. 7 of the four-nation South American trade bloc as planned.
"We will announce the good progress we have made in the last few months and our commitment to continue," the official said.
The two Brazilian officials asked not to be named to speak freely.
Brazil, which holds the revolving presidency of Mercosur until next week, had hoped that the meetings this week would resolve final differences in time for the summit.
Officials wanted to wrap up agreements before Argentina's Milei takes office on Dec. 10, as he has criticized the trade deal that took two decades to negotiate.
"The outgoing government clearly did not want to give Milei a free pass," said a senior diplomat with knowledge of the negotiations.
He added, however, that all indications are that the new government will want to support the deal with the EU.
A trade treaty was agreed in principle in 2019 after two decades of talks, but additional environmental commitments demanded by the EU led Brazil and Argentina to seek new concessions that prolonged negotiations.
An Argentine source familiar with the talks said the outgoing government's negotiating team had "flipped the chessboard" regarding Mercosur's negotiations with the EU before the handover to Milei.
Diplomats and trade experts, however, do not expect the presidential election win by Milei to derail the agreement, despite his vocal criticism of the South American common market.
Argentina's incoming foreign minister, Diana Mondino, said it was important to sign the EU-Mercosur accord after she visited Brasilia last Sunday to meet Brazil's foreign minister.
