Lula's Mercosur-China trade deal idea welcomed

Brazilian President Luiz Inacio Lula da Silva's call for the Southern Common Market, or Mercosur, to pursue a free trade agreement with China has been welcomed by experts as an encouraging signal of closer engagement with Beijing.

Speaking at the recent Mercosur summit, Lula urged the South American bloc to deepen ties with China amid growing trade protectionism and uncertainty in the international economic environment.

Ignacio Bartesaghi, director of the Institute of International Business at the Catholic University of Uruguay, described Lula's remarks as an important development.

"I consider this a positive sign, given that Lula does not usually mention China in his Mercosur speeches," Bartesaghi said.

While China already serves as a crucial export market for Mercosur countries, a free trade agreement would offer opportunities to further expand market access, particularly for agricultural products, he said.

Lula's reference to China reflects broader shifts in the global trading environment, he said.

Jiang Wenran, founding director of the China Institute at the University of Alberta in Canada, said a future Mercosur-China trade framework could accelerate cooperation in emerging industries, particularly electric vehicles and clean energy.

Chinese investment has already begun reshaping South America's EV industry, with Brazil emerging as "the regional anchor" while other countries develop upstream segments of the supply chain, Jiang said.

He highlighted Chinese automaker BYD's investment in a former Ford plant in Bahia state. The project is expected to produce 150,000 vehicles annually, create about 10,000 direct jobs and achieve 70 percent local content by 2028 under Brazil's MOVER program.

While Brazil has become the center for vehicle assembly, Jiang said the broader regional supply chain is gradually taking shape.

Argentina and Bolivia are advancing lithium-related projects with Chinese partners, helping build a more integrated EV supply chain across South America, he said.

Chinese companies are not simply exporting vehicles but helping build local industrial capacity, he added.

"This reflects a mutually beneficial industrial chain setup: China provides core battery and platform technologies, Brazil anchors regional assembly and lithium processing, and smaller Latin American markets fill niche supply chain roles," he said.

Building ecosystem

Chinese manufacturers have been able to move quickly, as many traditional automakers have been slower to expand EV production in the region, Jiang said. "Chinese firms are filling that gap while building Latin America's first fully functional EV ecosystem."

Interest from Global South countries has also grown because China offers mature technologies, competitive costs and practical industrial cooperation, he said.

"China is the undisputed leader here: CATL holds 37 percent of the global battery market, BYD sells more new energy vehicles than any other firm worldwide, and its EV clusters iterate faster and cheaper than Western alternatives," he said.

Chinese companies have also demonstrated the ability to tailor products to local conditions while pursuing commercially driven partnerships, he added. "For Global South policymakers, the cost of disengaging far outweighs setting clear, locally tailored partnership terms."

Looking ahead, Jiang said a Mercosur-China free trade agreement could provide a more stable institutional framework for expanding industrial cooperation beyond trade.

"Lula's push would turn this into a structured, win-win framework for regional EV collaboration," he said.

gaoyang@chinadailyusa.com