By Belén Carreño and Anthony Boadle
MADRID/BRASILIA (Reuters) - Argentina and Brazil are requesting 12.5 billion euros ($13.2 billion) in financial aid from the European Union in talks to conclude a trade agreement with South America's Mercosur bloc, according to a document seen by Reuters.
Three EU and South American diplomats confirmed the Argentine request, which is backed by Brazil, in the rotating presidency of the four-nation Mercosur.
Argentina and Brazil have also pushed to exclude more kinds of government procurement from European competition, but Uruguay and Paraguay did not back the idea because it could delay or derail a deal in the works for two decades, two diplomats said.
"To ensure fulfillment of the objectives of this agreement, the EU shall allocate financial resources ... for an amount of not less than EUR 12.5 billion in grants, loans and other financial instruments," said the text presented two weeks ago.
A spokesman for Brazil's foreign ministry said Mercosur's position was evolving and the text seen by Reuters might not be the latest version. "There are changes being discussed and agreed upon," he said.
The EU funds, meant to compensate for increased competition, would be available when tariffs start dropping, according to schedules in the trade in goods chapter, the text said.
A European diplomat involved in the talks told Reuters the 12.5 billion euros number was "floated" but that any support "would not be anything like that figure."
The agreement has been on hold since 2019 largely due to European concerns over Amazon (NASDAQ:AMZN) deforestation. The new aid request was made in a Mercosur counterproposal to an EU addendum proposing environmental safeguards.
Talks sped up in the last month with videoconferences and chief negotiators are due to meet face-to-face in Brussels next week, followed by an extended meeting in Brasilia on Oct. 30. But the financial aid request and reopening of the public procurement chapter could prevent a final deal this year.
A Mercosur ambassador in Brasilia told Reuters there was no time to reopen chapters of the accord. "If there is no agreement by December, it will never see the light of day," he said.
Spain's deputy trade minister, Xiana Mendez, speaking to reporters on Friday after a meeting of European trade ministers in Valencia, said it was still possible to reach an agreement by December.
"There is no will to reopen the Mercosur treaty, but there are additional issues to be discussed by the Mercosur countries," she added.
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