Unlikely Supporters: Brazilian manufacturing industry associations and the EU-Mercosur agreement

After the long-awaited signature of the EU-Mercosur agreement in January 2026, it took only two months for the Brazilian Congress to ratify the deal. Moreover, the agreement garnered widespread support – the Senate even approved it unanimously. Why, unlike in Europe, is there virtually no political opposition to the agreement in Brazil? Part of the answer lies in how the expected distributional losers on both sides of the Atlantic have diverged in their positioning toward the agreement.

The Brazilian manufacturing industry: from opposition to support

A key yet often overlooked piece of the EU-Mercosur negotiation story is the preference change of the organizations representing Brazilian manufacturing industry – the National Confederation of Industry (CNI), Sao Paulo Federation of Industries (FIESP), and virtually all of the main sectoral associations. As representatives of distributive losers from an agreement, they used to firmly oppose it – pretty much like farmers in Europe continue doing so to this day. For instance, when both parties were exploring a relaunch of negotiations in 2010, CNI sent a letter to the Brazilian Foreign Affairs Minister requesting reconsideration, as it expected wide negative impacts for the industry in case of a deal. 

However, by 2013–2014, amid a severe industrial crisis, CNI began advocating in institutional documents for PTA negotiations with the EU. And when negotiations formally resumed in 2016, it published multiple documents supporting a deal. Meanwhile, several previously opposed sectoral associations shifted to support –or at least accept– an agreement. This fundamentally altered Mercosur’s political economy, as the main source of opposition to a deal vanished. So much so that when the EU and Mercosur announced an ‘agreement in principle’ in 2019, CNI celebrated the news, as it did when both parties finally signed it in January 2026. 

Why and how did this happen? I explore this question in my latest article in the Review of International Political Economy. 

Three competing explanations

In the article, I test three competing explanations in the form of causal mechanisms, two from material-based, bottom-up logics of aggregation—the sectoral model and the firm-based mechanism—and the alternative top-down one I propose. They are depicted in Figure 1. 

Figure 1. Alternative causal mechanisms

The first one’s logic is straightforward: to develop collective preferences, peak business associations aggregate the preferences of their members – sectors. These, in turn, prefer trade liberalization or protection according to their “material interests” or, more precisely, the expected distributional implications of changes in trade policy. Thus, if a peak organization supports an agreement that reciprocally liberalizes trade like EU-Mercosur, it must be that a majority of sector members of that organization expect to win in distributional terms from that deal. 

However, I did not find evidence to support this claim. In fact, in 2013, when CNI was moving toward support, a study commissioned by an industrial think tank revealed that a wide majority of Brazilian industrial sectors –around 85%– were expected to lose in distributional terms from a deal with the EU. Combined with other pieces of evidence discussed in the article, like the opposition of most sectoral industry associations to a comprehensive reciprocal liberalization expressed around that time, this led me to discard the sectoral-based bottom-up mechanism. 

The second mechanism shares a bottom-up logic and the exclusive consideration of distributive incentives as the driver of preferences, but is based on the claim that firms are heterogeneously affected by trade within sectors. According to the firm-based model, multinational corporations (MNCs) benefit from and support trade liberalization, while the opposite holds for smaller, domestic-oriented firms. And since the former have an advantage in organizing collective action, the business associations they belong to will express their preferences, in this case for a deal with the EU. 

However, as I show in the paper, there is not enough evidence to claim that the preference shift on EU-Mercosur was driven by the emerging Brazilian industrial MNCs. While they have grown in number and sectoral coverage in the last two decades, most remain concentrated in just three sectors – and the two associations representing one of these have been amongst the most reluctant to support a deal. And while most MNCs were more receptive to the proposed shift than the average industrial firm, there are no traces of evidence indicating they invested efforts in promoting it. For instance, at the Forum of Transnational Companies (FET), the CNI group set up to champion their policy demands, the issue has never been even on the agenda. Consistent with this, CNI’s specific demands during the 2016-2019 negotiations did not reflect the expected stances of Brazilian industrial MNCs.

Alternatively, I developed a novel causal mechanism that, for contexts of economic crises and high uncertainty, introduces the possibility of top-down dynamics of persuasion and social pressure within organizations, in interaction with the material distributive incentives faced by their members. More specifically, I identify two actors who, while receiving and processing inputs about distributional implications of an agreement from sectors, spread economic and political ideas in the form of frames, new categories to analyze information, and new information, to shift preferences: the peak organization’s structure (directors and permanent staff), led by in-house “policy entrepreneurs”, and foreign trade officials engaging in “reverse lobbying.” To this end, they deploy the interrelated strategies of persuasion and social pressure. 

Empirically, I show how the CNI’s staff, with the CNI directors’ endorsement, and officials from the Foreign Trade Secretariat (SECEX), mobilized economic and political ideas to persuade and press reluctant industrial sectors about the need to support a gradual trade opening through a PTA with the EU as a response to a context of deep industrial crisis and high levels of uncertainty. This involved framing the PTA as a solution to the context, introducing new categories to highlight non-distributional gains, providing new information on how to reduce expected sectoral distributional costs, for which it first collected sectoral inputs, and limiting the range of policy alternatives deemed legitimate by the association. Progressively, as a result, some industrial sectoral associations shifted their view on the deal, while others felt there was no more room to oppose it outright, but just to present specific defensive demands within an overall framework of support. Overall, this led to a general preference for the deal among the associations representing Brazilian manufacturing industry, even if combined with specific defensive stances regarding its content on issues such as the length of liberalization baskets and the stringency of rules of origin. 

Further insights and implications

In addition to accounting for a consequential shift for the EU-Mercosur negotiations, the findings of my article may have further implications. First, the case study indicates that under certain conditions, the formation of trade policy preferences in business associations cannot be solely explained by the material distributive incentives faced by members; rather, we need to consider them in interaction with the role played by economic and political ideas. Second, the success of the CNI’s staff and SECEX officials means that, under certain contexts, the development of collective preferences may not follow a linear bottom-up logic of aggregation. Instead, there is room for top-down dynamics led by in-house policy entrepreneurs, as well as for reverse lobbying strategies deployed by technical-level government officials who interact with business associations on a frequent basis.

More broadly, as the world transitions from a “neoliberal” to a “geoeconomic” order in trade and investment, it is fair to assert that uncertainty for businesses in particular, and economic agents in general, is running high. Therefore, in the current international environment, it is possible that, when developing collective preferences, top-down dynamics of persuasion and social pressure may become the norm rather than the exception. Further work on comparative and case studies might delve deeper into that. 

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Dr. Nicolás Pose-Ferraro is an Assistant Professor in the Program of International Studies, School of Social Sciences, at the University of the Republic, and a member of Uruguay’s National Researchers System. His work appears in journals like The Review of International Political Economy, Journal of Common Market Studies, CIDOB d’Afers Internacionals and Civitas, among others. He is the author of The Political Economy of Industry Organizations and Mercosur’s North-South Trade Negotiations. The cases of Brazil and Argentina (2024 Palgrave Macmillan).

The opinions expressed in this blog are solely those of the author and do not reflect the opinions of the EULAS Network.