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France's Macron says EU-Mercosur proposal is 'very bad deal' on visit to Brazil

By Sarah Morland

(Reuters) -French President Emmanuel Macron said on Wednesday during his visit to Brazil that a potential agreement between the European Union and the South American Mercosur trade bloc as it stands is a "very bad deal" and more climate commitments are needed.

"As it is negotiated today, it is a very bad deal, for you and for us," Macron told businessmen in Sao Paulo while on a three-day trip to Latin America's largest economy, amid troubled talks over a free trade deal between the two economic blocs.

"There is nothing that takes into consideration the subject of biodiversity and climate; nothing," Macron said. "Let's forge a new deal in light of our goals and reality, a trade deal that is responsible on development, climate and biodiversity."

While Brazil has said it is ready to sign a deal, France has repeatedly expressed reservations and said its farmers have objected to the prospect that could allow in agricultural imports, notably beef, that do not meet strict EU standards.

"We still have time," said Brazilian Finance Minister Fernando Haddad at the same event. "It's true we lost an opportunity at the end of last year, but we should not give up on this deal."

Haddad added that Brazilian President Luiz Inacio Lula da Silva had invested a lot of time in the deal and would keep investing in a closer relationship with the European market.

Earlier this month, European officials said "decisive progress" was possible by July.

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Macron also called for much more direct investment from Brazilian firms into France and said the two countries could cooperate on investing in third markets, notably in Africa.

Lula has visited several African nations since he returned to power last year and said he wants to resume the "good and fruitful" relations his country used to have with the continent when he was first elected as president in the 2000s.

His government has also looked to reverse policies under the prior government of far-right President Jair Bolsonaro that sought to undo climate protections.

At upcoming G20 and COP summits in Brazil, Macron said he planned to push for more international standards to financially incentivize banks, firms and investors to decarbonize industrial processes and better preserve the environment.

"We need to go much faster, much stronger, much farther," Macron said.

Macron also said he had spoken with Lula earlier on Wednesday about closer cooperation across their defense industries, saying he wanted to "go beyond" producing helicopters and submarines and saw "immense bilateral potential" in this sector.

France is the world's No. 2 arms exporter, according to data from the Stockholm International Peace Research Institute, with its sales surging over recent years notably to buyers in India, Qatar and Egypt.

At a separate event with French citizens living in Brazil, Macron said his visit marked a tightening of relations since the administration of former President Nicolas Sarkozy, under which a series of partnerships were inked with Lula's then government.

This would notably involve simpler visa processes with the French territory of French Guiana, which borders Brazil in the northern Amazon rainforest, as well as cooperation on the European space launch center on the territory.

"A new page is opening," Macron said. "The next few months will seal this friendship between our two countries."

(Reporting by Sarah Morland in Mexico City and Eduardo Simoes in Sao Paulo; Editing by Jonathan Oatis, Kylie Madry, Kim Coghill and Sandra Maler)