A Mercosur summit planned to conclude a landmark trade agreement with the European Union closed Thursday in Rio de Janeiro with no deal in sight and its leaders focused instead on preventing a burgeoning territorial dispute between Venezuela and Guyana. 

The customs union made up of Brazil, Argentina, Uruguay and Paraguay succeeded in formally adding Bolivia to its ranks and inked a smaller trade pact with Singapore — far from enough to cement it as a force for South American economic integration. 

The lofty ambitions of Brazil’s President Luiz Inacio Lula da Silva, who has sought to reunite the bloc behind a push for the elusive deal with the EU, were largely eclipsed by escalating tensions over Venezuela’s claims to Essequibo, an oil-rich territory controlled by Guyana.

“We are following the Essequibo issue with increasing concern. Mercosur cannot stay away from this issue,” Lula, who concluded Brazil’s rotating presidency of the bloc, said in a speech. “If there’s one thing we don’t want in South America, it’s war. We want to build peace.”

As the summit closed, the Mercosur nations issued a joint call for de-escalation, saying in a statement that they “urge both parties to dialogue and seek a peaceful solution to the dispute, in order to avoid unilateral actions and initiatives that could worsen it.”

But while other South American countries, including Chile, Colombia, Ecuador and Peru, signed onto the statement, Bolivia — whose leftist President Luis Arce is a political ally of Venezuela’s Nicolas Maduro — did not.

Elusive EU Deal

Even before those worries took over the summit, hopes that it would lead to a breakthrough on more than two decades of negotiations with the EU had started to fade. France President Emmanuel Macron last week renewed his environmental concerns about the agreement, eroding the optimism that had been growing on both sides that a resolution was finally in reach. 

Argentina President Alberto Fernandez, a longtime Lula ally who will leave office this Sunday, also raised last-minute concerns about the deal, saying his government would not be responsible for making concessions to European companies that could hurt domestic industries, according to three people with knowledge of the matter who requested anonymity because the discussions are not public.

Lula, who last month said he wanted to finish the deal before Brazil’s stint at the Mercosur presidency ended this week, expressed frustrations about the lack of progress.

“I spoke with almost all of the European Union presidents to show the need for the agreement. I asked for Macron to stop being so protectionist. But it didn’t work,” he said during his opening statement in Rio. “I leave with the idea that next time we can do it.”

The future of Mercosur, however, remains uncertain — and heavily dependent on how incoming Argentina President Javier Milei will approach the bloc he criticized during his campaign.

The failed negotiation with EU has creates space to question the bloc’s purpose, one of the people with knowledge of the situation said, adding that Mercosur has struggled to make progress, deepen regional integration or strengthen ties with the world. 

Brazil, however, remains optimistic, with Foreign Minister Mauro Vieira telling reporters that the EU-Mercosur agreement could still be closed by mid-February.