(Adds comments by Brazil president in paragraphs 3-4, background on EU-Mercosur deal in paragraphs 5, 7-10)
BRASILIA, June 12 (Reuters) - European Commission President Ursula von der Leyen on Monday said the EU hopes to finalize its long-delayed trade deal with the Mercosur bloc of South American countries by the end of the year.
Brazilian President Luiz Inacio Lula da Silva, after meeting with von der Leyen, criticized an addendum the EU has added to the agreement, which has been on hold since 2019 largely due to European concerns over Amazon deforestation.
Lula said he told her that the so-called additional tool or side letter to the accord added obligations that could lead to sanctions if they are not complied with.
"The premise between partners should be mutual trust, not distrust," he said in a joint news conference.
The European Union is waiting for a Mercosur response to its proposal to attach sustainability and climate change commitments to the deal struck in 2019 with the Mercosur bloc of Argentina, Brazil, Paraguay and Uruguay.
Lula said earlier this month his country would not sign the trade pact without adjustments, specifically pointing to his government's opposition to allowing European companies to sell to Brazil's public sector.
Von der Leyen met Lula at the start of a four-nation trip to Latin America to bolster political and trade ties. She praised Lula's leadership on climate politics and his plan to end deforestation in the Amazon, and she offered European backing for Brazil to develop green hydrogen.
Since Russia's invasion of Ukraine, the European Union has cast around for "like-minded" partners to provide other sources of trade and critical minerals required for its green transition and help reduce its reliance on China.
Her talks with the presidents of Brazil, Argentina, Chile and Mexico will prepare the ground for the EU meeting with 30 leaders from Latin America and the Caribbean at a summit in Brussels on July 17-18.
EU and Mercosur negotiators are scheduled to meet again in Buenos Aires on June 29-30 and the South American countries will present a counterproposal. Brazil hopes to remove any possibility of sanctions, arguing that the Paris Agreement on climate set voluntary goals.
A spokesman for Brazil's foreign ministry said a counterproposal will be presented. He gave no date, but added that Mercosur negotiators will meet to agree on a joint stance before the next round of talks with the EU in Buenos Aires.
"Before the meeting with the Europeans, there will be an intra-Mercosur meeting to coordinate positions," he said. (Reporting by Lisandra Paraguassu and Anthony Boadle in Brasilia Editing by Mark Porter and Matthew Lewis)
