Austria has blocked the EU-Mercosur trade deal in a move which could derail it completely.
MPs demanded a Government veto on the deal with concerns over environmental issues.
Without backing from every EU Government, the deal cannot go through.
The Mercosur region includes Argentina, Uruguay, Paraguay and Brazil. But the recent fires in the Amazon have brought environmental issues into clearer focus.
France and Ireland have already warned they could reject the deal if Brazil does not do more to curb fires in the Amazon.
French President Emmanuel Macron has been particularly critical of the Brazilian President Jair Bolsonaro over his stance on climate change and the Amazon.
All but one of Austria’s main parties rejected the deal, stating the agreement must do more to tackle environmental issues.
The Austrian Trade Union Federation had argued the deal focused on the interests of industry, rather than people, and did not focus on workers’ rights and the environment.
Jorg Leichtfried of the centre-left SPO said it was a ‘great success’ for consumers, the environment, animal welfare and human rights. He warned the deal would be bad for climate protection and labour rights in South America.
But the Federation of Austrian Industries backed the deal, stating it included a commitment to the Paris Climate Agreement and the fight against deforestation in the Amazon.
Farming groups around Europe have been critical of the proposed arrangement, with concerns about increased access for South American agricultural produce, including poultry meat and beef.
Mercosur was announced in June, following 20 years of negotiations. In the UK, farming unions warned of the impact on an already struggling beef sector, highlighting the differences between production methods in the UK and Brazil.
However, it was not clear how the UK would be impacted by the deal if it was passed due to Brexit.