On December 6, 2024, the Southern Common Market (MERCOSUR) and the European Union (EU) signed a historic agreement after 25 years of negotiations.[1] Announced during the MERCOSUR Summit held in Montevideo, this Free Trade Agreement (FTA) aims to create one of the largest and most populous trade regions in the world. This new arrangement, in which an estimated 60,000 companies trade between the EU and MERCOSUR, offers great potential for both economic growth and political cooperation by facilitating trade. However, the environmental, economic, and social impacts of the agreement, as well as the challenges that may arise during the approval process, raise questions about the future of this historic step.
The most important aspect of the MERCOSUR-EU agreement is its potential to increase trade volume between the two parties. MERCOSUR countries will have the opportunity to present their agricultural products and raw materials to the European market with lower customs duties. For example, countries like Brazil and Argentina can accelerate their economic growth by opening their strong agricultural sectors to the EU’s high-demand market. Similarly, EU countries can also expand their global markets by providing easier access to Latin America in the automotive, technology, and pharmaceutical sectors.
This agreement also presents an important opportunity in terms of job creation. The opening of new trade routes and investments can create more job opportunities in both regions. Especially in Latin America, the growth potential of small and medium-sized enterprises will increase by collaborating with Europe. This situation can be seen as a driving force supporting regional economic development. In addition to these, it can be said that this agreement is very important for the growth of the domestic market and the stimulation of the economy in countries like Paraguay, which are sources of labor migration.
MERCOSUR is a regional trade bloc established in 1991 with the aim of facilitating trade and enhancing economic cooperation among South American countries through the Asuncion Agreement. Relations with the EU have been shaped by cooperation agreements that began in 1995. However, the negotiations were suspended due to disagreements on issues such as agricultural and environmental policies. Although a draft agreement was reached in 2019, the approval process could not progress due to environmental and political concerns. The Montevideo Summit has provided a historic opportunity to overcome this impasse.
MERCOSUR leaders and members consider the Free Trade Agreement signed with the EU as both an economic and political gain. Argentine President Javier Milei emphasized his belief that free trade would increase prosperity and stated that this agreement would strengthen regional cooperation.[2] Brazilian President Luiz Inacio Lula da Silva sees this agreement as an important step for MERCOSUR to become a more effective player in global trade.[3] Especially Brazil aims to transfer its strong position in the agriculture and energy sectors to a broader cooperation platform with the EU.
The economic impacts of the MERCOSUR-EU agreement are quite extensive. The EU, with this agreement, will meet Latin America’s demand for agricultural products and will be able to offer automotive, chemical, and technology products to the MERCOSUR market. With the implementation of the agreement, MERCOSUR countries are also expecting significant increases in their annual trade volumes.
From the EU’s perspective, this agreement offers significant benefits both economically and strategically. MERCOSUR stands out as an ideal partner for the EU’s trade and investment goals with its rich natural resources, growing markets, and diversified economic structure. The agreement offers EU countries the opportunity to increase trade volume by providing easier access to MERCOSUR’s wide range of agricultural products and raw materials. At the same time, it opens new doors for the EU to expand its strong presence in the automotive, technology, and chemical sectors in Latin America. These trade ties have the potential to deepen economic cooperation between the two sides, creating jobs and promoting economic growth in both regions. MERCOSUR’s young and dynamic population also constitutes a promising market for the EU in terms of future trade opportunities.
The environmental impacts of the agreement, especially regarding sustainability, are causing debates. Environmental advocates in Europe are highlighting the issue of deforestation seen in MERCOSUR countries and emphasizing the importance of taking further measures in this regard. The protection of the Amazon rainforest plays a critical role not only for the region but also for the global environmental balance. Therefore, it is expected that the EU will support the process with regulations that strengthen environmental standards.
From a social perspective, such agreements can create new opportunities, especially for small-scale farmers and low-income groups, while also necessitating some regulations and reforms. The capacity of farmers in MERCOSUR countries to compete with large-scale agricultural companies in the EU can be supported by policies that deepen cooperation between the parties. In this process, maintaining economic balance in rural areas and preventing income inequality will be important for maximizing the social benefits of the agreement. Additionally, diversifying economic activities in rural areas and empowering local producers can facilitate overcoming the potential challenges of this agreement. In this context, the agreement can be considered not only a commercial opportunity but also an opportunity for rural development and social improvements.
The MERCOSUR-EU Free Trade Agreement is a historic step taken by two major economic blocs towards partnership. However, for this agreement to be successful, the economic benefits, environmental responsibilities, and social impacts need to be carefully balanced. Although the agreement has been signed, the approval process is still ongoing. Although the Montevideo Summit made significant progress in the technical and political aspects of the agreement, environmental concerns could pose challenges during the approval process. MERCOSUR and the EU, while seizing this historic opportunity, are playing a significant role in shaping the future of global trade.
[1] “MERCOSUR-EU FTA Signed at Last”, Merco Press, 12.06.2024, https://en.mercopress.com/2024/12/06/MERCOSUR-eu-fta-signed-at-last, (Accessed Date: 01.03.2025).
[2] “Scholz, Milei in Favour of a Swift Conclusion to EU-Mercosur Deal”, Buenos Aires Times, 09.01.2024, https://www.batimes.com.ar/news/economy/scholz-milei-in-favour-of-a-swift-conclusion-to-eu-mercosur-deal.phtml, (Accessed Date: 01.03.2025).
[3] “Brazil’s Lula Says He Is Ready to Sign EU-Mercosur Trade Deal”, Reuters, 09.26.2024, https://www.reuters.com/world/brazils-lula-says-he-is-ready-sign-eu-mercosur-trade-deal-2024-09-25/, (Accessed Date: 01.03.2025).
