The EU–Mercosur trade agreement, nearing full ratification after more than two decades of negotiations, is poised to reshape the region’s trade and investment landscape. 

The agreement was legally concluded in December 2024 and brings closure to negotiations launched in 1999. It is among the most ambitious trade deals ever concluded by either bloc, covering a market of roughly 780 million people and close to a quarter of global GDP. 

It consolidates the EU’s position as Mercosur’s second-largest trading partner, after China. For the Mercosur countries, Argentina, Brazil, Paraguay and Uruguay, it represents the bloc’s first external trade deal and a step toward both regional and global integration.

Current EU-Mercosur trade in goods and services exceeds $135 billion annually, and the agreement is expected to unlock significant additional potential through tariff elimination. The EU is already Mercosur’s largest source of foreign direct investment, which amounts to nearly $400 billion.

For European companies, the deal provides a more predictable and transparent operating environment across Latin America. For Mercosur economies, it enhances access to one of the world’s largest markets and supports diversification beyond commodities.

The agreement’s two main pillars – market access and regulatory cooperation – cover goods, services and public procurement. In goods, tariffs will be progressively eliminated over five to ten years which will enhance food, energy and critical minerals security.

For Mercosur, benefits are concentrated in agriculture and light industry. The EU will reduce or eliminate tariffs on most agricultural exports, including meat, sugar and ethanol, while footwear and textiles will also benefit.

For the EU, the removal of tariffs in strategic sectors such as automobiles, machinery, and chemicals will create new opportunities for industrial exports and supply-chain integration.

In services, the agreement eases restrictions in areas such as business services, finance, telecommunications and transport. It also opens procurement markets, enabling firms from both regions to compete on equal terms for infrastructure and public-sector projects.

Regulatory cooperation will not impose new standards but will promote harmonisation and mutual recognition. Mercosur exporters will align more closely with EU standards, raising levels of quality, safety and sustainability. 

Binding commitments on labour, environmental and social issues – including adherence to the Paris Agreement on climate change and specific deforestation targets – reinforce the sustainable development dimension of the deal. 

However, ratification involves multiple steps: the trade element requires approval by the European Parliament and EU Council, while the political and cooperation chapters must be endorsed by all 27 member states.

Each Mercosur country must endorse the deal but the agreement allows for provisional implementation by individual members.

Once fully ratified, the EU-Mercosur accord will expand the EU’s trade network to cover 97% of Latin America’s GDP. This is twice the level of market penetration enjoyed by the United States, while China has access to only 14% of the market.

Beyond bilateral gains, the agreement could serve as a catalyst for Latin America’s own integration. Shared rules of origin, simplified customs procedures and common standards could eventually knit together a transatlantic market of 1.1 billion people with a combined GDP comparable to that of the United States. 

Estimates from the Real Instituto Elcano and the Bank of Spain suggest EU-Latin America trade could grow by up to 70%, while intra-Latin American commerce could rise by as much as 40%.

The EU is Brazil’s second-largest trading partner, and European companies account for nearly half of total foreign investment in the country. Brazilian exports to the EU in 2024 were led by oil and derivatives, coffee and cocoa, metal ores and animal feed, while imports centred on machinery, pharmaceuticals and vehicles.

According to Brazil’s Institute for Applied Economic Research (IPEA), the agreement could lift Brazil’s GDP by about 0.5 percentage points and investment by 1.5 percentage points annually. 

Agribusinesses – particularly beef, poultry, pork, sugar and ethanol – stand to gain most from preferential EU access, while lower tariffs on industrial inputs will strengthen competitiveness in sectors such as footwear, paper and aerospace.

Environmental clauses were decisive in securing the deal. Sustainability provisions and a new chapter on critical minerals align with the EU’s green-transition goals, leaving Brazil well-placed to expand exports in renewable energy, biofuels, and green hydrogen.

Parallel to the Mercosur deal, the European Union has updated its trade frameworks with Mexico and Chile, which were both early pioneers of EU-Latin America integration.

Mexico’s 2000 agreement with the EU, the first with a partner outside the Americas, has been expanded to remove barriers to key areas such as access to finance, telecommunications and energy. 

The EU is Mexico’s second-largest investor after the United States and third-largest import partner, with the updated deal aimed at further diversifying Mexico’s export base away from its heavy reliance on the US.

Chile’s association agreement, originally signed in 2002, has also been adapted. The modernised framework expands duty-free coverage to virtually all goods and adds chapters on gender, SMEs, digital trade and clean energy. It strengthens cooperation on critical minerals such as lithium and copper that are vital to the development of green technologies.

Together, these agreements reflect a new phase in Europe-Latin America relations. For businesses and investors, they offer not only expanded market access but also greater legal certainty, regulatory alignment and long-term partnership potential.

The Mercosur agreement also reinforces Latin America’s broader role as a reliable partner for Europe at a time of shifting global value chains.