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Positive progress made during the last decades, allowed the EU and Mercosur, through an intense process of negotiations, “to adjust” their relationships according to challenges facing national, regional and global governance. During last two years both sides conducted several rounds of negotiations and committed to the present agreement, which is not only serving increased economic opportunities, but is a political necessity too, acknowledged both sides.
Mercosur: past and present
The Southern Common Market (commonly known by Spanish abbreviation as Mercosur) is a South American trade bloc established by the Treaty of Asunción in 1991 (with a Protocol of Ouro Preto in 1994); its full members are Argentina, Bolivia, Brazil, Paraguay and Uruguay.
The four founding members (Argentina, Brazil, Paraguay and Uruguay) were joined by Bolivia, which became a full member in July 2024.
The Mercosur group – as an economic and political bloc – encompasses more than 285 million people and has a combined GDP of nearly $3 trillion. The main objective of Mercosur is similar to that of the EU: i.e. striving for free movement of goods, capital, services and people among its member states; however, the group has not yet formed a common market as planned.
Mercosur has its Parliament and the Structural Convergence Fund of Mercosur, FOCEM; since 2010, it seeks to develop regional infrastructure projects to increase integration. In 2024 its budget was $300 million: Paraguay receives the largest amount of funding from FOCEM, followed by Uruguay. This is line with the Fund’s stated goal of “reducing asymmetries” between the bloc’s smallest and largest economies.
There are some Mercosur-wide decision-making institutions: a) Common Market Council as the highest decision-making body; its presidency rotates between the four countries every six months; b) Common Market Group, which coordinates macroeconomic policy between members and negotiates trade with non-member countries; c) Trade Commission, which deals with everyday trade policy and makes proposals to the other two groups; it consists of four members and from each country who meet monthly (they evaluate the common external tariff and other Mercosur guidelines).
Besides, there is Mercosur’s Parliament, known as Parlasur; currently it has 150 members which are elected from each country, with seats according to population size. Parlasur has no enforcement powers, but serves to advise Mercosur’s decision-making bodies.
A visible advantage is free movement: thus, e.g. Mercosur citizens can be employed in any Mercosur state and it is relatively easy for Mercosur citizens to be granted permanent residency in the member states. One of the biggest disadvantages of Mercosur is still political and economic disparities existing among the member nations.
Since its foundation, Mercosur’s functions have been updated and amended many times; it currently confines itself to a customs union, in which there is free intra-zone trade and a common trade policy among the member countries. Brazil is the world’s 6th largest economy and it is the largest economy in South America.
More in articles about Mercosur in: https://www.as-coa.org/articles/explainer-what-mercosur
EU-Mercosur: present and perspective advantages
Already in 1994, the former Commission President Jacques Delors met with the President of Uruguay in Montevideo “to share a bold vision” for deeper integration among the EU and Mercosur states. After about three decades, this vision has been turned into reality.
Negotiations for a free trade agreement, FTA with the EU began in 1995; the process was suspended in 2004 though discussions were going on. In 2019, Mercosur reached an agreement with the EU to sign an FTA that has not yet been ratified.
One of the main hurdles to the Mercosur-EU agreement has been the European agriculture and livestock industry, especially in France. This sector has long protested that cheaper South American products, particularly meat, could flood the European market, representing “unfair competition.” Hopes that the deal could be concluded by the end of 2023 were additionally frustrated by environmental regulations inserted by the EU that would complicate meat exports from Mercosur.
Days before this year G20 summit in Brazil, French President affirmed that his government would not sign the FTA in its current form. Despite this, Brazil President Luiz Inácio da Silva continues pushing to finalize 30 years of negotiations, with vocal support from Germany and the European Commission.
The present EU-Mercosur agreement provides a “helping hand” to about 60,000 EU companies exporting to Mercosur: about half of them are SMEs. They benefit from reduced tariffs, simpler customs procedures and preferential access to some critical raw materials. Thus, the agreement also protects the EU food and drinks products: e.g. about 350 EU geographical indications. In addition, the agreement will save EU companies about € 4 billion worth of export duties per year while expanding markets and opening new opportunities for growth and jobs on both sides.
While supporting the FTA with Mercosur, some European leaders argued that it would help stem the influence of China in South America; China has sought raw materials (i.e. grains and oil) from South America’s markets and China announced its plan to increase bilateral trade with the region to $500 billion by 2025. Its trade with Mercosur was roughly $190 billion in 2023, about 18 times the 2003 total.
Note. It has to be remembered that Brazil, as the most powerful economic part of the Mercosur block, is also one of the “founding fathers” in BRICS, another global politico-economic cooperation facility, with Russia and China as leading members. Extremely tense EU’s relations to the latter (China and Russia, with their “interest” in Latin America) and the necessity “to be friends” with Brazil might tarnish fruitful EU-Mercosur negotiations and future prospects. It seems that new kind of diplomatic skills are required, coped with preserving strategic and mutual economic interests, to keep the present agreement alive.
Other cooperative benefits
First of all, the EU-Mercosur agreement creates one of the largest trade and investment partnerships in the world by reducing trade barriers down and facilitating investments: it is about forming a market of over 700 million consumers. Thus, the partnership will strengthen entire value chains, develop strategic industries, support innovation and create jobs and values on both sides of the Atlantic.
The EU-Mercosur will bring meaningful benefits to consumers and businesses, on both sides: e.g. it will facilitate European investments in strategic industries across all Mercosur countries, including sustainable mining, renewable energy, sustainable forest products, etc. It will also make it easier to invest in sectors that directly impact the people’s daily lives, for example by expanding the electricity grid to rural and remote areas and advancing digitalisation across the region.
The EU-Mercosur agreement reflects both sides steadfast commitment to the Paris Agreement and to the fight against deforestation: thus, President Lula’s efforts to protect the Amazon are welcome and necessary. But preserving the Amazon is a shared responsibility of all humanity; hence, the agreement ensures that investments respect Mercosur’s extraordinary yet fragile natural heritage, noted the EU Commission President.
Source: https://ec.europa.eu/commission/presscorner/detail/da/statement_24_6261
In light of the progress achieved since 2023, the Partnership Agreement between Mercosur and the EU is now ready for a legal review and final ratification. Both blocs are determined to carry out the necessary activities in the next months, with a view to the future signing of the agreement, as was noted in the Joint Statement (6 December 2024).