From Montevideo, Uruguay, the president of the European Commission announced the good news: after 25 years of arduous negotiations and withdrawals, the EU and the “Mercosur zone” of Latin America’s largest countries have successfully concluded negotiations for a free trade area for more by 700 million consumers. “Today is a historic milestone,” says Ursula von der Leyen, who speaks of a “powerful message” around the world and “one of the largest trade and investment agreements ever reached.”

Mutual commercial interests

The Mercosur zone consists of six major South American markets: Brazil, Argentina, Uruguay, Paraguay, Venezuela and Bolivia. But Venezuela’s participation has been suspended, while Bolivia, the group’s newest member, will not yet enter into a trade deal with the EU. At the main points of the negotiation, an agreement had been reached since 2019, which provides that Europeans and Latin Americans abolish 90% of the tariffs on each side that are in force today. For exporters in Europe this means they can save at least four billion euros per year. The total volume of trade is 110 billion (based on 2023 data).

Primarily EU member states are interested in exporting cars, mechanical equipment, chemicals and pharmaceuticals to Latin America. For their part, the Mercosur countries export to Europe mainly raw materials, agricultural products, food and beverages. Ursula von der Leyen called the agreement a “political necessity” as Europe tries to wean itself off Chinese imports, particularly of the precious “rare earths” that abound in Latin America.

Reactions from both sides

However, the impending deal is still causing backlash on both sides of the Atlantic. From 2019 until today, Latin American leaders rejected the demands of the Europeans for the protection of the environment (and in particular for the reduction of deforestation) included in an additional protocol of the agreement. During the election campaign, the current president of Argentina, the neoliberal Javier Millay, rejected strict environmental standards, while similar statements were made by the left-wing president of neighboring Brazil, Lula da Silva.

In a statement, the Commission claims that the two sides have reworked the text of the protocol, so as to reach “clear, specific and measurable targets to end deforestation”. However, Greenpeace and other ecological organizations oppose the agreement and consider that the protection of the Amazon forests is not guaranteed, where soy cultivation and cattle breeding are constantly expanding, at a huge cost to the environment.

But European farmers, especially in France and Belgium, are also reacting to the impending agreement. Even in Germany, farmers’ representatives are calling for a renegotiation of the agreement. The fear of unfair competition from low-cost agricultural products coming from the Latin American market is widespread.

Opinions differ among European governments. The opponent of the agreement with the Mercosur countries is mainly France, in fact on Thursday the president Emmanuel Macron had told the president of the Commission that for Paris the agreement “is unacceptable” in its current form. Poland and Italy also express reservations. On the contrary, Germany and Spain want the agreement to enter into force as soon as possible.

Long validation processes

The Commission itself admits, of course, that the completion of the negotiation is only the “first step” for the agreement. And this is because both sides will have to ratify the outcome of the negotiation, with the relevant procedures requiring time.

In Europe, the agreement will have to be translated into all EU languages ​​and then approved by the European Council, as well as the European Parliament. If it is characterized as a purely commercial agreement, its implementation can be blocked by a capable “suspending minority” of member states, as long as it involves at least four countries representing 35% of the total European population.

Edited by: Yiannis Papadimitriou