MONTEVIDEO, Uruguay — December 6, 2024

In a historic breakthrough, the European Union (EU) and the Mercosur trade bloc have finalized the terms of a free trade agreement, creating one of the world’s largest free trade zones. The announcement was made by European Commission President Ursula von der Leyen in Montevideo, marking the culmination of 25 years of on-again, off-again negotiations.

The agreement will encompass over 700 million people and nearly 25% of the global GDP, making it a significant milestone in international trade. Like the U.S.-Mexico-Canada Agreement (USMCA), the deal aims to eliminate tariffs and reduce trade barriers, enhancing economic exchanges between Europe and Latin America.

A Game-Changer for Global Trade

Mercosur, which includes Brazil, Argentina, Paraguay, Uruguay, and Bolivia, stands to gain significantly from improved access to European markets. Brazil, the bloc’s largest economy, is expected to play a pivotal role in the agreement’s success. Meanwhile, the EU hopes to secure vital raw materials and expand its influence in Latin America.

“This agreement will open huge opportunities for businesses and create economic growth on both sides,” von der Leyen said. She highlighted the benefits for approximately 60,000 European companies exporting to Mercosur, including reduced tariffs and streamlined customs procedures.

However, von der Leyen also addressed concerns raised by European farmers, particularly in France, who fear increased competition from South American agricultural exports. “We have heard your concerns, and we are acting on them,” she assured. The deal includes robust safeguards designed to protect European agricultural livelihoods.

A Long Road to Agreement

The journey to this landmark deal has been fraught with obstacles since talks began at a 1999 summit in Rio de Janeiro. Negotiations stalled multiple times due to differing economic priorities, regulatory standards, and disputes over agriculture.

The turning point came in June 2019 with a political agreement that laid the groundwork for tariff reductions and environmental commitments. However, concerns over Amazon deforestation—especially under former Brazilian President Jair Bolsonaro—delayed ratification.

Since taking office in 2023, Brazilian President Luiz Inácio Lula da Silva has pushed to finalize the agreement. Lula, who initially opposed the deal two decades ago, praised the milestone, stating, “After more than two decades, we have concluded negotiations on the agreement.”

Challenges Ahead

Despite the announcement, the deal is not yet fully ratified. Each of the EU’s 27 member states must endorse the agreement, and some, like France, remain cautious. French farmers have voiced fears over competition from Mercosur’s agricultural exports, and environmental groups have raised concerns about sustainability measures.

In Mercosur, the benefits are also being debated. While some countries welcome increased access to European markets, others worry about losing out to larger economies like Brazil.

Looking Forward

The EU-Mercosur agreement could have transformative effects on global trade, potentially setting a precedent for future multinational trade deals. However, its ultimate success will depend on how both regions address lingering concerns and implement the agreement.

As the deal moves towards ratification, it represents a symbol of renewed cooperation between Europe and Latin America, poised to reshape the global economic landscape.