After 26 years of back and forth, the European Union signed this Saturday with the Mercosur countries (Argentina, Brazil, Uruguay and Paraguay) the agreement that will create the largest commercial zone in the world. The historic pact was also a message to a world marked by the aggressive trade policy of US President Donald Trump. “We choose fair trade over tariffs; we choose a long-term partnership over isolation,” stressed the president of the European Commission, Ursula Von der Leyen, before the 800 attendees at the elegant José Asunción Flores Theater of the Central Bank of Paraguay, in Asunción. The host of the ceremony, holding the temporary presidency of Mercosur, the Paraguayan Santiago Peña, stressed that dialogue is “the only way.”
The association agreement contemplates giving European companies access to a market of 270 million consumers; The South Americans will have the doors open to another 450 million. Together, the GDP of the 31 countries is around $2.9 trillion. Trump’s tariff war created the opportunity to overcome the last obstacles, although the text must still obtain the approval of the European Parliament – a difficult step, with an uncertain outcome – and that of the Mercosur member countries to begin to be applied.
The pact assumes that around 92% of trade exchanges will be free of tariffs within a period of up to 15 years, although. Mercosur is expected to increase agricultural and mineral exports critical to the EU’s energy transition; for community partners, their sales of industrial products. Exports from the EU to Mercosur will increase by 39%, while those from Mercosur to the EU will increase by 17% (48.7 billion euros and 8.9 billion euros, respectively). South Americans also trust in the arrival of European investments for energy and mining projects.
The signatories of the association agreement were the representatives of the different Mercosur countries and the Commissioner for Trade and Economic Security, Maros Sefcovic. Von der Leyen appeared as witnesses of honor; the president of the European Council, António Costa; and the heads of state of Mercosur: Peña, as host; the Argentine Javier Milei and the Uruguayan Yamandú Orsi. The leaders of Bolivia, Rodrigo Paz, and Panama, José Raúl Mulino, attended as special guests.
The big absentee from the ceremony was the Brazilian president, Luiz Inácio Lula da Silva, who gave representation to the chancellor, Mauro Vieira. Upset with the delay that the EU imposed on a signing that was going to take place in the Brazilian city of Foz do Iguaçu, Lula decided that he would not travel to Asunción. Instead, he organized a prior meeting with Von der Leyen and Costa in Rio de Janeiro. Von der Leyen praised Lula’s role in the final negotiations, words that increased the discontent of the other Mercosur heads of state over the empty chair. From Argentine diplomacy they described it as “a lack of respect.” Peña recognized Lula’s leadership role in reaching the agreement, but did not forgive him for his rudeness and sent him a greeting from a distance: “I’m sure he’s following us on television.”
Milei refused to applaud every time one of his peers praised Lula. He arrived in Asunción with few hours of sleep, because he stayed up late to get on stage at the Jesús María dressage and folklore festival, in the central province of Córdoba, and sing alongside the star of the night, the Chaqueño Palavecino. An unconditional ally of Trump in foreign policy, he is, however, a firm defender of free trade in opposition to Kirchnerism. “As a prophet of a dystopian future, Argentina understands that closure and protectionism are the main causes of economic stagnation,” highlighted the Argentine president. Milei anticipated that the Argentine Congress will begin the ratification procedures in February, in extraordinary sessions, and asked the European Parliament to give it the green light.
The hostility between Milei and Lula was decisive for the Brazilian’s conspicuous absence at the signing ceremony. “We are not going to dedicate ourselves to fighting,” Brazilian sources admitted. The last disagreement between the two occurred just two weeks ago, after the capture of Nicolás Maduro by US special forces. Located at the ideological antipodes, Lula condemned the operation and Milei applauded it, but also published videos in which he associated the Brazilian with the Chavista leader. Shortly after, the Brazilian Ministry of Foreign Affairs announced to the Argentine Foreign Ministry that it was no longer in charge of diplomatic representation at the Argentine embassy in Caracas.
The road to reaching the signature was not easy and the protests in Europe continue. The agricultural sector of the community countries fears the impact of imports of South American meat, soybeans, sugar and rice, in exchange for the export of vehicles, machinery, chemical and pharmaceutical products. The sectors that oppose it will do everything possible to stop it in the European Parliament or prosecute it.
Both blocks agree on the need to diversify their trade relations to face an uncertain international scenario. Mercosur closed free trade agreements last year with the EFTA (the bloc made up of Iceland, Liechtenstein, Norway and Switzerland) and with Singapore. The EU did it with Indonesia and is in the final steps to also reach an agreement with India.
The agreements go beyond commercial matters. The United States bombing of Venezuela and the control it has since exercised over and Trump’s threats to annex Greenland have multiplied calls to strengthen relations with partners who defend international law and multilateralism. “It may arrive late, but it arrives at an opportune time,” Costa acknowledged.
Negotiations between both blocs began in June 1999. Then the EU was made up of 15 countries – today there are 27 – and Mercosur was made up of its four founding members, the same ones that signed the agreement this Saturday. In these 26 years, trade between the two blocs has undergone great changes. At the beginning of the century, the EU was the large market for products from the South American bloc, receiving 30% of its exports. Today, that percentage has been reduced to 17% and Mercosur’s main trading partner is China. The EU seeks to regain weight in a region that it has always seen as a natural ally.
