The EU-Mercosur Free Trade Agreement:
What It Means for Your Business
After 25 years of negotiations, the EU and Mercosur concluded their free trade agreement in December 2024. Once ratified, it will create one of the world's largest free trade zones. European companies that act early will have a significant advantage.
Get in TouchThe largest trade deal the EU has ever negotiated, and a major opportunity for companies on both sides.
On 6 December 2024, the European Union and Mercosur (comprising Brazil, Argentina, Uruguay and Paraguay) concluded negotiations on a free trade agreement that has been 25 years in the making. It is the largest trade deal the EU has ever concluded by volume of trade.
The EU is Mercosur's second-largest trading partner. In 2023, EU exports to Mercosur reached €56 billion in goods and EU investments in Mercosur countries amounted to €340 billion as of 2021. The FTA is designed to deepen this relationship significantly.
The FTA still needs to be ratified by EU member states, the European Parliament and the legislatures of the four Mercosur countries before it enters into force. The ratification process may take several years and faces political resistance in some countries, particularly France and Poland on the EU side, and certain domestic constituencies on the Mercosur side.
However, the commercial planning opportunity begins now. Companies that identify and develop their market positions before the FTA enters into force will be best placed to benefit from the tariff reductions and new market access it provides.
What changes for goods and services
EU exports to Mercosur: industrial goods
Mercosur will progressively eliminate tariffs on most EU industrial exports over a transitional period. Key sectors that will benefit include:
- Machinery and mechanical equipment
- Vehicles and automotive parts
- Pharmaceuticals and medical devices
- Chemicals and plastics
- Aircraft and aerospace components
Mercosur exports to the EU: industrial goods
The EU will phase out tariffs on all Mercosur industrial products within ten years. This opens significant export opportunities for Brazilian manufacturers across a wide range of sectors, particularly in:
- Steel and aluminium products
- Ethanol and biofuels
- Textiles and footwear
- Critical raw materials (with export tax liberalisation)
- Non-automatic import licencing requirements are also abolished
Services and digital trade
The FTA eliminates barriers in the services sector, giving EU service companies greater access to Mercosur's markets. This is significant for financial services, professional services, telecoms, transport and digital services companies seeking to expand into Brazil and other Mercosur countries.
Government procurement
EU firms will be allowed to compete for public contracts in Mercosur countries on equal terms with local companies. This opens Brazil's large government procurement market (including infrastructure, health and defence) to European bidders for the first time on a treaty basis.
Tariff reductions on key agricultural products
The FTA frees up 82% of agricultural imports from Mercosur to the EU, while maintaining quotas to protect European farmers. For EU agricultural exporters, it significantly reduces tariffs on a range of high-value products currently facing significant barriers.
Olive oil
Current tariff to be eliminated under the FTA, opening a major market for EU olive oil producers in Brazil and Argentina.
Wine & beverages
Significant tariff reductions on wines and other alcoholic beverages, benefiting producers from France, Italy, Spain and Portugal.
Chocolate
Gradual reduction on chocolate and confectionery products, benefiting EU producers while protecting Mercosur's cocoa sector.
Dairy products
Cheese, milk powder and other dairy products will benefit from gradual tariff reductions within quota limits, a significant concession given Mercosur's competitive dairy sector.
Infant formula
Gradual tariff reductions within quota limits, opening access for EU infant formula producers to fast-growing Mercosur markets.
Malt
Tariff reductions on malt benefit EU producers and the brewing industry, for which Brazil is already one of the world's largest markets.
Sustainability at the core of the agreement
Paris Agreement alignment
The FTA is explicitly aligned with the objectives of the Paris Agreement. It can be suspended if either party withdraws from the Paris Agreement, a significant enforcement mechanism.
Climate neutrality by 2050
Both the EU and Mercosur commit to achieving climate neutrality by 2050. The EU undertakes to reduce emissions by at least 55% by 2030.
Deforestation prevention
Brazil pledges to halt illegal deforestation by 2030 as part of the agreement. Sustainability enforcement mechanisms are incorporated into the treaty text itself.
Critical raw materials
Export monopolies and excessive pricing practices on critical raw materials are addressed. EU firms gain non-discriminatory rights to invest in Mercosur industries supporting critical raw materials production, a strategic priority for EU supply chain resilience.
What needs to happen before the FTA enters into force
🇪🇺 On the EU side
The FTA must be ratified by the EU member states and the European Parliament. This is not guaranteed: France and Poland have expressed concerns over agricultural competition and environmental safeguards.
The EU may also choose to apply parts of the FTA provisionally before full ratification, as it has done with other trade agreements, which could accelerate the entry into force of trade-related provisions.
🌎 On the Mercosur side
Legislative approval is required in all four Mercosur countries: Brazil, Argentina, Paraguay and Uruguay. Domestic political dynamics, economic priorities and environmental commitments will influence the process in each country.
Brazil's ratification is considered the most strategically important given the size of its economy and the political significance of the environmental commitments it has made under the FTA.
The first-mover advantage is real. The window is now.
In our experience advising European companies entering the Brazilian market, those who establish relationships, structures and market positions before a regulatory change is in force are consistently better placed than those who wait. The FTA ratification process will take time, but the preparation work begins today.
"Those EU businesses that start exploring opportunities in Mercosur countries ahead of the FTA coming into force will have a first-mover advantage. In our experience in Brazil, being a first mover is a key factor in achieving success."
D&Q Lawyers
European experience, Brazilian expertise
Luciana Queiroz is a partner at D&Q Lawyers with extensive international experience, having lived and studied in the United States, the Netherlands, France and Spain. Prior to joining D&Q, she gained experience at one of the leading tax firms in the Netherlands. That background gives Luciana a unique perspective on the opportunities the EU-Mercosur FTA presents for European companies entering Brazil.
D&Q Lawyers advises European companies at every stage of their Brazil market entry, from initial structuring and regulatory assessment to commercial contracts, tax planning and ongoing legal support. This page draws from our article on the EU-Mercosur FTA published on LawsofBrazil.
Meet the Full TeamThinking about Brazil ahead of the FTA?
We advise European companies at every stage of their Brazil market entry, from initial structuring and regulatory assessment to ongoing legal support. Initial enquiries are always welcome.
This page is a summary only and does not constitute legal advice. For the full article, visit LawsofBrazil.
