The European Union and Mercosur—the Common Market of the South that includes Argentina, Bolivia, Brazil, Paraguay and Uruguay—have finally come to an agreement on the free trade deal they have been negotiating for the past 25 years. European Commission President Ursula von der Leyen flew to the Mercosur leaders’ summit in Uruguay in early December to announce the finalization of the text.
The deal had already been finalized by both sides in 2019, only to be held up during the EU ratification process due to concerns over the threat it posed to European—mainly French—agriculture. The two regions were nevertheless on the verge of agreeing to an updated finalized text at last year’s Mercosur summit, until France added last-minute demands over environmental protections for the Amazon rainforest that Brazil found objectionable due to sovereignty concerns. Meanwhile, Latin America’s side of the negotiations were shaken up by the Argentine presidential election the preceding month, namely President Javier Milei’s hostility to Mercosur—at one point he threatened to pull Argentina out of the organization completely—and his natural suspicion and opposition to Brazilian President Lula da Silva, a long-time champion of the grouping.
Over the course of 2024, both sides showed some urgency in once again getting the deal finalized due to geopolitical concerns elsewhere. South America can help provide the EU with critical minerals it needs for the green energy transition, which will further reduce Europe’s dependence on Russia as an energy supplier over the long term. The agreement also means European companies can better compete in South America, where China’s trade and influence is growing. For Latin America, expanded trade with the EU provides an alternative to China, meaning not just a greater variety of products but also more leverage for the region to negotiate more effectively with Beijing.