The EU-Mercosur agreement started: ten keys to understanding what is coming, who wins and who loses

The agreement will bring together in a free trade zone 720 million people (270 for Mercosur and 450 for the European Union). There are 31 countries that add up a combined GDP of $24.2 trillion (just over 85% on the European side), equivalent to 20.2% of world GDP.

This is the most ambitious agreement ever signed between two already established regional blocs. Although the Regional Comprehensive Economic Partnership (RCEP) in Asia is technically larger in terms of population (2.3 billion people) and contributes a similar or slightly higher percentage of global GDP, the EU-Mercosur agreement It’s much deeper in terms of regulatory standards, services, government procurement and environmental commitments (such as compliance with the Paris Agreement).

Almost 92% of trade between Mercosur and the European Union will be tariff-free, immediately or after transition periods ranging from 5 to 15 years, depending on the sectors. This includes the vast majority of agricultural and industrial goods.

It is estimated that European companies will save around 4 billion euros annually in tariffs, while Mercosur will achieve preferential access for 99% of its agricultural exports.

European cars Today they pay a 35% tariff when entering Mercosur. The agreement progressively eliminates these tariffs, as well as all those that affect European machinery in general. Although this reduction can reach up to 15 years in some cases, It is irreversible and has no safeguards to block it. The rest of European technological products will enter Mercosur no tariff.

The European automotive companies that will see the most open door in Mercosur they will be Volkswagen (Volkswagen, Audi, Seat, Skoda, Dacia), Stellar (mainly French and Italian brands), BWM, Renault, Volvo or Mercedes-Benz. But also its suppliers, such as Bosch, Valeo, Pirelli or Michelin.

In industrial machinery the winners will be giants like Siemens, Schneider Electric or CNH Industrial. And in medicines, the agreement improves the situation for some of the largest companies in the world, such as Bayer, Novartis, Pfizer, Roche, Sanofi o GSK.

The big European textile brands that can do better are the Spanish ones Inditex (Zara)the French Decathlon or sports textile companies, such as the German companies Adidas and Puma. In technology it will benefit Philips, Nokia, Ericsson, Siemens and SAP.

Most of the Mercosur farm products will enter the European Union no tariff or quotasexcept:

– 99,000 annual tons of beef with a 7.5% tariff.

– 180,000 tons of poultry meat per year. The tariff will be progressively withdrawn until 2031.

– 180,000 tons of cane sugar (essentially Brazilian) without tariff.

– 450,000 tons of ethanol for chemical use without tariff and 200,000 tons “for other uses” with a reduced tariff

– European health and environmental requirements remain the same.

The agricultural chapter carries a safeguards document approved by governments in parallel to the agreement. It is about reassure the European countryside assuring you that measures will be taken, which may stop the trade of certain products, when a product imported from Mercosur is responsible for significant changes in prices. Essentially it points to the beef, poultry or sugar.

European companies They will have more facilities to fight for public tenders in Mercosur and those of Mercosur in Europe. Companies on both sides of the Atlantic will be able to compete in public tenders and provide financial, logistics and digital services without any authorizations other than national ones. That benefits both sides, but European companies in those sectors They are older and some are already in Mercosur, like several banks.

The big European beneficiaries will be banking and insurance companies (Santander, BBVA, Allianz, AXA), those of logistics and freight transportation (Maersk, DHL, Kuehne Nagel, DB Schenker or MSC), infrastructure and energy companies (Acciona, Sacyr, Ferrovial, Vinci, Suez, Iberdrola, Enel) and the large consultants (Accenture, Capgemini, Deloitte, PwC o KPMG).

It is one of the chapters with less economic impactbut more political impact. The pact includes respect for the commitments of the Paris Climate Agreement and involves dialogue mechanisms in case a country does not comply with them.

Environmental groups and European environmental parties are against the agreement because they consider that these commitments they are too weak and they assure that they should have incorporated mechanisms that would allow imposing considerable fines to dissuade those who would like to fail us.

It is one of the reasons that will make the majority of environmentalist MEPs vote against the agreement.

Newspapers such as the Financial Times assure that the agreement, in the long term, will benefit the most industrialized economies more, that is, the European ones versus those of Mercosur. That does not mean that those in Mercosur will not benefit, but the positive economic impact would be less than in Europe.

Mercosur’s agro-export sector winsbut not everything. Above all, the export of high-quality beef, wines, oils and processed fruits and large agro-industrial exporters benefit.

In Argentina, one of the losers that appears at first glance is the automotive industry with the gradual elimination of the 35% tariff to European cars. Also sectors such as metallurgy, textiles, footwear or chemistry.

The agriculture that does not meet the requirements of the European market will not gain anything from this agreement either.

The agreement is not only commercial, it is a framework of political association which may have geopolitical consequences at a time of tensions with the United States.

Europa seeks to reduce dependencies on Chinasecure their market shares in Mercosur and if possible increase them, strengthen their access to critical raw materials from the region and their influence in the region. Europe looks to lithium, copper and other critical minerals to reduce its dependencies on China. Mercosur opens a commercial door that allows it to diversify exports beyond the Asian giant.

Europe clashed with Brazilian Jair Bolsonaro. Javier Milei and the Spanish Pedro Sánchez have exchanged very critical statements, in some cases almost insulting. The agreement gives political stability to relations that did not exist until now and will make these clashes, normally circumstantial for ideological reasons, do not affect the economic relationship nor, in the long term, to the political relationship.

Those who defend the agreement from Europe see it as a geopolitical investment in Latin America and as an example of international cooperation just as the United States turns toward a new form of imperialism.