This past Saturday, January 17, 2026, the European Union (EU) and Mercosur signed the EU-Mercosur Trade Agreement in Asunción, Paraguay, a historic milestone in trade relations between the two largest economic blocs in the Northern and Southern hemispheres, after more than 25 years of multilateral negotiations that began in 1999.
The signing of the agreement represents a decisive step in the construction of what could become the largest free trade zone in the world, connecting about 700 million consumers and boosting the flow of goods, services and investments between the member countries of the European Union (27 states) and Mercosur (formed by Brazil, Argentina, Paraguay and Uruguay).
The trade agreement is composed of two instruments, the Comprehensive Partnership Agreement and the Interim Trade Agreement (ITA).
Below are some of the most relevant information of the agreement and next steps for entry into force.
- Content and Legal Structure of the Agreement
The agreement is based on two distinct legal pillars, although closely related:
- Comprehensive Partnership Agreement (EMPA)
EMPA brings together policy dialogue, cooperation, comprehensive sectoral engagement in a single framework, trade and investment, which will become fully applicable once the agreement enters into force.
These provisions aim to strengthen cooperation in areas such as sustainable development, environment and climate action, digital transformation, human rights, mobility, counter-terrorism, innovation and crisis management. EMPA also strengthens EU-Mercosur coordination in multilateral forums and provides structured platforms for sectoral dialogue.
2. Interim Trade Agreement (ITA)
It specifically deals with trade commitments, such as the elimination of tariffs and rules for trade in goods and services to be provisionally applied before the full entry into force of EMPA.
The agreement offers tariff reductions and opens up access to new markets for a wide range of goods and services. In addition, it includes provisions to facilitate investment and remove barriers to cross-border trade in services, particularly in digital and financial services.
On the legal level, this duality reflects a phased implementation strategy: swiftly implementing the trade parts while the broader cooperation and institutionalisation provisions (provided for in the EMPA) await the completion of internal ratification and regulatory adaptation processes.
EMPA will enter into full force after approval by the European Parliament and subsequent ratification by all EU Member States and Mercosur parties. In turn, the ITA only needs the approval of the European Parliament and ratification by the Mercosur parties, as it is a strictly commercial agreement that falls within the exclusive competences of the European Union, and will remain in force until it is replaced by the entry into force of the EMPA.
- Economic, Regulatory, Environmental and Sectoral Impacts of the Agreement
The EU-Mercosur Agreement produces broad and interconnected effects on intellectual property, the environment, public procurement, trade in goods, services and investments, and small and medium-sized enterprises (SMEs), establishing a new legal and regulatory framework for economic relations between the two blocs.
2.1. Intellectual Property and Innovation
The agreement strengthens the legal protection of trademarks, patents, industrial designs and copyrights, promoting greater alignment between the Mercosur and European Union regimes.
One of the most important points is the protection of geographical indications, especially European, against misuse in Mercosur. At the same time, the agreement creates a more favorable environment for the strengthening and recognition of South American geographical indications, including Brazilian ones.
Predictability and regulatory harmonisation in the field of intellectual property are particularly relevant for sectors such as:
- technology and software;
- pharmaceutical industry and biotechnology;
- creative industry, fashion and design;
- research, innovation and technology transfer.
2.2. Environment and Sustainable Development
The environmental dimension is one of the most sensitive and politically relevant axes of the agreement. The treaty incorporates commitments related to:
- compliance with multilateral environmental agreements;
- combating illegal deforestation;
- promotion of sustainable development;
- compliance with environmental and climatic standards.
Although the agreement does not provide, as a rule, for automatic trade sanctions, it does institute mechanisms for dialogue, cooperation, monitoring, and evaluation, which can influence public policies, business practices, and environmental compliance requirements along production chains.
For Mercosur companies — especially Brazilian ones — this means that environmental criteria become a structural element of access to the European market, affecting certifications, traceability, supply contracts and environmental compliance strategies.
2.3. Trade in Goods, Agriculture and Sensitive Sectors
The agreement provides for the progressive elimination of most customs tariffs, with different schedules according to the sensitivity of the sectors:
- Mercosur will eliminate 91% of tariffs on European products within 15 years.
- The European Union will eliminate 95% of tariffs on Mercosur products within 12 years.
In the agricultural sector, products considered sensitive, including meat, sugar and ethanol, remain subject to:
- tariff quotas;
- longer transition periods;
- safeguard mechanisms, which allow the temporary reintroduction of tariffs in case of significant impact on local producers;
- strict compliance requirements with EU sanitary and phytosanitary standards for all imported products.
This design seeks to balance trade liberalization with the protection of strategic and socially sensitive sectors.
2.4. Public Procurement
The agreement promotes a relevant opening of public procurement markets, allowing companies from one block to participate in bids and government contracts in the other, under more transparent and predictable conditions.
The provisions on public procurement include:
- non-discrimination commitments between domestic and foreign suppliers;
- greater transparency in bidding procedures;
- clear rules on deadlines, selection criteria and challenge mechanisms.
For Brazilian and Portuguese companies, especially in the infrastructure, technology, engineering, specialized services and industrial supply sectors, this chapter creates relevant opportunities to access traditionally protected markets, while requiring in-depth knowledge of local rules and European administrative law.
2.5. Services and Investments
The treaty significantly expands opportunities in trade in services and investment flows, creating a more stable, predictable and legally secure environment for cross-border operations.
Sectors such as:
- business and professional services;
- telecommunications;
- logistics and transportation;
- financial services
The agreement reinforces principles such as:
- national treatment and non-discrimination;
- regulatory predictability;
- greater legal certainty for investors.
These elements tend to stimulate cross-investments between the European Union and Mercosur, in addition to facilitating the internationalization of service providers, including professional offices, consultancies, technology companies and logistics operators.
2.6. Small and Medium-sized Enterprises (SMEs)
The treaty includes a specific chapter dedicated to Small and Medium-sized Enterprises (SMEs), recognizing that these companies face their own obstacles in international trade, such as high regulatory costs, difficulties in accessing information and less ability to adapt to highly regulated markets.
Among the main advances are:
- simplification of customs procedures and reduction of bureaucracy;
- increased regulatory transparency, with easy access to information on tariffs, rules of origin and technical requirements;
- encouragement of the integration of SMEs in global value chains.
2.7. Challenges
Despite the possibilities and new opportunities for expanding trade, investments and economic integration that the Mercosur-European Union agreement provides, the opening of the markets of both blocs also imposes challenges.
This opening of markets tends to intensify foreign competition, which can put pressure on less competitive sectors of Mercosur, especially the manufacturing industry, and generate internal political resistance. At the same time, European producers — especially in the agricultural sector — fear competition from South American products with lower production costs.
Another central challenge is regulatory compliance, even with the signing of the agreement, it will be necessary to work on technical details of the applicable regulatory frameworks. The European Union imposes strict standards in technical, sanitary, phytosanitary, environmental and compliance standards, requiring Mercosur countries to invest in productive adaptation, traceability, sustainability and corporate governance.
In addition, the economic asymmetry between the blocs and internal political instabilities make it difficult to harmonize interests and delay the implementation of the agreement, even in the face of its potential long-term benefits.
Finally, the signing of the agreement is a major step in this negotiation that has lasted 25 years, but the final steps will still be necessary, with the approval and ratification of the agreements, which may face the opposition of various political and economic actors and extend for a considerable period.
- The Role of the Office and Transnational Legal Expertise
The Philipe Cordeiro Law Firm, with offices in Brazil and Portugal, has as founding partner Philipe Augusto da Silveira Cordeiro, a lawyer qualified in Brazil and Portugal and specialist in European Union Law and International Law. The qualification in Portugal automatically confers the ability to act within the European Union, allowing the assistance of clients with regulatory compliance analysis, legal due diligence, structuring of commercial operations and consulting in cross-border trade processes, while the knowledge of Brazilian legislation allows the assistance of European companies that have an interest in the Brazilian market.
The combination of in-depth knowledge of the Brazilian, Portuguese and European Union legal systems positions us as a strategic partner for companies and institutions that wish to act in the new legal and commercial context emerging with this agreement.
In this sense, we are able to offer complete support in matters such as:
- Interpretation and application of customs and foreign trade rules of the European Union, Mercosur, Brazil and Portugal;
- Advice on international trade agreements, export and import contracts;
- Analysis of regulatory risks and compliance with environmental, sanitary and phytosanitary standards;
- Strategies to take advantage of opportunities to access expanded markets under the new agreement;
- Consultancy in matters involving intellectual property in the European Union, Mercosur, Brazil and Portugal;
- Representation before authorities of the European Union, Brazil and Portugal;
- Legal monitoring of legislative and normative processes.
For more information about our areas of expertise, see: https://philipecordeiro.com/en/em-que-trabalhamos/
