The EU and South America's Mercosur closed a free-trade agreement (FTA) nearly 25 years in the making, but there is still a long road to ratification.
Uruguayan president Luis Lacalle and European Commission president Ursula von der Leyen announced the deal at a Mercosur summit in Montevideo, the Uruguayan capital. The presidents of the three other Mercosur founding members — Argentina, Brazil and Paraguay — were present.
The FTA will remove tariffs on more than 90pc of goods among the members. Von der Leyen called the agreement a historic milestone that would benefit 700mn consumers. She said the agreement "is not only a trade agreement, but also a political necessity."
Lacalle said "an agreement of this kind is not a magical solution, but an opportunity."
Leaders recognized that the agreement still has major hurdles to clear as it requires approval from member states.
The agreement will go to legal review and translation in the next month in view of its future signing, according to the Mercosur-EU declaration.
While the Mercosur countries are in favor of the agreement, opposition is strong in France, Poland and several smaller EU states. Argentinian president Javier Milei, who supports the agreement, criticized Mercosur as a block.
"Mercosur, which was born with the idea of deepening our commercial ties, ended up like a prison that does not allow its members to take advantage of their comparative advantages or export potential," he said.
Van der Leyen said that more than 60,000 businesses, half of them small, export to Mercosur. The EU exported $59bn to Mercosur in 2023, while Mercosur's four founding members shipped $57bn to the EU.
She also stressed the importance of EU investment in Mercosur, including in sustainable mining, renewable energy and sustainable forestry.
Brazilian president Luiz Lula da Silva said during the summit that the region had to take advantage of its resources, including agriculture and energy.
The four Mercosur countries are major food producers, including crops such as corn, soy and sugarcane, used for biofuels.
Brazil is the world's top soy producer, while Argentina is third, Paraguay sixth and Uruguay in the 14th spot. Bolivia, which joined Mercosur in July, is the 10th producer.
Brazil is a major mineral producer and Argentina is slowly beginning to strengthen its mining sector. It has the world's second-largest lithium resources. Argentina is also beginning to monetize its unconventional gas formation, Vaca Muerta, the second largest in the world with 308 trillion cf of reserves. It is working on different LNG projects, with a focus on exports to Europe.
The Mercosur countries also have in common plans for low-carbon hydrogen production, which also see the EU as an export market for value-added products, such as fertilizers.
