The Mercosur and European Union trade agreement, which has been in the making for 26 years, is finally expected to come into effect by the end of May. This agreement, signed in January, aims to liberalize over 90% of trade by 2040, although it presents immediate challenges for sensitive sectors exposed to increased competition. As final ratifications by Mercosur parliaments, including Brazil and Paraguay this week, wrap up, the commencement of the agreement is now ensured even amidst ongoing terms revision by the EU Court of Justice.

While a limited portion of trade will be opened immediately, with Mercosur committing to eliminate tariffs on 10.7% of its goods, which accounts for 15.4% of Brazilian imports from the EU in 2024, several sectors will experience reduced protection. The agricultural sector, particularly food and some capital goods sectors, electronics, and optical products, will face increased competition, necessitating significant investments to enhance their competitiveness in the market.

Conversely, around 39% of agricultural products from Mercosur will gain access to EU markets, which highlights the mutually beneficial aspects of this trade agreement. The need for both blocs to adapt to the new trade dynamics underlines the importance of competitiveness and strategic investment, as protected sectors in Brazil prepare for a new era of trade relations in a globalizing economy.