The European Union and Mercosur officially signed one of the world’s largest free trade agreements on Saturday, clinching a deal that has been in the works for more than two decades.
Most Read from BloombergEuropean Commission President Ursula von der Leyen and European Council head Antonio Costa inked the pact in Asunción, Paraguay, a week after the EU blessed the deal with the South American bloc of Brazil, Argentina, Uruguay and Paraguay.
The agreement, which will create an integrated market of 780 million consumers, will strengthen Europe’s foothold in a resource-rich region that’s being increasingly contested by the US and China. Von der Leyen and leaders like Brazil’s Luiz Inacio Lula da Silva have also touted it as a way to signal independence from the two superpowers.
“This moment is about connecting continents,” von der Leyen said at the signing. “It reflects a clear and deliberate choice: We choose fair trade over tariffs; we choose a productive long-term partnership over isolation; and, above all, we intend to deliver real and tangible benefits to our people and our businesses.”
The signing comes amid the backdrop of renewed US interest in South America. President Donald Trump’s administration recently issued a national security document that re-prioritized the region for US policy moves. Two weeks ago, the US arrested Venezuelan leader Nicolas Maduro and brought him to New York to face criminal charges.
The gradual erasure of tariffs on farm goods is set to benefit South America’s agricultural powerhouses, while the removal of levies on cars, machinery and other products is positive for European industry. Bloomberg Economics has estimated the deal would boost the Mercosur bloc economy by as much as 0.7% by 2040, and Europe’s by 0.1% after 15 years.
“We are talking about the largest agreement between two blocs — it puts together economies that account for $22 trillion,” Tatiana Prazeres, Brazil’s foreign trade secretary, said in public remarks earlier this week. “That will help the region to be better integrated to the global economy.”
Argentina President Javier Milei, Uruguay’s Yamandu Orsi and Paraguay’s Santiago Pena attended the signing ceremony. Lula, who’s been a part of the trade talks since his first presidency began in 2003, didn’t travel to Paraguay but met with von der Leyen in Rio de Janeiro on Friday.