EU and Mercosur sign landmark trade and association deal after 26 years

Following 26 years of negotiations and a string of setbacks that threatened to scupper it, representatives of the Mercosur countries and the European commission signed the EU-Mercosur trade deal at a ceremony in Asunción, Paraguay, on Saturday.  The agreement creates the world’s largest free-trade area, comprising more than 715 million people. Regional leaders on both sides of the Atlantic have endorsed it as a powerful gesture of multilateral cooperation, peace, and free trade at a time when world powers such as the U.S. are turning towards protectionism and a worldview guided by spheres of influence.  However, the deal has faced opposition due to fears about price suppression and possible harm to South America’s local industries. Speaking as Mercosur’s rotating leader, Paraguayan President Santiago Peña told the audience: “We could have reached an even better deal, we could have got more benefits for our presidents.” “For that reason, I would like to challenge you all: let us look to the future with greater courage, with greater audacity, and let us expand even further our perfectible union in a complex world, in which old certainties are wavering before our eyes.”  You may also be interested in: Mercosur-EU deal to be formally signed in Paraguay: what comes next? He called for South America and Europe to be “not just spectators, but the main actors in the history of humanity.” European Commissioner for Trade and Economic security, Maroš Šefčovič, signed the agreement with the Mercosur members’ foreign ministers shortly before 2 p.m. local time in a ceremony at the Central Bank of Paraguay.  ‘A very clear message to the world’ For all elements of the deal to enter into force, they must now be approved by the parliaments of each country involved, although the trade provisions are expected to come into effect sooner because the approvals process is simpler. European Commission President Ursula Von der Leyen said during the ceremony that “almost 20% of the global GDP is being traded here. This is phenomenal. This sends a very clear message to the world. […] We will join forces like never before, because we believe that this is the best way to make our people and our countries prosper. And when two regions like ours speak with one voice on global issues, the world will be listening.” Mercosur exports to the EU are expected to grow by 9 billion euros (US$10.4 billion) per year, she added at the press conference after the ceremony. Argentina to discuss EU deal in special sessions Argentine President Javier Milei celebrated the signing of the agreement, promising to send it to Congress for approval during extraordinary sessions planned for February. However, he also reiterated demands that trade be subjected to as few barriers as possible. “The incorporation of mechanisms that restrict that access, such as safeguarding quotas or equivalent measures, will significantly reduce the economic impact of the agreement, which would go against its essential goal,” he said. Argentine President Javier Milei speaks at signing ceremony for EU-Mercosur Association Agreement in Asunción, Paraguay, January 17 2026. This and cover image: provided by delegation of EU to Argentina. “As a prophet of a dystopian future, Argentina understands first-hand that isolation and protectionism, protected by rhetoric instead of results, are the greatest causes of economic stagnation and growing poverty.” The delegation of the European Union to Argentina is planning to hold an EU-Argentina Trade and Investment Forum on June 1-2 to investigate investment opportunities and explore value chain opportunities.  You may also be interested in: What benefits and challenges does the Mercosur-EU deal bring for Argentina? Brazilian President Luiz Inácio Lula da Silva did not attend the signing, instead sending Foreign Minister Mauro Vieira. Peña said during a press conference that Lula’s absence left “a bitter taste” because the deal would not have happened without him, but acknowledged that his Brazilian counterpart had a complex agenda due to the country’s upcoming elections. President Yamandú Orsi of Uruguay, European Council President António Costa, President Rodrigo Paz of Bolivia, and President José Mulino of Panama were also on stage. Bolivia is not currently a party to the deal because it only became a full Mercosur member in 2024, and Panama became a Mercosur associate member the same year. Paz vowed to push for Bolivia to join the deal as soon as possible. While popularly described as a trade deal, the free trade provisions form part of a broader association agreement. It will involve not only the gradual reduction of tariffs on more than 90% of bilateral trade between the blocs, but also a series of commitments on political cooperation, investment, and the environment.  Opposition to the deal Farmers and politicians in European countries such as France and Poland say the deal risks flooding their market with cheap agricultural goods. Opponents in South America, meanwhile, have argued that the deal will foster the export of raw materials to Europe and the import of complex, value-added manufactured goods in return, fostering a “colonial” dynamic. The parties have attempted to allay these concerns by rolling back tariffs on industrial goods imports in South America gradually, over a period of several years. They also negotiated safeguards in European agricultural markets if prices begin to fluctuate.  The leaders of the blocs had been hoping to sign the deal before the end of 2025, but last-minute doubts, mainly about political support from Italy, meant the deal was pushed back by one month. The EU-Mercosur agreement was reached in principle in 2019, but was delayed by a further five years as Europe sought further commitments from its South American counterparts, especially on environmental standards and Amazon deforestation. Analysts say progress was made in this regard with Brazil’s change in government from the far-right Jair Bolsonaro, who aggressively stripped protections from the world’s largest rainforest, to Da Silva. The leaders finally announced they had reached a deal on December 6, 2024.