Europe-South America Trade Deal, 25 Years in the Making, Nears Finalization

Negotiations for a  between the European Union and four South American nations began so far back that the euro wasn’t yet in circulation, China hadn’t joined the World Trade Organization, and Venezuela still held the title of America’s top oil supplier.

But amid a sharply different geopolitical landscape and significant challenges — including  — the EU and the South American bloc known as  are set to officially sign their  trade agreement this Saturday at a ceremony in Paraguay.

This marks Mercosur’s first major trade deal; the bloc includes the region’s two largest economies, Brazil and Argentina, plus Paraguay and Uruguay. Bolivia, the newest member, wasn’t part of the talks but can join the agreement in the coming years.

The  — which eliminates tariffs on items from Argentine steaks and Brazilian copper to German cars and Italian wine — still needs to be ratified by the .

The signatories recognize the importance of establishing one of the world’s largest free-trade zones (home to over 700 million people and representing a quarter of global gross domestic product) while  pulls the United States  .

For Once, This Isn’t About Trump vs. China

European Commission President  lauded the deal last week as a strong endorsement of multilateralism “in the face of an increasingly hostile and transactional world.” Brazilian President , 80, called it a rare “victory for dialogue, negotiation and the bet on cooperation.”

Experts note that this victory comes at the expense of the U.S. and China, as Trump aggressively  in the resource-rich region and  and  to expand influence.

“This signals that South American economies are looking to distance themselves from the U.S.-China great power rivalry,” said Lee Schlenker, a research associate with the Global South program at the Quincy Institute for Responsible Statecraft, a Washington think tank.

“It shows South America can keep asserting itself on the global stage, diversify its trade partners, and exercise a degree of autonomy it’s often been denied.”

South American Ranchers Celebrate

The agreement gives South American countries — known for their fertile land and skilled farmers — enhanced access to Europe’s large agricultural goods market at a preferential tax rate.

In Argentina, exporters estimate they’ll save tens of millions of dollars annually thanks to the deal’s immediate removal of a 20% tariff on the EU’s long-standing quota system for high-quality meat imports.

This is a breakthrough for Argentina, a country dominated for decades by  governments that kept the economy  from the outside world and prioritized the domestic market so much that they imposed taxes on farm exports to keep food prices low.

“We’re in the middle of a paradigm shift here,” said Carlos Colombo, president of the Cañuelas Cattle Market in Buenos Aires province (where over 12,000 cattle are sold daily, many bound for Europe and China). “Argentina has reopened to the world.”

Argentine President Javier Milei may be Trump’s closest  in Latin America — sharing his  and the  — but no one can label the radical libertarian a .

Initially, he  the notoriously slow-moving Mercosur as irrelevant and threatened to leave it. But he changed his stance after realizing the bloc’s potential to eliminate tariffs and cut customs red tape.

“He views this agreement as a way to revitalize and redefine Mercosur,” said Marcelo Elizondo, an Argentine economic analyst focused on international trade.

The free-trade enthusiasm has also spread to Brazil’s long-closed economy. Apex, a Brazilian government investment agency, projects that agricultural exports to the EU (like instant coffee, poultry, and orange juice) will bring in $7 billion in the coming years.

Europe’s Farmer Lobby Secures Concessions

Pressed by environmental regulations and fearing a flood of cheap food from across the Atlantic, farmers have  and  in European capitals in a wave of anger over the agreement.

The EU has worked hard over decades of talks to ease their concerns, adding environmental and animal welfare  and setting strict quotas for South American meat and sugar exports to ensure local produce remains competitive.

Even so, angry farmers  Poland and a few other countries to oppose the deal in last week’s internal EU vote, robbing the accord’s backers of the unified show they’d hoped for. Italy and other agricultural powerhouses only  after the EU offered farmers generous subsidies totaling $52 billion.

“It’s a substantial bribe,” said Jacob Funk Kirkegaard, nonresident senior fellow at the Peterson Institute for International Economics. “EU leaders decided the deal is so important right now that it’s worth it.”

‘Cows for Cars’

Some have nicknamed the deal “cows for cars,” reflecting the belief that Europe’s auto industry will also benefit greatly.

Hit by  with China and sky-high , renowned German automakers like  and BMW are pleased with the boost — as are producers in Europe’s pharmaceutical, construction, and machinery sectors, which gain access to hundreds of millions more consumers.

Experts say the elimination of 35% tariffs on auto parts and cars gives European industrial exporters a rare chance to regain their South American market share from cheaper Chinese competitors.

“Failing to sign the EU-Mercosur free trade agreement could have pushed Latin American economies closer to Beijing’s sphere of influence,” said Agathe Demarais, a senior policy fellow at the European Council on Foreign Relations.

But many are still holding their breath, having watched negotiations drag on for years only to hit a snag at the last minute.

“There are still several steps to take … and Europe remains very cautious,” Colombo said, struggling to be heard over the shouts of cowboys herding hundreds of bellowing cattle into trucks.

“Let’s not forget — this is historic. We’ve never reached an agreement like this before.”

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Associated Press writer Mauricio Savarese in Sao Paulo contributed to this report.