After more than two decades of negotiations, the European Union and Mercosur have reached a historic trade agreement covering a market of more than 700 million people. It brings the EU closer to Argentina, Brazil, Paraguay and Uruguay and creates a new framework for trade, investment and economic cooperation between the two regions.
The timing matters. Companies are reassessing supply chains, looking for new markets and competing for access to energy, raw materials and industrial capacity. Lower tariffs and fewer trade barriers will make it easier for European companies to export to Mercosur, source products and materials from the region, take part in public tenders and set up local operations. For European businesses, this is about more than trade. It opens up one of the world’s largest emerging economic regions, with Brazil at the centre of the Mercosur market.
What Is the EU-Mercosur Agreement?
The agreement brings together the European Union and the four founding Mercosur countries: Argentina, Brazil, Paraguay and Uruguay. It covers trade in goods and services, investment, public procurement, intellectual property, customs and other areas of economic cooperation.
It consists of two linked instruments: the EU-Mercosur Partnership Agreement (EMPA) and the Interim Trade Agreement (iTA). The iTA focuses on trade and investment and has been provisionally applied since 1 May 2026. It will be replaced by the full Partnership Agreement once that has been ratified. The EU and Mercosur reached a political agreement in December 2024, signed in January 2026 and began provisional application of the trade agreement in May 2026.
For businesses, the change is simple: trade between the two regions now runs under a framework designed to cut tariffs, remove trade barriers and make market access more predictable.
Why the Agreement Matters
The agreement creates a trade relationship covering more than 700 million people, and it connects two large economic regions at a time when companies want to diversify their markets and supply chains. The EU is already an important trading partner for Mercosur. In 2025, EU exports to the four Mercosur countries reached €53.3 billion, while Mercosur exports to the EU totalled €56.1 billion. European exports are concentrated in machinery, chemicals, pharmaceuticals and transport equipment. Mercosur sends large volumes of agricultural and mineral products the other way.
The agreement strengthens this relationship in several ways. Lower tariffs make European goods more competitive in Mercosur, and fewer non-tariff barriers make cross-border trade easier. Better access to services markets creates opportunities beyond physical goods, and the procurement provisions open up government contracts. Clearer customs and trade rules make cross-border operations more predictable, and improved access to critical raw materials supports supply-chain diversification in Europe.
So the agreement goes well beyond reducing import duties. It’s a broader framework for trade, investment and business cooperation between Europe and Mercosur.
Lower Tariffs and Better Market Access
Tariff reduction is the most direct effect. For EU exporters, tariffs on more than 91% of goods sent to Mercosur will be eliminated over time, with different transition periods per product. Several major European industries stand to benefit.
Automotive. Mercosur currently applies high import duties to European vehicles. Under the agreement, duties on EU electric and hybrid vehicles fall from 35% to 25% immediately, and duties on internal-combustion cars are reduced from 35% to 17.5%. Tariffs on many car parts are then phased out over the following years.
Machinery and industrial equipment. Tariffs of 14–20% on machinery and appliances will be gradually eliminated for 93% of EU exports in these categories, in most cases over ten years.
Pharmaceuticals. These currently face tariffs of up to 14%, which will be phased out for 90% of EU pharmaceutical exports over ten years.
Agriculture and food. European exporters gain improved access through tariff reductions and quotas for products including olive oil, wine, beer and other food products, while sensitive agricultural sectors stay protected through tariff-rate quotas and safeguards.
The impact isn’t limited to tariffs. The agreement also addresses technical barriers, customs procedures, conformity assessments and international standards, which removes some of the administrative friction in cross-border trade.
Access to Public Procurement and Tenders
One of the most important changes for European companies is better access to public procurement in Mercosur countries. The agreement opens parts of these government procurement markets, so European companies can compete for contracts under the rules and coverage set out in the agreement. In Brazil alone, the federal public procurement market is worth more than €8 billion a year. The opportunities cover infrastructure, transport, energy, construction, engineering and other public services, and the agreement sets rules on publishing procurement information, tender procedures and transparency.
That means market access is no longer limited to selling to private customers. Public tenders can become a route into the Brazilian market.
Not every Brazilian government contract is automatically open to European companies, though. Coverage depends on the contracting entity, the type of procurement, value thresholds and the specific commitments Brazil has made.
What Does It Mean for European Companies?
The agreement creates opportunities across several types of business.
Exporters. Lower tariffs make European products more competitive in Mercosur, especially machinery, vehicles, chemicals, pharmaceuticals and other industrial products.
Service providers. The agreement covers trade in services and establishment, with commitments in areas such as telecommunications, financial services, transport and business services.
Manufacturers. You can use the agreement to do more than export finished products. It also helps you build sourcing and production relationships within Mercosur.
Investors. Companies looking at Brazil or other Mercosur markets get better access to trade, investment and supply-chain opportunities, plus a framework for the movement of certain business personnel between the two regions.
The practical impact depends on your sector and business model. For some companies the opportunity is cheaper exports. For others it’s local production, sourcing, partnerships or public tenders.
Brazil: The Largest Market in Mercosur
Brazil is the largest economy and market in Mercosur, which makes it especially important for European companies that want to benefit from the agreement. With more than 200 million people, a large industrial base and major agricultural, energy and natural resource sectors, it offers opportunities across a wide range of industries. It’s already the EU’s largest trading partner in Mercosur, and European companies are active in Brazil in automotive, machinery, chemicals, pharmaceuticals, energy, financial services and infrastructure.
The agreement can strengthen these links and open up more in industrial manufacturing, agribusiness and food, energy and renewables, infrastructure and construction, mining and critical raw materials, technology and digital services, logistics, and financial and professional services. For European companies, Brazil can serve both as a large domestic market and as a base for wider operations in South America.
Strategic Sectors and Investment Opportunities
Several sectors in Brazil and the wider Mercosur region are already attracting international investment.
Energy. Brazil’s renewable resources create opportunities in wind, solar, hydropower, energy storage and related infrastructure. European companies with expertise in energy technology, project development and engineering can find a place across the value chain.
Agribusiness. Brazil is one of the world’s largest agricultural producers and exporters. The opportunities run well beyond primary production, into agricultural technology, food processing, logistics, storage and supply-chain infrastructure.
Infrastructure. Brazil needs investment in transport, logistics, energy networks, sanitation and urban infrastructure. Better access to public procurement gives European engineering, construction and infrastructure companies another route in.
Mining and critical raw materials. Mercosur holds significant reserves of minerals and other materials needed for industrial production and the energy transition. The agreement strengthens cooperation and market access here, and the EU already sources a large share of its niobium imports from Mercosur.
Technology and digital services. Brazil has one of Latin America’s largest technology markets, with strong demand for cloud computing, financial technology, enterprise software and digital infrastructure. European technology and professional services companies can combine improved market access with local partnerships and operations.
The trade agreement doesn’t create these sectors. What it does is make it easier for European companies to take part in markets where the opportunities already exist.
Supply Chains and European Manufacturing
The agreement can also change how European companies structure their supply chains. Lower tariffs and clearer trade rules make it easier to source products and components from Mercosur and to sell finished goods into the region. For manufacturers, that opens options beyond exporting from Europe: sourcing raw materials or components from Brazil and other Mercosur countries, setting up local production, or combining European technology and expertise with local manufacturing capacity.
Brazil stands out for its large industrial base and strong position in agriculture, mining, energy and manufacturing, which gives you access to suppliers and customers in the same market. Diversification is also becoming a practical priority. Companies that have relied on a handful of suppliers or production locations can use the agreement to assess alternatives in South America. The opportunity isn’t only selling more to Brazil. It’s building more integrated supply chains between Europe and Mercosur.
Infrastructure, Logistics and Trade
More trade needs the infrastructure to move goods, energy and information between markets. Brazil already has a large network of ports, roads, railways, warehouses and logistics operators, but infrastructure remains a work in progress. Higher trade volumes create demand for more logistics capacity and for better transport corridors.
Ports will play a central role. Brazil’s main export and import gateways connect its industrial and agricultural regions with international markets, and better rail and road links can lower transport costs between production centres and ports. The same goes for energy: investment in generation, transmission and storage supports industry and the growth of energy-intensive sectors.
For European companies, this creates opportunities beyond exporting goods. Engineering, construction, logistics, infrastructure technology and project development companies can all take part in the investment needed to support higher trade. The agreement doesn’t create these infrastructure needs on its own, but it strengthens the commercial framework in which the investments can take place.
Implementation: What Happens Now?
The Interim Trade Agreement (iTA) has been provisionally applied since 1 May 2026, so the trade and investment commitments are already taking effect while the broader Partnership Agreement goes through ratification. Companies don’t have to wait for the full agreement to use the trade provisions that already apply.
Not everything happens at once, though. Many tariffs are being reduced in stages, with different transition periods per product, and sensitive agricultural products remain subject to quotas and safeguards. So look at what it means for your own products and operations. Which tariffs apply today, and when will they fall? What rules of origin apply? Are there new opportunities in public procurement? Which technical or regulatory requirements still apply? Does the agreement change the economics of sourcing or production in Mercosur? The agreement provides the framework. You now need to work out how it affects your business.
What European Companies Should Do Now
The agreement improves market access, but you still need to understand how the new rules apply to you. A practical first step is to review your current products, suppliers and commercial activities against the agreement.
Review your tariff position. Check which import duties apply to your products now and when they will be reduced or removed. Reductions are phased in differently per product category.
Check the rules of origin. Preferential tariffs only apply when products meet the agreement’s rules of origin, so look at where your products and components are made and whether they qualify.
Look beyond exports. Local production, sourcing, services, partnerships and public procurement can all be part of your market strategy.
Review public tenders. If you’re active in infrastructure, engineering, energy, construction or similar sectors, assess whether the covered procurement opportunities are relevant. EU companies can already bid for covered public contracts under the provisional trade agreement.
Consider a local presence. For some businesses, exporting from Europe makes sense. For others, a local operation, a Brazilian partner or a local supply chain will offer better opportunities.
The agreement removes some barriers to the Mercosur market. The next step is deciding how to use that access.
Brazil as a Long-Term Business Partner
The agreement strengthens an economic relationship that already exists at significant scale. The EU is Mercosur’s second-largest trading partner in goods, and European companies already have a substantial investment presence in the region. EU investment stock in Mercosur reached €390 billion in 2023. Brazil stands out within Mercosur because of its economic scale, industrial base, natural resources and domestic market.
There are many ways to take part: exporting European products and technology, sourcing raw materials and components, setting up local production, developing infrastructure and energy projects, providing professional and digital services, bidding in public tenders or building partnerships with Brazilian companies.
The agreement doesn’t remove the practical challenges of doing business in Brazil. You still deal with local regulations, taxation, Portuguese, logistics and the specific requirements of the Brazilian market. What changes is the commercial framework. European companies now have better access to a market that was already important and is becoming more closely connected to Europe.
Conclusion
The EU-Mercosur agreement provides the framework. The real opportunity lies in how you use it.
Ipanema International helps international companies turn that opportunity into a working business in Brazil. We support you with your market entry strategy and with the practical side of setting up: local representation, company formation, accounting and day-to-day operations. If you want to compete for public contracts, we help you with your bid. And if you’re sending employees to Brazil, we support you with the immigration process. Get in touch to talk about what the agreement means for your business.
