01 | JUL | 2019

Mercosul and the European Union sign a free trade agreement

On 28 June, the agreement signed between Mercosur and the European Union was announced. The provisions in the contract set forth that 92% of the exports from the South American bloc, made up of Brazil, Argentina, Uruguay and Paraguay, to the 28 member countries of the European bloc will be exempt from taxes over a period of 10 years. The European Union will withdraw tariffs on 91% of the products it exports to Mercosul during the same period.

According to the Ministry of Economy, it is estimated that the agreement will generate annual increases in the GDP, the flow of bilateral investments and Brazilian exports and imports, providing greater international business and dynamism to the Brazilian economy.

According to these estimates, the agreement will increase the Brazilian GDP by R$ 87.5 billion over 15 years, and it might amount to R$ 125 billion considering the reduction of non-tariff barriers and the expected increase in the total productivity of the factors of production. The growth of investments in Brazil, in the same period, will be approximately US$ 113 billion. Regarding bilateral trade, Brazilian exports to the EU will total almost US$ 100 billion in earnings by 2035.

"The trade agreement with the EU will form one of the largest free trade areas in the world. Because of its economic importance and the scope of its disciplines, it is the largest and most complex agreement ever negotiated by Mercosul," said a representative of the Brazilian government in a joint announcement from the Ministries of Economy and Foreign Affairs.

The agreement is expected to come into force after it has been ratified by the European Parliament and the Congress of the four South American countries.