On December 6, 2024, Mercosur and the EU reached a political agreement on a historic partnership treaty. If ratified, this would become one of the largest economic collaborations in the world, covering a market of no less than 780 million people and offering vast trade opportunities.

However, the deal is under pressure. The world is in flux, and both the US and China have a vested interest in a divided EU and Mercosur. Political and environmental concerns make the agreement controversial, while geopolitical interests further complicate the playing field. Can this treaty fundamentally reshape the relationship between Europe and South America? And who is pulling the strings? This article examines the strategic interests, internal divisions, and external pressures shaping the negotiations.

The Long Road to an Agreement

The first discussions between the EU and Mercosur—comprising Brazil, Argentina, Uruguay, and Paraguay—began in the 1990s when globalization was still seen as the future. Formal negotiations started in 1999, aiming to lower import tariffs and improve market access. However, negotiations repeatedly stalled, primarily due to European agricultural interests and South American demands regarding industrial products.

Additionally, there was a deeper, more difficult-to-bridge gap: perception. Western European politicians and NGOs were often perceived as condescending in South America, further straining mutual understanding.

In 2019, a breakthrough seemed imminent with a preliminary agreement, but the EU's notorious bureaucratic sluggishness led to another delay. Political shifts in Brazil and Argentina added further complexity. Internally, this caused turbulence, but externally, Mercosur’s position remained strikingly steadfast. Meanwhile, the political landscape in Europe also changed: the agricultural lobby gained more influence, while the green lobby weakened. Interestingly, both factions, for different reasons, opposed the treaty.

A Shared History, But No Automatic Understanding

Europe and South America share a long and deep history. Over 500 years of mutual influence, migration, and trade have created cultural and religious ties. The Mercosur countries even have more Catholics than the EU, and the two most spoken languages are Spanish and Portuguese. Yet, this shared background does not guarantee mutual understanding.

A large part of this misunderstanding stems from Europe's diversity. Portugal, naturally, has a different relationship with Brazil than Finland does, and Greece views Uruguay differently than Spain. This makes it challenging to forge a unified European strategy.

Political and Economic Battle Lines

Ultimately, this agreement is about economic interests, and both sides are lobbying hard. In the EU, farmers and environmental activists are at odds with industry and the trade sector. In South America, governments protect their industries and markets against foreign competition. Meanwhile, the US and China are skilfully exploiting internal divisions to strengthen their influence in both regions.

The condescending nature of Europe's stance, particularly in Northern and Western Europe, does not make things easier. Despite centuries of ties, significant mutual misunderstanding persists. With geopolitical pressure, internal divisions, and stark economic interests at play, one thing is clear: a sustainable free trade agreement is far from guaranteed.

Mercosur

Brazil

With 211 million inhabitants, Brazil is by far the largest country in Mercosur and keeps all options open. While both current President Lula and his predecessor Bolsonaro support the trade deal with the EU, the country takes a pragmatic approach. In November 2024, during a visit by Xi Jinping, Lula signed no fewer than 37 trade agreements with China, spanning agriculture, trade, energy, and technology—showing Europe that economic interests take priority.

Lula warned Europe in 2023: Brazil will not accept 'green neocolonialism.' In other words, trade restrictions disguised as sustainability measures are unwelcome. Meanwhile, China is by far Brazil’s largest trading partner, accounting for 27% of exports, while the EU (15.4%) and the US (11.4%) lag behind. Brazil skillfully manoeuvres between global powers in a world where trade blocs are increasingly pitted against each other.

Argentina

For neighbouring Argentina, the EU is the second-largest trading partner after Brazil (12.9% of exports), followed by China (9%) and the US (7.6%). The country has long advocated for an agreement with the EU, and this remains unchanged under President Javier Milei. The libertarian economist radically restructured the economy after his election in 2023. His shock therapy is working: inflation is decreasing, the budget deficit is disappearing, and foreign investments are flowing in. But the cost is high—poverty and social unrest are rising. A free trade agreement with the EU aligns with Milei’s liberal policies and could further boost the economy. However, he is also willing to consider drastic measures, such as leaving Mercosur, to secure favourable bilateral trade agreements with other countries.

Paraguay and Uruguay

Paraguayan President Santiago Peña sees the Mercosur-EU agreement as a historic breakthrough. In December 2024, he stated: "After 25 years of negotiations, there is finally an agreement. This is a unique opportunity for Paraguay to attract investments and strengthen its global position." Yet, he remains cautious. A few months earlier, in October, he had already warned that the EU's lack of unity was complicating negotiations.

Then there is Uruguay. This small but assertive Mercosur member wants to break free from the bloc’s sluggish decision-making. President Luis Lacalle Pou is impatient and believes countries should be able to negotiate trade deals individually. The EU talks are dragging on too long, and he is threatening to sign independent agreements, for example, with China. Uruguay wants to escape internal deadlocks and advocates for modernising Mercosur: less protectionism, more trade, and greater flexibility.

South American Impatience

The Mercosur countries are not all on the same page. Brazil is eager for an agreement with the EU but is also exploring alternatives. Argentina is also in favour but is in a hurry. Paraguay views the deal as historic but points to European divisions. Uruguay wants more flexibility and faster decision-making. Meanwhile, negotiations continue to drag on, hampered by conflicting interests and external pressures. One thing is certain: Mercosur is at a crossroads, and the choices made in the coming years will shape the future of South American trade.

European Union

The Netherlands

The Netherlands has been a trading nation for centuries and plays a key role as Europe's gateway. With the Port of Rotterdam as the largest in Europe and Schiphol as the EU’s main airport, the country is a true transit hub. This makes the Netherlands a significant trading partner for Mercosur. For Brazil, the Netherlands is even the fourth-largest export destination, while Argentina and Uruguay rank it sixth.

Yet, as always, the Netherlands struggles to balance the roles of merchant and moralist. The merchant sees the EU-Mercosur trade agreement as an opportunity to expand trade flows, while the moralist lectures South America on sustainability and fair trade. This tension is a major factor in the political debate. On one hand, the influential farmers' lobby fears competition from cheap South American agricultural products. On the other, powerful environmental groups—largely government-funded—push for strict ecological conditions in the treaty.

This dynamic became evident on December 3, 2024, when a motion was introduced in Dutch politics to vote against the agreement in the EU Council of Ministers. The initiators? A surprising coalition of small left- and right-wing parties, united in their opposition to the deal. The motion was widely supported and passed, placing the Netherlands among the opponents.

France

The strongest traditional opponent of the EU-Mercosur agreement in Europe is, unsurprisingly, France. The French farmers' lobby has held significant influence for decades, and the Common Agricultural Policy (CAP) is sacred to France. In 2019, French farmers received no less than €6.3 billion in EU agricultural subsidies, and these acquired rights are fiercely defended.

Under President Emmanuel Macron, the French government has further hardened its stance. Paris calls the agreement "unacceptable" and claims it endangers the Amazon. Macron insists that trade agreements cannot be separated from environmental policy and that countries failing to comply with international climate agreements should not receive trade benefits. Brazil’s President Lula counters this by accusing the EU of "green colonialism," arguing that Brazil alone determines its environmental policies without European interference.

The Supporters: Spain, Portugal, and Germany

Not all European countries share France’s stance. Spain and Portugal are outspoken supporters of the agreement. Spain sees a strategic opportunity to strengthen economic ties with South America, particularly for exporting Spanish olive oil, wine, and other agricultural products. Portugal, with its historically strong ties to Brazil, considers Mercosur its third-largest trading partner outside the EU and views the deal as a way to strengthen Europe’s geopolitical position in Latin America.

Germany is also a major supporter, though for different reasons. Berlin is primarily focused on the economic benefits for German industry. At the same time, German politics—like in the Netherlands and France—considers the impact on the environment and its own agricultural sector. This dual stance is visible in other Western European countries as well: economic opportunities versus ecological and agricultural concerns.

European Divisions

Ultimately, the EU is just as divided over the Mercosur agreement as the Mercosur countries themselves. Germany and Spain are pushing for the deal, while France, Austria, and Poland are blocking it. The core of the debate? Economic opportunities versus the protection of the agricultural sector and environmental conditions.

One thing is clear: this treaty is far more than a simple trade deal. It touches on deeper questions of sustainability, geopolitics, and national interests. Just as Mercosur countries navigate between global powers, the EU balances between being a trader and a moral authority.

Geopolitics: BRICS, China & the US

BRICS

In recent decades, the global order has undergone significant changes, shifting away from Western dominance. A key factor in this transformation is the rise of BRICS, an alliance of five major emerging economies: Brazil, Russia, India, China, and South Africa. BRICS is seen as a counterweight to traditional Western influence, particularly that of the United States. The BRICS countries collectively represent a large portion of the global population and economic output. They aim to create a multipolar world order where power is no longer exclusively in the hands of Western nations, which is reflected in joint initiatives in trade, finance, and diplomacy.

One of BRICS' key instruments is the New Development Bank, led by former Brazilian president Dilma Rousseff. This NDB is intended to provide alternative financing for infrastructure and development projects and to offer an alternative to the US dollar. Whether this is realistic remains uncertain, but US President Trump already threatened in January 2025—shortly after his inauguration—with tariffs of at least 100% "if they want to play games with the dollar."

The BRICS nations share the ambition to break Western dominance, but their internal interests vary greatly. China and India, for example, have territorial conflicts, and India is a military ally of the US, Japan, and Australia. It is therefore uncertain whether BRICS will truly form a lasting counterweight to the Western world.

Within Mercosur, Brazil is the only BRICS member, but it is also the bloc’s largest player. Argentina had applied for BRICS membership but quickly withdrew its application under President Milei. The strategic choices Brazil will make in the future remain unclear, as the country must balance its position between BRICS and the EU.

China

China, the driving force behind BRICS, has significantly expanded its influence in South America in recent years. With major infrastructure investments, it is strengthening its position in the region. A notable example is the construction of the Chancay container port in Peru, a crucial link in the maritime Silk Road (Belt and Road Initiative, BRI). This expansion now connects China’s trade route to Latin America's west coast. Such projects open new trade routes and reduce dependence on traditional transatlantic connections, further consolidating China’s grip on global trade.

Several Mercosur countries are showing interest in free trade agreements with China. Uruguay is already open to negotiations, whereas Brazil has opted not to join the Belt and Road Initiative (BRI). Within Mercosur, there is debate over the different conditions imposed by the EU and China. The EU ties trade to strict environmental requirements, which some see as "green colonialism"—an interference with national sovereignty and a brake on economic growth. China, on the other hand, imposes no political conditions, making it a more attractive trade partner for some countries.

United States

Meanwhile, the Trump administration largely distanced itself from the EU-Mercosur trade agreement. However, Trump's protectionist policies—favouring bilateral deals and imposing tariffs—clashed with the free trade agreement between the EU and Mercosur. This policy, combined with an unpredictable diplomatic approach, led both Mercosur and the EU to rethink their trade strategies.

Turning Point

Where the US was once Europe's natural transatlantic partner, it is now becoming less and less reliable. This is pushing the EU to adopt a more independent geopolitical stance. In this light, a trade agreement with Mercosur suddenly appears much more attractive. The same applies to Mercosur: in an increasingly unpredictable world, strong alliances are more valuable than ever. Despite the economic and political differences between member states, the EU and Mercosur share a long history, cultural ties, and mutual understanding. In uncertain times, these factors weigh more heavily than past frictions.

The Future of the Agreement

As of February 2025, there is still no finalized agreement between the European Union and Mercosur. Negotiations began as early as 1999 but have been fraught with difficulties from the outset. In 2004, talks were even temporarily suspended. A restart came in 2010, and on December 6, 2024, Ursula von der Leyen, President of the European Commission, along with the presidents of the Mercosur countries, announced that negotiations for the EU-Mercosur partnership agreement had been completed.

However, the deal is far from sealed. Several hurdles remain: approval by the European Commission, the Council of the EU (where the governments of the member states convene), and the European Parliament. Additionally, the parliaments of Brazil, Argentina, Paraguay, and Uruguay must also ratify the agreement.

Although signatures have yet to be placed, geopolitical shifts appear to be accelerating the negotiations. The United States has severely undermined its leadership position by making increasingly brazen demands of its neighbours and allies—ranging from claiming resources and ports in Ukraine to outright imperialistic ambitions of annexing Greenland and Canada. On top of that, unilateral trade tariffs and a gangster-like diplomatic strategy, complete with power displays, have put pressure on international relations. The American government is forcing neighbours, friends, and partners to accept "offers they can't refuse." Even Europe, once a close friend and ally, sees the writing on the wall and is rapidly distancing itself.



For Mercosur, this might feel like a form of justice—the EU is now being treated in much the same way as Latin America has been since the 19th century. But this shared experience is also leading to a broader realization: Europe and Latin America (and Canada) are in the same boat. The global order is now dominated by three major expansionist, oligarchic power blocs, with some smaller nations eager to align themselves with that dynamic. Unfortunately, this is the new reality we must contend with.

If the EU-Mercosur agreement is to succeed, both blocs must make some strategic decisions. For Europe, this means adopting a more pragmatic stance on environmental requirements, possibly through a phased implementation and compensation mechanisms for South American nations. Mercosur, in turn, will need to take steps to strengthen trade standards and transparency to reduce European resistance. Additionally, diplomatic leadership will be necessary to bridge internal divisions within both blocs—whether in Europe, where France and Germany stand in stark opposition, or within Mercosur, where Uruguay and Brazil each seek their course.

An agreement is far from a certainty, but the alternatives are even less appealing. Without a deal, Mercosur remains economically vulnerable and dependent on China and the US—a situation that is increasingly true for Europe as well. In a world where geopolitical alliances are becoming more fragile, closer cooperation is not a luxury but a necessity. The coming year will determine whether the EU and Mercosur have the resolve to move forward—or whether they will remain stuck in old patterns of distrust and division. And the latter is something we can no longer afford.