Mercosur Trade Expansion

By Lisandra Paraguassu and Anthony Boadle

Overview

BRASILIA (Reuters) – Brazil anticipates that the South American trade bloc Mercosur will accelerate free trade negotiations following a recent agreement with the European Union. As the threat of U.S. tariffs under President Donald Trump looms, countries are diversifying their export options, according to diplomats.

Future Trade Agreements

Among the prospective new trade deals for Mercosur in the coming year are agreements with the European Free Trade Association (EFTA), which comprises four non-EU nations, and with the United Arab Emirates (UAE). Additionally, Singapore has reached a preliminary agreement with Mercosur, which is currently being translated for ratification by its government.

Brazilian officials state that this is an opportune moment for Mercosur to advance negotiations, with several countries already showing interest in collaboration. If these deals progress, they could revitalize the bloc, which includes Brazil, Argentina, Uruguay, Paraguay, and Bolivia.

Norway has expressed interest in finalizing an EFTA-Mercosur agreement by the first half of 2025, emphasizing the urgency of concluding negotiations given the recent EU-Mercosur agreements. The UAE hopes to enhance commerce with Mercosur and anticipates reaching an agreement within the year.

Impact of U.S. Tariffs

Threats of new tariffs from President Trump are compelling major U.S. trade partners, including Mexico, to consider alternatives to the USMCA despite its upcoming review. Mexico is exploring deeper ties with Mercosur to diversify its trade relationships.

Although there are ongoing discussions for a trade deal between Mercosur and Canada, Canadian officials indicate that their focus will remain on USMCA negotiations, potentially delaying talks with Mercosur.

Negotiations are also underway with South Korea, Vietnam, Indonesia, and Lebanon. Brazilian officials emphasize the desire to engage with other Asian trade partners, although agricultural lobbies in those countries may resist competition from Brazil and Argentina.