Carnival of Opportunities following the MERCOSUR-EU and US-ARGENTINA Agreements

Signed in January and February, the EU-Mercosur and US-Argentina agreements present different, yet complementary, characteristics. Their combination generates a circumstantial geopolitical controversy. In Argentina, for example, both agreements are currently vying for parliamentary ratification. While the Mercosur-EU agreement required 25 years of negotiations, the one signed between the US and Argentina took no more than a year and a half, defying the rule of Mercosur Council Decision 32/00, which establishes a principle of joint negotiation by the member states. This outdated regulation, consisting of four articles and signed in a different context, unexpectedly ignited a legal debate about its validity for two and a half decades—precisely the same amount of time it took Mercosur to finalize the agreement with the EU. Without hesitation, this decision must be repealed, or it will generate a pointless regional conflict. 

USA-Argentina, Carnival opening Monday

While on February 5, at a bilateral meeting in Brasilia at the Brazilian Agency for the Promotion of Exports and Investments (APEX), Brazil and Russia were outlining serious guidelines for a strategic trade agreement, Argentina was signing its bilateral trade and investment agreement with the US.  

This agreement aims for detailed trade liberalization by product, as outlined in Annex I for Argentina and Annex II for the US, through a tariff treatment by category established in the supplementary notes. Products are fully liberalized (EIF), subject to a reduced tariff of 2% (R2), and include products with most-favored-nation (MFN) status (Z) and tariff-rate quotas (TRQ). Furthermore, Annexes 2A and 2B exempt Argentine products from the tariffs imposed by President Trump's Executive Orders 14257 of April 2, 2025, and 14360 of November 14, 2025. For all other products, the additional tariff will be 10%. The EU-Mercosur agreement is not as dynamic.  

EU-Mercosur: a “mardi gras” of carnival 

While  Brazil's growth serves as a model of economic prosperity for Mercosur, it hasn't provided the other members with any impetus. Mercosur's only success is owed to the temporary residency program that has integrated its member societies, fostering investment in private businesses. A stroll through Florianópolis is enough to confirm this.  

The EU-Mercosur agreement promises free trade among 700 million people, boosted by the extraordinary provisional application of Article 23.3, which applies before the agreement enters into force. However, it does not contain, for example, a chapter dedicated to digital trade. The only references to digital trade and data protection arise from Article 16, which deals with the reciprocal dissemination of information on telecommunications and technological cooperation. This remarkable provisional application, embodied in Article 23.3, takes effect on the first day of the second month following the notification of ratification of the agreement by a Mercosur country and by the EU.  

The concept of fair international trade recognizes, for example, geographical indications for agro-industrial products and mobilizes a €1.8 billion enhanced cooperation fund, administered and implemented annually within each EU budget. It symbolizes a triumph of multilateralism, so strongly championed by Brazil in recent times and also by the EU, embodying a political dialogue on cooperation (Association Agreement) and trade (Interim Agreement). The association establishes guidelines for sustainable development, environmental protection, digital transformation, human rights, mobility, counterterrorism, and crisis management. A comprehensive trade agenda will safeguard labor rights and corporate social responsibility.   

The interim agreement focuses on facilitating investment, eliminating trade barriers, and simplifying public procurement, while leaving open the possibility of implementing agricultural safeguards through tariffs and specific price monitoring. These agricultural safeguards were recently approved on February 10th by the European Parliament with 483 votes in favor, passing a regulation that entrusts the Commission with monitoring import trends for agricultural products. This regulation triggers alarms when a Mercosur product's price is 10% lower than the price of the same European product. If an investigation reveals serious harm to European farmers, tariff preferences will be withdrawn. Parliament also requested an advisory opinion from the Court of Justice on the legal compatibility of these safeguards.

Argentina: Ash Wednesday for Mercosur

Four liberal governments created Mercosur in 1991, and four conservative governments reformulated it in 2000, demanding integration with social justice. They incorporated the Buenos Aires Social Charter and Regulation 32 to prevent members from individually signing preferential agreements within ALADI. Around the same time, they began to erode Mercosur's external tariff with exceptions, which, at Argentina's insistence, increased to 150 products in 2024. 

Mercosur has never regulated or negotiated foreign investment, both domestic and foreign, which for the past 20 years has flourished almost exclusively in the Brazilian economy. Only in 2017, and for the only time, did they negotiate foreign investment in a powerless document with no practical results (Decision 3/17). While Brazil was breaking world records in attracting direct investment, the other members were mired in political crises, demanding the possibility of negotiating tariff preferences bilaterally with third countries. For decades, they confused foreign trade with investment, and Brazil did nothing to help them correct this misconception.  

In February, Argentina's 2024 demand was transformed into a bilateral agreement with the US that streamlines strategic investments between the two countries, repealing the unenforceable regulation 32/00. Having overcome its fear of challenging Brazil with bilateral negotiations, the Brazilian government has until June, in the midst of an election year, to either challenge Argentina—and the US—or allow all Mercosur countries to finally negotiate their agreements individually. Brazil could now deepen its BRICS alliance with tariff preferences, given that it has not yet been able to negotiate with the US. This objective has been postponed for the next government.   

Business opportunities for both agreements.  

Mercosur is neither a customs union nor a free trade area. Its legal disruption is not serious in the current tariff context of international trade. These two agreements politically shape the region's future. Argentina needs the agreement with the US to finally develop its exports, which have been stifled for two decades by internal tariffs in the form of export taxes. Brazil is already a stable global exporting power, so any legal challenge to the Argentina-US agreement within Mercosur represents an attack on its continuity, laden with unnecessary protectionism compared to the business opportunities it generates.  

Both agreements contain rigorous intellectual property protection clauses. Argentina will permit and facilitate US investment in its territory to explore, exploit, extract, refine, process, transport, distribute, and export critical minerals and energy resources, as well as to provide power generation, telecommunications, transportation, and infrastructure services, on terms no less favorable than those it grants to its own investors in similar circumstances, and will regulate such investments in accordance with the minimum standards of international law (Art. 5.1 US-Argentina). These US businesses will not go to Brazil. This rule grants them preferential treatment over European companies. US companies will contribute advanced technology, operating standards, and management practices that will increase Argentine productivity and allow them to expand within Mercosur.  

Trump has just decreed an increase in the import quota for Argentine beef from 20,000 to 80,000 metric tons. Upon entering the US, Argentine beef and poultry will obtain FSIS 9060-5 quality standard certification and will be able to enter markets such as Canada—if the USMCA trade agreement survives—gaining a unique and fundamental recognition for global exports. The EU will eliminate tariffs on 92% of imports from Mercosur, benefiting key products such as beef, poultry, soybeans, coffee, and fruit. The EU-Mercosur agreement is structural, modeled on the European bloc, and meticulously controlled by agricultural trade oversight and safeguards, while the agreement between Argentina and the US establishes reciprocal access, sanitary harmonization, and constant and unlimited productive complementarity.  

Both agreements will have a substantial impact on the dynamics of the automotive market. The EU will benefit from a gradual reduction of the Mercosur tariff to 35% over a period of up to 15 years, starting with a 25% reduction. In turn, the US will be able to export 10,000 vehicles per year duty-free to Argentina, allowing for the much-needed renewal of its vehicle fleet.  

Argentina will not tax digital trade with the United States, nor will it impose any conditions for accessing a specific technology, production process, source code, or for purchasing, using, or granting preferential treatment to a specific technology as a condition for doing business within its territory. It will provide certainty for transferring personal data from its territory to the United States, recognizing U.S. jurisdiction as offering an adequate level of data protection under Argentine law. In this way, Argentina commits to maintaining more rigorous digital security standards than those of Mercosur—standards that were not even negotiated within the bloc. 

The compliance parameters established in the US-Argentina agreement will guide Argentina towards modern and well-paid international trade, accelerating negotiations and controls of the interim EU-Mercosur trade agreement.  

Finally, it is worth noting a detail in the preamble to this latest agreement: it was signed between the EU and four countries, member states of Mercosur, and is not an agreement between regional blocs. Each Mercosur country maintains its functional autonomy for its implementation.