Historical opportunity and challenges of the Mercosur-EU and Mercosur-EFTA Agreements Argentina - Uruguay

On 16 September, Mercosur announced the signing of the Free Trade Agreement with the European Free Trade Association (EFTA), comprising Switzerland, Norway, Iceland and Liechtenstein, an agreement that opens up new opportunities in a free trade area of almost 300 million people, with a combined GDP of more than US$ 4.3 trillion, which will facilitate the internationalisation of companies in the region as well as attract investment.

Meanwhile, the historic Mercosur-European Union agreement, politically signed in 2019, has regained significant momentum after 25 years of negotiations, after the European Commission presented its proposals to the Council on 3 September for the signing and conclusion of the agreement, which could be ratified before the end of 2025 and which will create a market of more than 700 million consumers, consolidating the largest free trade area globally.

Both treaties, although different in scope and content, represent a structural change for Argentina and Uruguay.

Undoubtedly, they position them as countries open to the world, committed to international standards, and with the potential to access markets with high purchasing power. However, they also imply legal, institutional and commercial challenges that must be carefully assessed.

2. Legal challenges ahead

2.1 Argentina

For the Republic of Argentina, these agreements increase the opportunities to attract foreign investment as they create a clear regulatory framework and a dispute settlement mechanism that provides certainty and predictability to economic operators.

Meanwhile, they promote regulatory integration within Mercosur and with the region, as these agreements indirectly promote economic issues of the internal agenda of the regional bloc in terms of free circulation, regulatory harmonisation and simplification of procedures, advancing in disciplines not yet regulated intra-regionally that allow for the creation of a single market.

In terms of trade operations, they facilitate and simplify the transit of goods, reducing physical inspections and establishing clear and transparent criteria for the actors.

In sum, the agreements foresee provisions that generate greater transparency, predictability and confidence for implementation and cooperation in the different areas, such as technical regulations, standards and procedures, which will facilitate trade between the parties.

2.2 Uruguay

In the case of Uruguay, the treaties imply the need for regulatory and administrative adjustments in several key areas.

In the area of public procurement, regulations will have to be adapted to ensure a level playing field between national and European bidders, which may have an impact on government procurement systems and the regulation of local preferences.

In the area of intellectual property, legislation and administrative practices on patents, trademarks, geographical indications and copyright will need to be updated and brought into line with stricter European standards.

On the other hand, exports will have to comply with more demanding technical regulations that meet the sanitary and phytosanitary standards and certification requirements of the signatory countries, which implies strengthening the role of the Ministry of Livestock, Agriculture and Fisheries (MGAP) and LATU, both in terms of inspection and certification.

Finally, environmental and social sustainability impose binding commitments, which will require institutional reforms or strengthening in environmental matters, labour rights and citizen participation.

3. Institutional implications

3.1 Argentina

The Mercosur-EU agreement will generate institutional repercussions in Argentina, mainly through the need for legislative adaptation and the involvement of the branches of government in its implementation.

In addition to congressional approval, greater coordination will be required between ministries (Economy, Production, Foreign Ministry) and bodies such as SENASA and INTI, which will have to implement policies that promote competitiveness and investment and comply with the new standards assumed in the agreements, such as sanitary and phytosanitary standards.

Argentina must adapt and strengthen its institutions linked to foreign trade, and public institutions must train their officials in technical issues such as rules of origin, certifications and European standards.

3.2 Uruguay

These agreements also have a direct impact on the structure and functioning of the Uruguayan state.

In terms of technical capacities, the challenge they present is the need for training and modernisation of ministries, regulatory agencies and customs authorities in order to effectively apply the provisions of the treaties and generate a modern economic, regulatory and institutional environment.

Uruguay will also need to establish robust internal trade defence mechanisms to use safeguard, dispute settlement and anti-dumping clauses in case local productive sectors are affected.

Meanwhile, Parliament should review multiple sectoral regulations to ensure coherence with international commitments, which could include reforms to trade, environmental protection, state procurement and competition laws.

On the other hand, institutionalising a political and strategic relationship will also strengthen political, cultural and economic ties, deepening the roots that unite both regions.

4. Direct effects on the private sector

4.1 Argentina

Argentina has managed to establish a solid trade relationship with the EU, with the European bloc being one of its main partners.

Currently, Argentina's exports to the EU represent approximately 10.24% of its global sales, a significant figure in the country's foreign trade. Among the most important products exported by Argentina to the EU are soybean meal, peanuts and refrigerated beef.

Soybean meal is the main export product to the EU, with a value of 628 million dollars, followed by refrigerated beef for 458 million dollars.

This set of exports not only highlights Argentina's relevance as a supplier of high-quality foodstuffs, but also shows the growing interdependence between the two blocs in strategic sectors.

With the agreement, Argentine exports to the EU are expected to increase significantly, opening up new opportunities for these products as well as for wine, citrus fruits, soybean oil, and dairy products. In addition, market integration will strengthen Argentina's small and medium-sized enterprises, improving their capacity to export to the European bloc.

These agreements will equalise the access conditions enjoyed by competitors of Argentine products that have been signing preferential agreements with the EU for years, and will guarantee the stability of the rules of access to one of the main export markets, avoiding the risk of being affected by protectionist measures that could be applied.

In services, the EU is the world's leading importer of services. Argentina, an exporter of knowledge-based services, will benefit from the removal of most of the existing barriers and will also be able to compete on equal terms in the European market.

The agreements foresee the development of programmes to facilitate the integration of SMEs into global value chains, as well as technical assistance in the areas of technical regulations and standards.

Also, the participation of SMEs in government procurement procedures and access to information on procurement requirements.

4.2 Uruguay

Uruguayan business, especially exporting SMEs, will also face practical changes.

The European Union is a strategic trading partner of Uruguay, accounting for 14% of Uruguayan exports of goods in 2024, with a value of US$ 1,786 million. Among the main exported products are cellulose, beef and rice.

One of the most relevant benefits of the agreement is the progressive elimination of tariffs for more than 90% of Mercosur's exports to the EU, which will reduce costs and strengthen the competitiveness of Uruguayan exporting companies. This opens up new possibilities for agro-industrial sectors, but also for strategic sectors such as renewable energies and green hydrogen.

On the other hand, companies will have to invest in improving production processes and certifications to comply with European standards and technical requirements.

In terms of legal protection, the legal framework for investments and exports will be strengthened, reducing commercial risks and providing greater predictability.

5. Final considerations

In summary, the Mercosur-EU and Mercosur-EFTA agreements are much more than trade agreements; they represent a strategic step forward for both Argentina and Uruguay to become more competitive and dynamic economies.

The entry into force of these treaties -once ratified- will not only be an economic issue, but a real legal-regulatory transformation.

It is an opportunity for them to consolidate their position as key players in global trade, which will result in increased investment, improving the region's economic prospects.

The success of its implementation will depend on the capacity of states to adapt to the new regulations, and on public-private collaboration to make the most of the new opportunities.