May 1 marked a turning point for the history of South America: a part of the trade agreement between regional bloc Mercosur and the European Union (EU), which had been in talks for over two decades, finally became operational.

The deal is a key step to boost Mercosur exports, allowing Argentina, Brazil, Uruguay, and Paraguay to enter or increase their presence in European markets, especially regarding agricultural products.

In turn, it will allow those countries to receive industrial machinery, cars, pharmaceuticals, and other manufactured products from Europe. The deal created the largest free-trade area in the world, representing around 20% of the global GDP. While it’s a huge opportunity for the South American region, it doesn’t come without challenges or hurdles.

What exactly is underway?

Following years of negotiations, Mercosur and the EU decided to split the agreement into two.

The first is a trade-only segment, which eliminates tariffs for most products sold by both blocs and grants preferential, lower tariffs to some Mercosur products like beef, soy, honey, and rice to export to Europe via a quota system.

The other part is a broader association agreement, which includes clauses relating to environmental protection, sustainable development, and human rights.

What became provisionally operational on May 1 is the interim trade-only segment, after it was approved by the EU and Mercosur countries.

The broader association agreement needs to be greenlighted by the European Parliament and the national parliaments of the EU countries to enter into force.

“The agreement is a great opportunity for Mercosur to improve its structural competitiveness as a bloc, because we will be competing in super-strict markets and moving forward with good trade practices,” Esteban Actis, a lecturer and researcher in international relations, told the Herald.

In addition, it is a strategic geopolitical move, allowing both blocs to diversify their markets and supply chains “in a fragmented world that is tending more and more towards protectionism,” said Actis, who teaches at the National University of Rosario.

However, to fully reap the benefits of the agreement, Mercosur countries must first sort out some obstacles: adapting to strict European regulations,........

© Buenos Aires Herald