After 26 years of negotiations since 1999, the European Union and Mercosur (Argentina, Brazil, Paraguay, Uruguay, and Bolivia) signed a landmark free trade agreement on January 17, 2026, in Asunción, Paraguay. The deal creates one of the world's largest free trade zones, spanning about 720 million people and 20% of global GDP, by eliminating tariffs on over 90% of bilateral trade and promoting sustainable development amid rising protectionism.
The signing ceremony occurred at noon in the José Asunción Flores theater in Paraguay's capital, under Paraguay's rotating Mercosur presidency. Mercosur leaders present included Presidents Santiago Peña (Paraguay), Javier Milei (Argentina), Yamandú Orsi (Uruguay), and Rodrigo Paz (Bolivia), alongside Brazilian Foreign Minister Mauro Vieira. European officials attending were European Commission President Ursula von der Leyen and European Council President António Costa. Brazilian President Luiz Inácio Lula da Silva, unable to attend due to scheduling, met von der Leyen and Costa the previous day in Rio de Janeiro, praising the deal as a victory for multilateralism, democracy, and shared values.
Talks, relaunched in December 2024 after European Commission approval in September 2025, culminated in this final agreement. Von der Leyen emphasized 'fair trade over tariffs' and a 'productive partnership over isolation,' contrasting with global protectionism like U.S. President Donald Trump's tariff threats. Peña called it a 'historic day' and 'clear signal for international trade,' crediting Lula's role—though Milei refrained from applauding. Vieira highlighted foundations for 'sustainable development.'
The pact progressively eliminates 91-92% of tariffs: EU on Mercosur agricultural goods like beef, poultry, soy, sugar, rice, and honey (with quotas); Mercosur on EU industrial products like cars, machinery, wines, and cheeses. For Brazil, it promises diversification beyond commodities, boosting aviation (US$662.6 million exports to EU in 2024) and machinery (US$1.2 billion). Milei defended free trade against protectionism, Orsi stressed democratic values, and Paz pledged Bolivia's full integration.
Despite benefits, the deal faces opposition from European farmers, particularly in France, over import competition, and requires parliamentary ratification in both blocs. Implementation may face delays.
