MERCOSUR in a Changing World

Relevance and the Role of the EU-MERCOSUR Trade Deal

By Tomás Díaz García

As global dynamics shift and regional blocs face renewed pressure to adapt, MERCOSUR finds itself at a crossroads. Once a symbol of South American integration, the bloc now grapples with internal divisions and external challenges that threaten its relevance. The EU-MERCOSUR Agreement, long in negotiation, embodies both the promise of modernisation and the risk of fragmentation. Can this deal revive MERCOSUR’s strategic role, or will it expose its structural weaknesses? In the end, the success of this trade partnership could redefine not only South America’s global presence but also Europe’s influence in an increasingly competitive world.

In an era of rapid technological change, environmental urgency, and shifting global power dynamics, regional alliances are redefining their purpose. Among them, the Southern Common Market, better known as MERCOSUR, stands as Latin America’s most ambitious attempt at economic and political integration. Founded in 1991 by Argentina, Brazil, Paraguay, and Uruguay, MERCOSUR was designed to promote free trade, regional cooperation, and the free movement of goods, services, and people. More than three decades later, it faces the challenge of remaining relevant in a world marked by globalisation, protectionism, and the green transition. Central to this debate is the EU-MERCOSUR Agreement, a landmark deal that could reshape the bloc’s position in the global economy.

The EU-MERCOSUR Agreement, still pending ratification, serves as both a symbol of opportunity and a reflection of the bloc’s internal contradictions. This article explores whether MERCOSUR can utilise this agreement to modernise and reposition itself on the global stage, or risk falling behind.

MERCOSUR’s Path So Far

Established in 1991 through the Treaty of Asunción, MERCOSUR (Southern Common Market) was envisioned as a vehicle for regional integration, economic cooperation, and political coordination among its founding members, previously mentioned. The bloc aimed to create a common market, eliminate trade barriers, and foster economic development through interregional trade. In its early years, MERCOSUR achieved notable successes, including a significant increase in trade among member states and the establishment of a common external tariff.

Politically, MERCOSUR has served as a platform for dialogue and regional diplomacy, promoting democratic consolidation in South America. Economically, it accounts for over 60 per cent of South America’s GDP, making it a key player in the region. However, despite its ambitions, MERCOSUR has faced persistent structural limitations. Economic asymmetries between Brazil and its smaller partners, divergent national interests, and recurring political tensions, such as the suspension of Paraguay in 2012 and Venezuela’s later expulsion, have impeded deeper integration and institutional consolidation.

New Global Challenges

In the 21st century, MERCOSUR faces a rapidly evolving global landscape marked by the twin transitions of ecological sustainability and digital transformation. Climate change imperatives demand a shift toward greener economies, while the digital revolution is reshaping global value chains and competitiveness. Simultaneously, the rise of China and the strategic rivalry with the United States have intensified global competition, compelling regional blocs to reassess their positions in the international order.

For MERCOSUR, these dynamics emphasise the urgency of modernisation. The bloc must adapt its institutional framework and economic strategies to remain relevant. Yet, it faces a dilemma: whether to embrace greater openness to global trade or to reinforce regional protectionism to shield domestic industries. This tension has often paralysed decision-making, underscoring the need for a more flexible, forward-looking integration model.

The EU-MERCOSUR Agreement

The EU-MERCOSUR Trade Agreement, agreed in principle in 2019 after two decades of negotiations, marks a significant milestone in interregional cooperation. The agreement aims to eliminate tariffs on over 90 per cent of goods traded between the two blocs, establish common rules on intellectual property, public procurement, and sustainable development, and promote political dialogue and cooperation.

The potential benefits are significant: the deal would create one of the world’s largest free trade areas, encompassing over 700 million people. For MERCOSUR, it promises increased access to the EU market, particularly for agricultural exports, while offering European firms greater entry into South American markets for industrial goods and services. Politically, the agreement could strengthen bi-regional ties and enhance MERCOSUR’s global standing.

However, the agreement has sparked controversy. Environmental concerns, particularly regarding deforestation in the Amazon, have led to strong opposition in several EU member states, notably France and Austria. Critics argue that the deal undermines the EU’s climate commitments and fails to enforce robust environmental safeguards.

Moreover, the slow ratification process has exposed internal divisions within both MERCOSUR and the EU, raising questions about the political will to implement the agreement. Whether the deal becomes a catalyst for MERCOSUR’s modernisation or a symbol of its limitations remains to be seen.

Future Perspectives

For MERCOSUR to play a relevant role in the 21st century, a structural reform agenda is essential to give it greater flexibility, institutional agility and sustainability. This involves revisiting the principle of consensus, which has hindered key decisions, and allowing for different degrees of integration among its members, following models such as the ‘multi-speed Europe’.

In addition, the bloc must look beyond its traditional borders. Diversifying alliances with regions such as Asia and Africa, as well as inserting itself into the global digital economy, are necessary steps to reduce dependence on traditional markets and adapt to new trade dynamics. Initiatives such as the Pacific Alliance or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) show that flexible, future-oriented integration is possible.

In this context, the EU-MERCOSUR agreement is a litmus test for the bloc's international credibility. Its successful implementation would demonstrate MERCOSUR's ability to negotiate and fulfil complex international commitments, while its failure could reinforce perceptions of stagnation and institutional weakness.

Conclusion

The future of MERCOSUR will ultimately depend on its ability to adapt to a constantly changing world. The ecological transition, the digital revolution and the reconfiguration of the global order require agile and coordinated responses that the bloc, in its current form, is still struggling to provide.

The agreement with the EU represents a historic opportunity: it could be the catalyst that drives the modernisation of MERCOSUR and better integrates it into the global economy. However, it could also become a mirror that reflects its internal contradictions and the lack of cohesion among its members.

In an increasingly interdependent world, regional integration is not an option, but a condition for survival. MERCOSUR must decide whether it wants to be a relevant player on the global stage or be relegated to the periphery of the great transformations of the 21st century.

Sources: MERCOSUR, European Commission, EuroNews, Bruegel, CIDOB (Barcelona Centre for International Affairs), Council on Foreign Relations, Aduana News, Asian Trade Centre, ScienceDirect, Taylor & Francis Online.

Written by Tomás Díaz García. 

Edited by Sarah Valkenburg and Nina Gush.