After over two decades of negotiations, the European Union (EU) has finalized a significant trade agreement with four Mercosur countries: Brazil, Argentina, Paraguay, and Uruguay.

This landmark agreement establishes one of the largest free trade zones in the world, encompassing 720 million people, including 273 million from Mercosur and 447 million from the EU.

The European Commission has highlighted several benefits of the agreement, including the elimination of trade barriers that will facilitate the sale of goods and services and encourage investment in Mercosur.

Moreover, the agreement is set to promote sustainable access to critical raw materials, thereby enhancing economic security and supporting dual transitions.

By strengthening value chain integration between the EU and Mercosur, the agreement aims to help industries remain competitive on a global scale.

For Portuguese companies, the reduction of high tariffs on products such as wine, olive oil, cheese, machinery, chemicals, car parts, and pharmaceuticals presents significant opportunities.

This agreement is particularly beneficial for Portugal as it allows for diversification of export markets, especially in light of economic challenges faced by Germany and France.

Additionally, the agreement facilitates direct investment opportunities for both Mercosur companies in Portugal and Portuguese companies in the Mercosur market, leveraging cultural ties, especially with Brazil.

Despite facing some final hurdles, including internal opposition in France and Italy regarding agricultural competition and environmental concerns, the agreement reflects the EU's efforts to regain economic and geopolitical relevance.

The agreement also aims to shape global trade rules in accordance with the EU's stringent standards, sending a strong pro-rule trade signal against protectionism.

The importance of trade policy for Europe's future competitiveness has been emphasized in the Draghi report, underscoring the strategic significance of this agreement.

However, Portuguese firms may encounter increased competition from tariff-free Mercosur products, including textiles, footwear, and low-cost agricultural goods.