EU-MERCOSUR: STRATEGIC OPPORTUNITIES AND PRACTICAL
IMPLICATIONS FOR ITALIAN BUSINESSES
Key takeaways from the DG TRADE Italian Edition discussion – 26 May 2026

INDEX

• Executive Summary
• Market Access, Competitiveness and Regulatory Simplification
• Sector-Specific Implications and Strategic Considerations for Italy
• Conclusions

Executive Summary

The DG TRADE Italian Edition discussion on 26 May 2026 provided a practical overview of what the EU-Mercosur Agreement could mean for Italian businesses, placing the debate within a broader geopolitical and commercial context. The discussion made clear that the agreement is being framed not only as a trade instrument, but also as a strategic response to Europe’s declining competitive position in parts of Latin America, particularly in comparison with China’s growing economic footprint in the region.

A central message from the speakers was that the agreement would create opportunities for European exporters by reducing both tariffs and administrative barriers, while preserving EU regulatory standards. For Italian businesses, this could translate into stronger market access, improved protection for geographical indications, and a more predictable commercial environment in sectors where Italy has established strengths. At the same time, concerns around sensitive agricultural imports were directly addressed, with assurances that EU food safety requirements and market safeguard mechanisms remain fully in place.

Market Access, Competitiveness and Regulatory Simplification

Much of the discussion focused on the practical implications of the agreement for European companies seeking to expand in Mercosur markets. Speakers emphasized that the commercial value of the agreement goes well beyond tariff reductions. A major advantage lies in the reduction of non-tariff barriers that often make exporting costly and slow, including duplicative technical checks, burdensome certification procedures, and import authorization processes that create uncertainty for businesses.

The agreement was also presented as a strategic tool to strengthen Europe’s competitive position in Latin America at a time when Chinese firms have become increasingly embedded in the region. According to the speakers, European businesses currently face a structural disadvantage in markets such as Brazil and Argentina, where China has consolidated its presence while European market share has weakened. Because China does not currently benefit from an equivalent trade arrangement with Mercosur, the agreement could improve the relative position of European exporters, particularly in sectors such as automotive manufacturing, fashion, wine, and industrial goods where Italian companies are especially active.

Sector-Specific Implications and Strategic Considerations for Italy

A more technical part of the discussion focused on rules of origin, which will determine whether products qualify for preferential tariff treatment. Speakers acknowledged that these requirements can be complex and differ significantly depending on the sector, especially where supply chains rely on components sourced globally. This means that businesses will need to assess carefully whether their products can effectively benefit from the agreement in practice.
For Italy, the agreement was presented as especially relevant for industries that rely on quality, brand value, and product authenticity. The protection of geographical indications was highlighted as a concrete gain, with products such as Parmigiano Reggiano expected to benefit from stronger recognition and protection in Mercosur markets. Agricultural sensitivities were also openly discussed, particularly concerning beef imports, with the Commission underlining that monitoring tools and safeguard measures are intended to mitigate risks for vulnerable European sectors. The discussion also briefly addressed Mercosur’s evolving political composition, including Bolivia’s prospective accession and Venezuela’s continued suspension, both of which may shape future developments.

Conclusions

The discussion framed the EU-Mercosur Agreement as a strategic attempt to combine economic opportunity with geopolitical positioning, offering new openings for European businesses while seeking to preserve the regulatory safeguards and market protections that remain central to the EU’s trade approach.

• • The EU-Mercosur Agreement is being positioned as both a commercial opportunity and a
    strategic instrument to strengthen Europe’s presence in Latin America.

• • For Italian businesses, the most immediate potential benefits lie in improved market access,
    reduced administrative barriers, and stronger protection for high-value branded products.

• • Real commercial gains will depend on companies’ ability to navigate technical implementation issues, particularly rules of origin and product-specific compliance requirements.

• • While sensitivities remain in agriculture, the Commission’s message was that regulatory
    protections and monitoring mechanisms are designed to ensure that market opening does not come at the expense of EU standards or vulnerable sectors.

GA‑Alliance Shares Key Takeaways on the EU–Mercosur Agreement
3 February 2026

GA‑Alliance – Global Legal and Tax Advisors presents the latest developments on the EU–Mercosur Agreement following its international webinar “The EU–Mercosur Agreement and the Future of Transatlantic Business”, held on 22 January 2026. The discussion brought together experts from Europe and Latin America to assess the agreement’s practical impact on companies, trade flows, and regulatory frameworks across both regions.

Signed on 17 January 2026, the EU–Mercosur Partnership Agreement introduces wide‑ranging commitments, from significant tariff reductions to strengthened sustainability, SPS and intellectual‑property provisions, as outlined by GA Alliance. Speakers highlighted the geopolitical relevance of the agreement, its potential to diversify EU supply chains, and the opportunities it creates in sectors such as energy, agribusiness, industrial production, and services.

GA‑Alliance continues to monitor the institutional process, including the pending review before the European Court of Justice, and provides integrated guidance to businesses navigating the evolving regulatory landscape.

A detailed briefing with country‑specific insights and legal analysis is available here: click to access the full document.

EU-MERCOSUR AGREEMENT: The future of transatlantic business

Table of Content

• Executive Summary
• State of the Agreement and Institutional Process
• Strategic relevance of the agreement for the EU
• Legal, trade and sustainability aspects
• Country perspective and sectorial implications
• Conclusions

Executive Summary

This document provides an update on the status of the EU–Mercosur Association Agreement following the seminar organized by GA-Alliance – Global Legal and Tax Advisors together with its partners in South America, held during the webinar on 22 January 2026 entitled “The EU–Mercosur Agreement and the Future of Transatlantic Business.”

The webinar event brought together GA Alliance professionals from Europe and Latin America, confirming the Alliance’s role as an international platform capable of connecting the two continents and offering an integrated analysis of the main developments in international trade, regulation, and tax strategy. The panel — made up of experts from Italy, Argentina, Brazil, Paraguay, Uruguay, Venezuela, and Colombia — discussed the practical significance of the agreement for European and Latin American businesses, examining commercial, regulatory, and operational implications.

The webinar also highlighted that the agreement, politically concluded after more than 25 years of negotiations, represents far more than a tariff deal: it introduces new sustainability standards, rules on intellectual property, procurement opportunities, and a regulatory framework that will reshape the economic axis between the EU and Mercosur. The gradual elimination of over 90% of customs duties could generate significant benefits for European and Italian exports, estimated at more than €14 billion.

GA Alliance, leveraging its global presence in over 80 countries and a multidisciplinary team of more than 2,600 professionals, continues to monitor developments in the agreement, offering an integrated perspective on the impacts for economic operators and investors, and translating a complex debate into concrete guidance for international stakeholders.

State of the Agreement and Institutional Process

The EU-Mercosur negotiation process began in 2000, following earlier exploratory dialogues and cooperation frameworks dating back to the 1990s. After years of intermittent negotiations, the parties reached a political agreement on 6 December 2024 on a comprehensive Partnership Agreement (EU-Mercosur Partnership Agreement, or “EMPA”), covering trade, political dialogue, cooperation and sustainable development.

Subsequently, on 3 September 2025, the European Commission adopted proposals for the Council to authorise the signature and conclusion of two parallel legal instruments: the EMPA and an Interim Trade Agreement (“iTA”), designed to allow trade commitments to be applied ahead of the full EMPA’s entry into force.

On 9 January 2026, the Council of the European Union formally adopted the decisions authorising the signature of both the EMPA and the iTA.

The agreements were signed on 17 January 2026 by representatives of the EU and the Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay) in Asunción, Paraguay.

At this stage, the EMPA and the iTA are concluded instruments. However, their entry into force depends on further procedures: the EMPA must be ratified by all EU Member States and Mercosur legislatures, while the iTA will enter into force once the European Parliament gives its consent and the Council concludes it.

Currently, EU ratification of the agreement is suspended pending review by the European Court of Justice following a referral by the European Parliament in January 2026 over questions related to legal competence, the precautionary principle, and the structure of the agreement, a process that may take up to approximately 18-24 months.

Strategic relevance of the agreement for the EU

From the perspective emerging during the seminar, the EU-Mercosur Agreement was presented as a legal, political and institutional instrument with clear geopolitical relevance, capable of reshaping long-term economic leadership through rule-based cooperation.

Beyond trade liberalisation, the agreement was framed as a tool to reinforce the EU’s strategic presence in South America at a time of mounting global fragmentation and intensified competition from China. In an increasingly unstable geopolitical environment, the EU must diversify not only its export markets but also its sources of imports, while establishing solid contractual ties with reliable partners.

The Mercosur region comprises approximately 300 million inhabitants and represents a major trading area. The EU is Mercosur’s second-largest trading partner, while Mercosur is the EU’s tenth-largest trading partner. Historically, the EU remains the largest investor in the region, with European companies operating in Brazil and Argentina for over a century. In 2024, the EU accounted for 16.8% of Mercosur’s total trade. EU exports to Mercosur amounted to €53.3 billion, while Mercosur exports to the EU totalled €57 billion.

Mercosur’s main exports to the EU consisted primarily of agricultural products (42.7%), mineral products (30.5%), and pulp and paper (6.8%), whereas EU exports were dominated by machinery (28.1%), chemicals and pharmaceuticals (25%), and transport equipment (12.1%). In the services sector, in 2023 the EU exported €28.5 billion to Mercosur, while Mercosur exported €13.1 billion to the EU.

The agreement is structured around four main pillars (trade, investment, sustainability and cooperation) and is expected to generate estimated tariff savings of around USD 4 billion per year. The schedule of commitments reflects an asymmetric and gradual approach, with Mercosur granted up to 15 years to dismantle tariffs on around 90% of imports, while the EU would liberalise approximately 93% of imports from Mercosur within 10 years.

Over the long term, the agreement is expected to support industrial production, facilitate access to capital goods, enable accumulation of origin between the two blocs and foster intra-bloc trade, with positive GDP effects projected towards 2040.

Legal, trade and sustainability aspects

Food safety and sanitary and phytosanitary (“SPS”) controls are integrated into the agreement’s operational framework.

The EU already imports beef and other products from Mercosur countries, and the agreement maintains existing EU sanitary legislation while intensifying border checks. Only authorised slaughterhouses may export to the EU, subject to 100% documentary controls, supported by a rapid alert system among Member States and bilateral safeguard clauses to prevent sudden import surges or price collapses. The EU has also doubled available crisis funds for the agricultural sector.

Legal certainty is reinforced through references to the precautionary principle and WTO-aligned SPS measures, while the rebalancing mechanism (modeled on GATT framework) provides a structured dispute resolution pathway, allowing a party to request compensation if measures nullify expected benefits. These mechanisms underpin both predictability and enforceability, contributing to the robustness of the agreement.

Sustainability commitments are central, including legally binding obligations to halt deforestation and align with the Paris Agreement, Sustainable Development Goals, and Glasgow Leaders’ Declaration on Forests. The agreement also provides a platform for dialogue on the EU Deforestation Regulation and wider environmental initiatives.

Country perspective and sectorial implications

While the EU-Mercosur agreement sets a common framework, its economic and regulatory impact varies significantly across the member countries, reflecting differences in population size, industrial structure, and trade policies. Understanding these national perspectives is essential to grasp the practical implications of the agreement and the opportunities it creates for trade, investment, and sustainability initiatives.

• Paraguay benefits from extensive differentiated treatment designed to bolster its domestic processing and service sectors. The agreement grants an exclusive 10,000-tonne quota for organic sugar at a zero-percent tariff, alongside preferential 5% duties for critical auto part designations. To ensure stability, the framework provides extended timelines for trade defense and sanitary measures, including a two-year extension of the Generalised Scheme of Preferences (“SGP”) conditions for key exports like corn and yerba mate. By preserving national policy space for public procurement and amplifying service exclusions, the agreement facilitates integrated value chains in biofuels, honey, and oilseeds while fostering a robust market for sustainability certification services.

Argentina is positioned as a relevant dual energy partner for Europe, offering immediate and long-term solutions to the continent’s energy needs. In the short term, the country is set to supply natural gas and LNG from the Vaca Muerta formation under stable, long-term contractual arrangements. Looking ahead, the focus shifts to the renewable energy sector and green hydrogen, underpinned by the extraction of critical minerals such as lithium and copper. These initiatives are closely aligned with Europe’s decarbonisation agenda and are supported by the “Global Gateway” initiative. This framework facilitates technology transfer and attracts European investment into projects that strictly adhere to Environmental, Social, and Governance (“ESG”) standards.

Brazil, with over 210 million inhabitants, represents most of the Mercosur’s population and a leading global agricultural exporter. The agreement is broadly compatible with existing practices among large companies already aligned with EU standards, though smaller firms may need to adjust. Key improvements include the simplification and digitalisation of customs procedures, the mutual recognition of certifications, and a potential reduction of the “custo Brasil.” by mitigating the structural and bureaucratic burdens that historically inflate the cost of operations in the country. Additionally, the agreement fosters enhanced competitiveness through interactions with the current VAT reform. The analysis also covered consumer prices and investment decisions across sectors such as machinery, vehicles, fertilisers, and food and beverages.

Conclusions

GA-Alliance’s seminar showcased the value of practitioner-led, cross-regional analysis in breaking down the legal and economic complexities of the EU-Mercosur agreement. By providing a bridge between policy and practice, the discussion translated high-level trade objectives into concrete opportunities for the private and public sectors.

• The EU-Mercosur agreement constitutes a strategically significant instrument to reinforce the EU’s global competitiveness, diversify trade and supply chains, and secure access to critical resources and energy supplies.
• The agreement establishes robust legal, trade and sustainability mechanisms, including precautionary and SPS measures, rebalancing provisions, and enforceable climate and deforestation commitments.
• Differentiated treatment for specific Mercosur countries, combined with sectoral and investment provisions, supports agribusiness, energy transition, industrial production, and integrated value chains across the region.
• The agreement offers measurable long-term economic benefits, including tariff reductions, market access, investment opportunities, and enhanced cooperation on environmental and sustainability objectives.

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3 February 2026

Bruxelles

Cross Border Investment in Latin America

Banking and Finance

Paraguay reaches investment grade for the first time in its history

The risk rating agency Moody's announced that it raised Paraguay's credit rating from Ba1 to Baa3, granting it investment grade for the first time in its history, reported the Ministry of Economy and Finance (MEF) on past July 24, 2024. Paraguay joins a select group of countries in the region to have the sovereign degree, Chile, Colombia, Mexico and Peru.

In a statement, they indicated that this stable outlook is reached after 26 years when the rating agency assigned a rating to Paraguay for the first time and after 9 years since the last upward review. "This unprecedented achievement is based on the country's solid economic fundamentals and its long history of macroeconomic stability," the MEF said.

They claim that it is the result of more than 20 years of responsible, consistent and predictable public policies. Prudent management of macroeconomic policies was able to achieve and preserve the sustainability of public finances and maintain low inflation

Tax

Agreement between Paraguay and Spain to avoid double taxation finally in force

After ratification by Paraguayan Law Nr. 7.271/2024 and publication in the Official bulletin of the Spanish Kingdom on July 29, 2024, said important agreement for the economic relationships between both countries shall be in force starting October 14, 2024, having effect for all tax purposes since January 1, 2025.

The agreement comprehends the Personal Income Tax, Corporate Tax and Non Resident income taxes in both countries (the so called IRP, IRE and IDU, and INR in Paraguay and IRPF, IS and IRNR in Spain) document observes OECD standards and includes measures to prevent tax base erosion and profit shifting (BEPS), affecting to Personal and Company income taxes in both countries (including income taxes for non-residents), which must now be ratified by the respective Congresses for its entry into force. Model Tax Convention on Income and on Capital 2017 shall be applicable for the interpretation of articles 5 (permanent establishment) and 7 (entrepreneurial benefits) of said Agreement.

Energy

Amendment of Law "On the Independent Production and Transmission of Electric Energy (PTIEE)"

On August 20224 Law No. 7299/2024 that amend Law Nr. 3009/2006 was enacted to foster private investments for the generation of renewable electricity through small hydroelectric plants (SHPs), by introducing correction of concepts that blocked the previous legislation to be applicable and improving the legal framework, by extending the threshold to grant licenses up to 50 MW and generation greater than 50MW should be subject to international public tenders, without the requirement of a risk-sharing contract with the national utility company (ANDE) as stated in the previous Law, although it retains a first call right to acquire the energy generated in case it is not exported or it is needed in the internal market.

Among other changes, the Ministry of Public Works and Communications replaced a Council of several Ministries (MOPC, Environment, Industry and Trade, Foreign Affairs) that made the procedure very bureaucratic. It must be clarified that shall Law is only applicable for the generation of electricity from the use of natural gas and/or minor hydroelectric generation, which also includes cogenerators and self-generators. This Law does not apply to other renewable energies (solar, wind) governed by Law No. 6977/2023, on Non-Conventional Renewable Energies (NCRE).

Public Procurement

Enactment of Decree Nr. 2264/2024, which regulates Law No. 7021 of December 9, 2022, "On Public Supply and Procurement".

This decree imposes a significant advance in what has to do with administrative management in public procurement. It seeks to improve efficiency, transparency and all flexibility in everything that has to do with public procurement processes. There are updates in terms of terminology, structure, facilitating reading and limiting the search for information and providing greater clarity to the management of State procurement, reducing the deadlines that have to do with protests, reconsideration appeals and deadlines for responses from public institutions to the DNCP.

A special type of bidding that he highlighted is joint procurement, which he described as an innovation in public procurement. It consists of public institutions coming together to buy goods or services, in search of efficiency through the implementation of economies of scale and administrative standardization. The annual average of the awards is USD 3.246 million, with 9.513 procedures and 3.266 suppliers.