Preliminary Analysis of the MERCOSUR and European Union Agreement, 2019

During the last 20 years, the European Union (EU) and MERCOSUR have been discussing and developing a trade agreement to boost the economies of both blocs. After final approval, this may be the world’s biggest agreement between economic blocs and will have a positive impact on trade of goods and services. Ministries suggest that the agreement will impact a consumer market of 773 million people, and together the blocs will represent 25% of global GDP at €19 trillion. MERCOSUR is the fifth-largest global economy, comprised of Brazil, Argentina, Paraguay, and Uruguay. Venezuela was suspended by the group due to a rupture in its democratic order. The MERCOSUR/EU agreement is in an advanced stage of approval and will move to the next step of legal review by all involved countries, which may occur in 2021. MERCOSUR exports to EU are focused on agricultural products while EU exports to MERCOSUR are focused on automotive and machinery products. The agreement will create many benefits for each bloc and eliminate most of the critical barriers on trade. Actual trade between the blocs is strong and quite important to MERCOSUR economy. Yet trade is facing a complex scenario tied to bureaucracy and barriers, such as tariffs, documents, certificates, and closed market dynamics, which are directly impacting results and opportunities. To overcome most of these barriers, the agreement is focused on identifying and implementing alternatives to most of them. Frost & Sullivan research on the MERCOSUR/EU Agreement is structured into 5 key areas: • Executive Summary: Key findings and key facts; Summarizes MERCOSUR bloc formation to generate trade and investment opportunities through the competitive integration of national economies with the international market • Current MERCOSUR/EU Trading Structure: Analyzes actual trade dynamics between the blocs (details on actual trade, complexities, and trade with EU by each MERCOSUR country) • Overview of New Proposed MERCOSUR/EU Agreement: Identifies the key initiatives, topics, most benefited sectors; maps the proposed tariff reductions, implementation timeline, and next steps • Impact of Proposed MERCOSUR/EU Agreement on Automotive Sector: Analyzes tariff reductions to the automotive industry, maps key actions on technical barrier improvements, and summarizes key impacts • Growth Opportunities and Strategic Imperatives: Focuses on growth opportunities for the automotive sector in MERCOSUR (e.g., Agreement Approval Process, Automotive Importation Tariff Reduction, MERCOSUR Importation Quota, New Vehicles Offers and Segments, New Business Models) This is a preliminary analysis of the pending trade agreement firmed by the European Union and MERCOSUR, but final approval may take about two more years. As such, various topics and particularities may be revised. Frost & Sullivan analyses will be updated accordingly. Author: Guira Barretto