Brazil & Southern Cone - February 2026

The ink had barely dried on the free trade agreement signed in January between the European Union (EU) and the Southern Common Market (Mercosur) when the European Parliament questioned the legality of the deal. Legislators called on the European Court of Justice (ECJ) to evaluate whether the deal was in conformity with EU law. A verdict could take more than a year. This marked the latest in a series of challenges on the long road of more than two decades towards shaping one of the world’s largest free trade areas.

Under the accord, the EU would grant Mercosur nations Argentina, Brazil, Paraguay, and Uruguay tariff-free access on 95% of their exported goods over a period of 12 years. It would also grant quotas with preferential tariffs on beef, sugar, and other agricultural products. On the other side, EU exporters could save more than €4bn (US$4.7bn) a year in tariffs by gaining more access for products such as cheese, wine, and spirits, as well as services.

When the deal faced a vote in the Council of the European Union, the EU’s inter-governmental decision-making body comprising the national governments of member states, countries with powerful farming lobbies such as France, Poland, Austria, Ireland, and Hungary opposed the accord. But they were ultimately outvoted, and the Council approved the agreement on 9 January, passing one of the final hurdles for the deal to be ratified. Italy only consented after the insertion of safeguard clauses designed to ensure the EU can swiftly respond to market disturbances arising from imports of sensitive agricultural products.

Ursula Von der Leyen, the president of the European Commission, and António Costa, the president of the European Council (distinct from the Council of the European Union), later travelled to Asunción on 17 January for a signing ceremony with regional leaders. Paraguay’s President Santiago Peña, who currently holds the six-month rotating leadership of Mercosur, as well as the presidents of Argentina and Uruguay, Javier Milei and Yamandú Orsi, were present, but Brazil’s President Luiz Inácio Lula da Silva did not attend, citing scheduling conflicts as the official reason. He did, however, meet with Von der Leyen on 16 January in Rio de Janeiro before she went to Asunción.

• Lula snub

When Brazil held the six-month rotating presidency of Mercosur in the second halves of 2023 and 2025, Lula personally lobbied for the deal in meetings with European leaders. But Lula did not go to Asunción for the signing ceremony, instead sending Foreign Minister Mauro Vieira as Brazil’s representative. Media reports have speculated various potential reasons for the snub, including the possibility that Lula did not want to share the stage with other Mercosur leaders and the lingering disappointment that, after his diplomatic efforts to get the deal over the line, the agreement was not signed during one of his terms as Mercosur president.

The agreement was supposed to create a counterbalance to superpower hegemony, and particularly to US President Donald Trump’s offensive against multilateral, rules-based trade. “This agreement sends a strong signal to the world,” Von der Leyen said in Asunción. “It reflects a clear and deliberate choice. We choose fair trade over tariffs.”

“Europe must jointly uphold the principle of rule-based action,” said Sven Giegold, a member of the German Green Party’s federal executive committee and its head of European coordination, in an interview published by the Heinrich Böll Foundation, a think tank with ties to the Green Party. Giegold insisted that while the environmental, labour, and human rights standards should continue to be upheld, the unilateral threats against rules-based trade by the US administration made it so much more important to ensure an agreement with Mercosur. “That is why the vote in the European Parliament has sent out a fundamentally wrong signal,” he said.

On 21 January the European Parliament narrowly approved a resolution by a vote count of 334-324 to formally request the ECJ to review the legality of the trade agreement with Mercosur. Detractors had raised several legal concerns, including the splitting up of the deal into a partnership agreement that requires approval from each national parliament and an interim trade agreement that requires ratification by the European Parliament alone. Another legal concern focused on the so-called ‘rebalancing mechanism’ included in the deal, which would allow Mercosur countries to adopt compensatory measures if future EU regulations were to cause a significant drop in South American exports to Europe. Critics say the mechanism could constrain the EU’s ability to adopt rules on issues such as environmental protection or consumer standards.

However, the resistance to the trade deal in the European Parliament was of a political, not a legal nature. There had been fierce resistance particularly amongst European farmers to competition from South American countries that they alleged were cutting corners on environmental, sanitary, and labour standards.

Indicative of how sensitive some of the issues are, supermarkets in Austria said they would not sell meat from Mercosur countries. “The Mercosur agreement doesn’t change anything in our product offering,” Lidl Austria told the Austrian news agency APA in January. “Beef, pork, and veal come exclusively from Austria. Nothing will change that,” Markus Kaser, a board member of supermarket chain Spar, told Austrian newspaper Kronen Zeitung.

Building on that scepticism, an unusual alliance of far-right Eurosceptics, European Greens, and left-wing lawmakers in the European Parliament joined forces to tip the balance against the deal.

The European Commission could still go ahead with a provisional application of the deal while the ECJ appeal is being examined. “The mandate given by the Council is very clear: the Commission has the possibility to go for provisional application,” the EU’s Agriculture Commissioner Christophe Hansen said to the Oireachtas, the Irish parliament, in early February.

Member countries in the Council have authorised the Commission to provisionally apply the trade agreement once a Mercosur state ratifies it. The move has been backed by several EU leaders including German Chancellor Friedrich Merz. France has rejected the application of the deal as undemocratic, paving the way for a potential standoff between the two largest economies of the EU.

Indeed, sidestepping that procedure could strain relations between EU institutions, particularly because the Commission had previously said it would respect parliament’s decision. The more likely approach is that the Commission could seek to win over more legislators to vote in favour of a provisional enactment of the trade deal while the ECJ conducts its review.

Longer-term, legal experts say the agreement stands a good chance of surviving the ECJ’s scrutiny. “I believe that the ECJ will not find any major objections during its review,” EU legal expert and professor, Franz Mayer, told German TV channel ZDF. Mayer also dismissed the argument that the European Commission was wrong to split the agreement into a political and a trade component so as to bypass national parliaments and expedite approval. “Mercosur’s opponents cite, among other things, jurisdictional issues. However, it is perfectly clear that the EU is responsible for trade policy – not the individual member states,” Mayer said. By comparison, the EU-Canada trade deal, which was signed in October 2016, entered into force provisionally a year later without being fully ratified by the national legislatures of all EU member states.

At the time of writing, the national congresses of Mercosur countries had not yet ratified the agreement, but politicians in the region expressed support for the deal. For example, Brazil’s Lula included the approval of the EU-Mercosur deal in a list of legislative priorities for 2026 he sent congress on 2 February.

Bolivia excluded

Bolivia’s President Rodrigo Paz attended the signing ceremony in Asunción on 17 January, even though Bolivia is not part of the EU trade agreement. Bolivia is the fifth member of Mercosur, but its membership of the bloc was only confirmed in 2024, so it did not participate in the negotiations for the deal, which were largely concluded before Bolivia’s accession. Despite being a full Mercosur member, Bolivia is still in the process of incorporating the bloc’s regulations. Bolivia’s congress approved a protocol in July 2024 which set a deadline of four years to align with Mercosur’s rules.