The trade agreement between the European Union (EU) and Mercosur (Brazil, Argentina, Paraguay, Uruguay) is raising serious concerns among experts and civil society organizations in South America. Based on analyses by the Institute for Agriculture and Trade Policy (IATP), reports from the Centro de Análisis y Difusión de la Economía Paraguaya (CADEP), and data on Paraguay's industrial exports to the EU and the United States, the key threats involve a trade pattern centered on exchanging raw materials for advanced industrial products. This could constrain the economic and civilizational development of the region.
One of the greatest threats is the intensification of deforestation and environmental degradation. The agreement promotes the expansion of soy, corn, beef, poultry, and ethanol production, directly affecting regions such as the Amazon and the Cerrado in Brazil. These areas, home to indigenous peoples and traditional communities, are critical for biodiversity, yet exports drive land conflicts and greenhouse gas emissions. According to the IATP, agribusiness and mining — the sectors most harmful to the environment — will be strengthened after the signing of the Mercosur deal, increasing pressure on the natural environment.
In Paraguay, rice and organic sugar production requires intensive water use, concentrated in river basins such as the Tebicuary (94% of rice production in four departments). Opening the market could increase pressure on water resources without adequate regulation. The EU formally demands sustainable practices, but Paraguay lacks the necessary infrastructure to comply, risking indirect deforestation and soil erosion. The CADEP report criticizes the agreement for ignoring these aspects.
Mercosur's agricultural sector faces unequal competition. The agreement offers export quotas that favor the EU. For countries like Paraguay, dependent on agricultural commodities (36% of exports in 2018), this means drastic price fluctuations. These countries currently lack mechanisms to regulate such effects, risking the collapse of individual sectors.
Mercosur's industrial sector, especially in Paraguay, could suffer from an influx of EU products flooding the market. Free trade threatens job losses due to low competitiveness — exports to the EU grew by 24% since the 1990s, but their share fell from 34% to 20%. The CADEP institute warns that the agreement favors the EU in accessing Mercosur's industrial markets, which could marginalize small local firms and impoverish entire regions.
Mercosur also threatens the rights of indigenous peoples, traditional communities, and smallholder farmers through land conflicts driven by export expansion. In Brazil, agribusiness is linked to so-called rural violence, characterized by physical exploitation. In Paraguay, small-scale rice and sugar producers (averaging 10 hectares) struggle with debt and exit the sector due to organic certification costs and price volatility. Employment is concentrated in large firms (94%), marginalizing micro-enterprises (59% in the sugar sector). A lack of training and preferential credit deepens inequalities, potentially driving rural migration.
The IATP criticizes the agreement as "neocolonial," arguing it impedes a just transition by prioritizing market access over socio-environmental protection.
The EU-Mercosur agreement, despite declarations to the contrary, deepens asymmetries by favoring agribusiness at the expense of sustainable development. The CADEP think tank recommends renegotiating equitable trade quotas for both the EU and Mercosur.
