The federal government estimates that the free trade agreement announced this Friday (6) between Mercosur and the European Union (EU) should increase the flow of trade between Brazil and the European bloc by R$94.2 billion, which represents an impact of 5.1% on current trade. The government still estimates an impact of R$37 billion on the Gross Domestic Product (GDP, sum of goods and services produced in the country), that is, around 0.34% of the Brazilian economy. 
As the reduction in import tariffs is gradual, the impact estimated by the economic team is for the year 2044. With the reduction in tariffs, the government estimates that there will be an increase of R$42.1 billion in EU imports and growth of R$52.1 billion of Brazilian exports to the bloc.
The European Union is Brazil’s second largest trading partner, behind only China. In 2023, trade between Brazil and the European bloc represented 16% of Brazilian foreign trade.
Professor Giorgio Romano Schutte, member of the Observatory of Foreign Policy and International Insertion of Brazil (Opeb), assessed that the agreement is better than the one negotiated in 2019, among other reasons, due to the fact that Brazil has placed safeguards for the automotive sector , to prevent imports of European cars from harming the industry in Brazil.
“But this will depend on the government on duty, whether or not it will use the safeguard power,” he said.
Professor of international relations at the Federal University of ABC in São Paulo (UFABC), he considered that the economic impacts of the agreement take time to be felt and are limited. He recalled that only China has a greater trade flow with Brazil than the 27 countries in the European Union combined with the United States.
“The impact is not that quick. Job creation should take time to produce results. But with this agreement you increase trade. Furthermore, with the agreement, negotiating power with China and the United States increases. There is also a political element to this agreement, in addition to the economic one. Now, a few Brazilian and Mercosur companies will be able to take advantage of the opportunity to do business in the European Union, for sure”, analyzed Giorgio Romano.
The Brazilian government also estimates an increase of R$13 billion in investments in Brazil, which represents a growth of 0.76%. A 0.56% reduction in consumer prices and a 0.42% increase in real wages are also expected. Everything only for 2044, said Giorgio Romano.
Quotas
The reduction in tariffs that Mercosur charges the EU can be immediate or over periods, which vary between 4 years and 15 years. For the automotive sector, tariff reduction periods are longer, ranging from 18 years to 30 years for electrified vehicles, powered by hydrogen and with new technologies.
On the EU side, the tariff reduction can also be immediate or for periods ranging from 4 years to 12 years, depending on the product.
Quotas are also foreseen for agricultural and agro-industrial products from Brazil. In other words, above a certain quantity, some products start paying the full price to enter the block. This category includes products such as pork, ethanol, sugar, rice, honey, corn and sorghum, cheese, among others.
For professor Giorgio Romano Schutte, this is the main asymmetry of the agreement. “In the case of industrial products from the European Union, they enter without quotas, without restrictions on volume. And in the case of Mercosur agricultural products, there are quotas”, he recalled.
Brazil exported US$46.3 billion to the European Union in 2023:
Animal food – 11.6%
Metal ores and scrap – 9.8%
Coffee, tea, cocoa, spices – 7.8%
Oil seeds and fruits – 6.4%
Iron and steel – 4.6%
Vegetables and fruits – 4.5%
Cellulose and paper waste – 3.4%
Meat and meat preparations – 2.5%
Tobacco and its manufactures – 2.2%
Brazil imported US$45.4 billion from the European Union in 2023:
Pharmaceutical and medicinal products – 14.7%
General machinery and industrial equipment – 9.9%
Road vehicles – 8.2%
Oil, petroleum products – 6.8%
Machines and equipment. of energy generation – 6.1%
Organic chemicals – 5.5%
Specialized machines and devices for certain industries – 5.3%
Electrical machines and appliances – 4.7%
Materials and chemicals – 3.6%
Iron and steel – 3.4%
