The EU and Mercosur finally sign their trade agreement after 26 years: “We are creating a market of 700 million people and 20% of global GDP.”

Parliamentary ratification of the agreement is expected to be swift, and it is hoped that the European Parliament will do the same as soon as possible.

Saturday, January 17, 2026

The alliance that seemed destined never to happen is finally a reality: on Saturday, January 17, 2026, in Asunción, Paraguay, the European Union (EU) and Mercosur signed the agreement creating the world's largest free trade area, sending a strong message from Europe and the Southern Cone at a time when multilateralism is under threat.

“We are creating a market of 700 million people and a GDP of almost 20 percent of the planet, which is phenomenal,” said European Commission President Ursula Von der Leyen in a speech in which she did not hold back her excitement.

“This was negotiated for more than 25 years, and many hands were involved in this document. We chose free trade over tariffs, a long-term partnership over isolation, and with real and tangible benefits for our citizens and our businesses,” she added.

“When two regions like ours speak with one voice on the world stage, the world will listen,” Von der Leyen said, taking the impact of the agreement beyond the economic sphere.

“This agreement may be late, but it comes at the right time,” said António Costa, President of the European Council. The signing was attended by the host president, Santiago Peña, who is in charge of Mercosur this semester, Argentina's Javier Milei, and Uruguay's Yamandú Orsi.

Also in attendance were Rodrigo Paz, president of Bolivia, a country that only needs to harmonize its laws to become the fifth member of the bloc, and José Raúl Mulino of Panama, which is negotiating to join Mercosur. Representing Europe were Von der Leyen, Costa, and Trade Commissioner Maro Šefcovic, who signed the agreement alongside the foreign ministers.

Not present, however, was Brazil's Luiz Inácio Lula da Silva, leader of the continental left, who is upset with Milei and Peña, emblems of the right. But Lula had the luxury of holding a “private summit” on Friday in Rio de Janeiro with Von der Leyen, and sending her and Costa to Asunción on a Brazilian government plane along with Foreign Minister Mauro Vieira.

“Lula is in another league in world politics, he's not going to get involved in fights in Mercosur,” a senior source at Itamaraty, the Brazilian Foreign Ministry, told EL MUNDO. “And the protocol indicated that today the foreign ministers should sign, not the presidents.”

Peña did not forgive the absence, sending a greeting to Lula in his opening speech, saying he was sure “he is watching on television” and describing it as “poetic justice” that the agreement was signed in Asunción and not in Brazil, although he later praised Lula and described him as “fundamental” to the signing of the agreement.

The pact will establish one of the largest free trade areas globally, linking Mercosur —comprising Argentina, Brazil, Paraguay and Uruguay— with all 27 EU member states, encompassing an estimated 720 million people and a combined GDP surpassing US$25 trillion.

In December 2025, the signing initially expected around the Foz do Iguaçu Mercosur summit was pushed back to January amid EU internal divisions and mounting pressure from farmers’ protests. MercoPress reported Ursula von der Leyen saying the bloc needed “a few more weeks” to settle outstanding issues with member states, while European Council President António Costa played down the delay after a quarter-century of talks.

Momentum shifted on Jan. 9, when a qualified majority of EU countries backed moving ahead despite France’s opposition. Italy’s move was pivotal, following negotiations that included a boost to the Common Agricultural Policy and “emergency brake” safeguards for sensitive products—against the backdrop of renewed farmer mobilisations, particularly in France.

On the Mercosur side, it was described a stance of “constructive patience” as EU politics delayed the timetable, while Paraguay—set to hold the rotating presidency—outlined a 2026 agenda aimed at cutting red tape and simplifying customs. Uruguay’s Foreign Minister Mario Lubetkin, meanwhile, called the EU green light an “extraordinary” breakthrough as the Asunción signing was confirmed.

Government expectations and post-signature implementation

Ahead of the signing, Uruguayan President Yamandú Orsi indicated that a key priority is initiating discussions with the EU delegation on how to implement the treaty following ratification by legislative bodies on both sides of the Atlantic. (reported by regional diplomatic sources)

Officials expect that the agreement’s economic texts and regulatory frameworks will require extensive review and consultation with domestic sectors, especially those that may face heightened competition, such as agriculture and manufacturing. (based on regional economic reporting and government communications)

Global and geopolitical context

The agreement was approved by EU member states on January 9, opening the way for the formal signing, although it still requires approval from the European Parliament and the national parliaments of Mercosur countries before it can enter into force.

For the EU, the pact represents not only a commercial milestone but also a strategic step in strengthening economic ties with Latin America, amid broader global trade tensions and efforts to diversify partnerships.

The deal includes safeguard mechanisms to address concerns from agricultural sectors in Europe, particularly after opposition from countries like France and Poland, with concessions negotiated to secure broader support.