NextFin News - In a decisive move to reshape South America’s economic landscape, Brazilian President Luiz Inácio Lula da Silva officially submitted the long-negotiated Mercosur-European Union (EU) trade agreement to the National Congress for approval on February 2, 2026. According to Noticias UOL, the submission marks a critical milestone in a process that has spanned over 25 years, aiming to create one of the world’s largest free-trade zones covering a market of more than 700 million consumers. The Brazilian Chamber of Deputies is expected to begin voting on the pact in the week following the Carnival holidays, signaling an accelerated legislative timeline intended to capitalize on shifting global trade dynamics.
The timing of this legislative push is far from coincidental. It follows the ceremonial signing of the agreement in Asunción, Paraguay, on January 17, 2026, and comes at a moment when the Southern Common Market (Mercosur) is seeking to insulate itself from the increasingly coercive trade policies of the United States. Under the administration of U.S. President Trump, who was inaugurated in January 2025, the U.S. has implemented a baseline 10% tariff on virtually all imports and utilized economic leverage to influence regional political outcomes. Analysts suggest that the cumulative pressure from Washington has acted as a catalyst, reinforcing the determination of leaders like Lula to strengthen ties with Europe and China.
However, the path to full implementation remains fraught with complexity. While the Brazilian executive branch has moved forward, the European Parliament recently voted 334 to 324 to refer the agreement to the European Court of Justice (ECJ) for a legal opinion. According to POLITICO.eu, this judicial review could delay European ratification by 18 to 24 months. The referral was driven by concerns from European lawmakers regarding the "splitting" of the agreement into trade and partnership components, as well as intense pressure from domestic agricultural lobbies in countries like France and Poland. Despite these setbacks in Strasbourg, the Brazilian government’s decision to proceed with domestic ratification serves as a powerful diplomatic signal of intent and readiness.
From an economic perspective, the stakes for Brazil are immense. The Inter-American Development Bank projects that the agreement could boost Brazil’s exports by 6.3%, while Bloomberg Economics estimates a 0.7% increase in the bloc’s total GDP by 2040. The deal would eliminate tariffs on over 90% of goods traded between the two blocs, opening the European market to Brazilian agricultural powerhouses—specifically beef, poultry, and soybeans—while granting Brazil easier access to high-tech European machinery and industrial goods. For a Brazilian economy currently navigating a complex recovery, this diversification is viewed by the Lula administration as a necessary hedge against the volatility of U.S. trade policy.
The internal politics of Mercosur also play a pivotal role in this development. While President Lula has been a vocal proponent of the deal, he has had to manage a fractious bloc. Argentine President Javier Milei, who once threatened to withdraw from Mercosur, has recently signaled support for the EU pact as a means of achieving greater autonomy from regional protectionism. Meanwhile, Uruguay’s persistent efforts to ink a bilateral deal with China have created friction, making the EU agreement a vital "middle ground" that could preserve the bloc’s unity. By sending the deal to Congress now, Lula is attempting to lock in a regional consensus before domestic political cycles or further external shocks can derail the momentum.
Looking ahead, the success of the Mercosur-EU deal will hinge on whether the European Commission decides to pursue "provisional application" of the trade portion of the pact while the ECJ review is pending. German Chancellor Friedrich Merz has already called for such a move to counter the geopolitical influence of rival powers. For Brazil, the legislative approval in Brasilia will provide the necessary legal framework to act immediately should Brussels give the green light. As global trade continues to fragment into competing blocs, Brazil’s pivot toward Europe represents a sophisticated attempt to maintain strategic autonomy in a world where traditional alliances are being rapidly redefined by the protectionist agenda of U.S. President Trump.
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