A free trade deal between the European Union and the Mercosur bloc of South American countries is set to be signed in Paraguay next week after EU nations backed the agreement on January 9.

The accord, which has been in the works for more than two decades, had to overcome concerns about environmental protections and agrifood standards as well as opposition from large farming nations including France and Italy. 

Bloomberg Economics has estimated the deal would boost the Mercosur bloc economy by up to 0.7% and Europe’s by 0.1%. Geopolitically, it would also strengthen the EU’s footprint in a region where China has emerged as a major industrial supplier and commodities purchaser.

Paraguay Foreign Minister Ruben Ramirez told reporters on January 9 that Mercosur officials agreed to sign the deal on January 17 in Asuncion, the country’s capital. European Commission President Ursula von der Leyen is expected to travel to sign the agreement.

German Chancellor Friedrich Merz called the accord “a milestone in European trade policy and an important signal of our strategic sovereignty and ability to act.” 

“We are strengthening our economy and trade relations with our partners in South America – which is good for Germany and for Europe,” he said in a statement on January 9. 

European Commission President Ursula von der Leyen will likely sign the deal in Paraguay on January 12. The agreement still requires approval by the European Parliament. 

The deal, which also includes Brazil, Uruguay and Argentina, will conclude 25 years of talks to remove tariffs and boost exports, creating an integrated market of 780 million consumers. The accord has proved highly controversial, however, particularly among European farmers who worry about an influx of agricultural imports into the EU. 

Farmers protested in central Paris on the eve of the decision, while demonstrations took place in Poland on January 9. Ireland was among the countries that voted against the deal.

EU leaders had hoped to sign off on the pact at their summit last month, but last-minute opposition by Italy, which became the swing vote, scuppered an agreement.  

Ultimately, however, Rome backed the proposal at a January 9 meeting of EU ambassadors, in part because of extra money offered by the commission earlier this week to farmers in the EU’s next long-term budget.

“I’ve never been ideologically opposed to Mercosur,” Italian Prime Minister Giorgia Meloni told reporters on January 9. She criticized the EU for regulating within its own borders while opening up to trade that doesn’t include the same level of regulation.

“I’m in favor of free-trade agreements,” she said. “But also of regulation.”

Safeguard measures offered to farmers helped sway Italy. These include a commitment to open an investigation into the possible suspension of preferential tariffs if there is an increase in import volumes from South America or a decrease in prices compared to the three-year average. 

Farmers protest the EU-Mercosur trade pact near Binasco, outside Milan, on Jan. 9. Photographer: Francesca Volpi/Bloomberg

The threshold at which this investigation would be triggered has been set at 5%, down from the most recent proposal of 8%, after lobbying by countries like Italy and France as well as the European Parliament. 

France, which has consistently opposed the trade agreement, saying it will harm European farmers and consumers, voted against the deal.

“France is favorable to international trade, but the EU-Mercosur agreement is an agreement from another age, negotiated for too long on bases that are too outdated,” French President Emmanuel Macron said in an X post on the evening of January 8. “It does not justify exposing sensitive and essential agricultural sectors to risks to our food sovereignty.” 

Ireland was also among the countries that voted against the deal, joining Poland, France, Austria and Hungary, while Belgium abstained, according to people familiar with the matter who spoke on the condition of anonymity.

“The conclusion of the EU-Mercosur trade deal is great news for Europe’s global geopolitical and economic clout,” Agathe Demarais, a senior policy fellow at the European Council on Foreign Relations, said in an emailed statement. “For Europeans, the finalization of free-trade agreements with new partners stands among the best responses to U.S. tariffs, growing protectionism and trade tensions with China.”