In a landmark move, the Southern Common Market (Mercosur) and the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland, signed a free trade agreement (FTA) on Tuesday (16th) in Rio de Janeiro. Brazilian Foreign Minister Ambassador Mauro Vieira described the partnership as “historic” and “innovative,” emphasizing that it will facilitate closer ties among the signatory countries and potential future members of Mercosur.
The agreement does not come into effect immediately, as there are additional phases of ratification before it begins to apply. It is very similar to the Mercosur x EU agreement.
EFTA: A Key Player
The four EFTA nations together have a population of 15 million and a combined GDP of $1.4 trillion. According to the Brazilian government, the FTA will establish a free trade zone encompassing nearly 300 million people with an aggregated GDP surpassing $4.3 trillion.
“It will benefit both parties with access to an expanded market for over 97% of their exports, boosting bilateral trade and providing advantages to the companies and citizens of the signatory countries,”
– Itamaraty, the Brazilian Ministry of Foreign Affairs
The agreement is also expected to create new business opportunities, particularly for small and medium enterprises, and improve customs rules and procedures.
Environmental and Economic Impacts
Minister Vieira highlighted the agreement’s environmental focus, stating it promotes sustainable development and requires a green integration of companies. Vice President Geraldo Alckmin attended the signing ceremony and praised the deal as a testament to the strength of multilateralism. He also mentioned advanced negotiations for a possible agreement between Mercosur and the United Arab Emirates, alongside potential tariff lines with Mexico and the hope to finalize the Mercosur-European Union agreement by year’s end.
Economic projections indicate a positive impact of R$2.69 billion on Brazil’s GDP, an increase of R$660 million in investments, and an expansion of R$3.34 billion in exports by 2044. In 2024, EFTA accounted for 1.54% of Brazil’s imports and 0.92% of its exports. Brazil exported US$3.09 billion to EFTA and imported US$4.05 billion, resulting in a trade deficit of US$0.96 billion. EFTA’s main exports to Brazil included pharmaceuticals, chemicals, and machinery, while Brazil’s exports to EFTA featured basic metals, plant and animal products, and foodstuffs.
Next Steps for Implementation
The signing of the agreement is just the beginning of a multi-step process. Following the ceremony, the agreement will be translated into the languages of all Mercosur and EFTA countries. Subsequently, each country will undergo its internal approval process, which in Brazil involves both the executive and legislative branches, specifically approval by the National Congress.
Once the internal procedures are completed, the countries will notify each other of their readiness and formally ratify the agreement. The FTA will then come into effect on the first day of the third month following this notification, provided at least one country from each bloc has completed its internal processes.
This agreement marks a significant stride towards enhancing trade relations and sustainable economic growth between South America and the EFTA countries, promising substantial benefits for businesses and consumers alike.
Source: Globo
