Geopolitics in Europe and strategic Latin America: opportunities and challenges in the MERCOSUR-EU alliance

The world is undergoing a geopolitical and economic reconfiguration that has had direct consequences for continental foreign policies and international relations in general. Various theories exist regarding the current international system, and several authors agree that we are witnessing a multipolar international system characterized by interdependence, complexity and uncertainty. The feeling is that “the old is dying and the new is not yet born,” as Gramsci stated more than a century ago.

The relationship between the European Union (EU) and the Southern Common Market (MERCOSUR) is no exception to this trend. The EU bloc is advancing in its search for reliable partners to ensure a stable supply of critical resources, within its declared pursuit of strategic autonomy. The EU's renewed interest in MERCOSUR, and in Argentina in particular, stems from the disruption of supply chains during the COVID-19 pandemic, the energy crisis caused by the war in Ukraine, and the technological and trade dispute between the United States and China. These external factors have compelled the EU to redouble its efforts to diversify its trading partners and reduce its dependence on Russia. Thus, the European Commission, presided over by Ursula von der Leyen, is taking on the challenge of shifting towards a necessary and timely geopolitical Europe, summarized in the concept of a "geopolitical awakening.". To this end, on the external front, the EU is promoting the multilateral system, which it perceives as being in crisis.

The MERCOSUR countries possess raw materials such as natural gas and oil. In addition to the "Lithium Triangle" - the geographical area located between Argentina, Bolivia, and Chile, which holds more than 60% of the world's known lithium reserves - Latin America, in general, is considered to have significant potential for producing and exporting green hydrogen at competitive prices, thanks to its favorable climatic conditions (sun and wind) and geographical advantages (ample space and proximity to ports). Argentina, in particular, has positioned itself as a key player in this emerging landscape. Its wealth in lithium, essential for battery technologies and the transition to renewable energy, has placed the country at the center of attention for European investors, as has the territory's potential for developing the green hydrogen industry. Argentina also has reserves of copper, manganese, cobalt, graphite, nickel, and rare earth elements, among other minerals now considered strategic. However, it faces the challenge of attracting foreign direct investment (FDI) and technology transfers that will allow it to develop these resources sustainably and in the long term. In addition to outlining a clear national policy on critical minerals, with a scientific-industrial development plan, like Australia or Chile.

The Mercosur-EU Association Agreement: An ambitious opportunity

In 2024, after 25 years of negotiations, progress was made toward a transatlantic partnership agreement. The EU Council is expected to ratify the agreement between December 18 and 19, with the possibility that South American presidents will travel to Brussels before Christmas for the final signing ceremony.

In an effort to focus on the current state of the bi-regional trade relationship, we find that in 2023, foreign trade between MERCOSUR and the EU reached approximately US$110 billion, with an export basket dominated by agro-industrial products. Although the EU remains one of MERCOSUR's main trading partners, it has been overtaken by China. 14% of MERCOSUR's exports are destined for the EU, while 20% of its imports come from that bloc. In 2003, the EU received 24% of MERCOSUR's exports, but twenty years later this figure had fallen to 14%. The drought, coupled with certain unfavorable tax policies, is believed to have impacted Argentine exports, which fell by more than 36%, reaching a historic low . In 2024, Argentina supported the conclusion of the negotiations, and Uruguay and Paraguay have also supported the initiative. Brazil has always been a key driver, further bolstered by its pro tempore presidency of the bloc. On September 3, 2025, the European Commission presented the two-part agreement to the Council and the European Parliament, but some member states remain hesitant.

In Europe, protests by agricultural unions and environmental organizations continue. Austria, Ireland, the Netherlands, and Belgium have raised concerns about environmental damage, although France and Poland are the main opponents, arguing that the agreement would harm their farmers by increasing imports of sensitive products such as meat, sugar, and ethanol. However, the European Commission attempted to mitigate the concerns of the European agricultural sector with safeguards: a system of strict quotas for sensitive products, arguing that the agreement would diversify the EU's sources of raw materials and export destinations. In addition to the risk of increased competition that worries European farmers, the agreement, which aims to establish the world's largest free trade area to date, is also criticized for its environmental consequences.

This always sensitive point included provisions for shared responsibility in environmental crimes. In this regard, the European Commission maintains that improving productivity in MERCOSUR through the transfer of clean technologies would limit the carbon footprint of the affected sectors. One issue that has arisen regarding environmental obligations is the Carbon Border Adjustment Mechanism (CBAM), an EU instrument that seeks to put a fair price on the carbon emitted during the production of carbon-intensive goods. By confirming that a price has been paid for the implicit carbon emissions generated in the production of certain goods imported into the EU, the CBAM ensures that the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU's climate objectives are not undermined. This mechanism will be fully implemented starting in 2026, while its transitional phase runs from 2023 to 2026. Several European media outlets maintain that the treaty's main environmental risk lies in a mechanism called "rebalancing," which allows one of the signatory parties to assert its commercial interests and request compensation if a measure adopted by the other party "negatively affects trade." If the EU were to ban the import of agricultural products treated with a specific pesticide, the MERCOSUR countries would have the right to refer the matter to a panel of experts, which would assess whether the impact on their profits has been demonstrated. If so, both parties would have to agree on compensation, such as, for example, a further reduction in customs duties.

The agricultural safeguard presented by the European Commission to alleviate the concerns of France and Poland added some caution, but they are not the only voices expressing discontent. Reducing tariffs by approximately 90% would generate an increase in exports to Europe and, consequently, an increase in deforestation in Latin America. "According to our impact analysis, in the automotive, textile, and footwear supply chains, there will initially be a shift towards the major industrial centers, especially São Paulo. In the medium term, there will be deindustrialization in all Mercosur countries," explains Marita González, technical secretary of the Mercosur Economic and Social Consultative Forum. In contrast, Mario Lubetkin, Uruguay's Foreign Minister, during his official visit to the EU, stated: “We are aware of the situation: either we reaffirm multilateralism or we remain mired in fear. There will be many problems, but the future is stronger. None of us can overcome this situation alone. It is not just a trade agreement; it is a projection for the next twenty or thirty years. There will be difficulties, but the will to sign it is very strong.” The agreement would open a market of 750 million people and encompass almost 20% of global GDP, with multiple potential benefits for both blocs, according to the joint declaration of the MERCOSUR member states and the European Commission on the conclusion of the negotiations.

Prospective reflections, from the Argentine perspective

The Agreement is not merely a matter of trade, but rather about building a shared future and strengthening not only the Western axis, but multilateralism as a whole. In addition to material economic and commercial interests, and strategic and geopolitical interaction, there is the factor of bi-regional sociocultural identity. In this sense, it is crucial to conduct a rigorous analysis to determine the capabilities for this type of initiative to become an opportunity for both parties. The EU's need to diversify markets in its priority pursuit of strategic autonomy, while navigating the consequences of climate change and the competition between the United States and China, could open a new path for the South American region as a provider of strategic resources.

In Argentina, in particular, restrictions and prejudices prevail regarding the integration of the mining and energy sectors. Even so, Argentina received the most investment worldwide for lithium exploration projects between 2010 and 2022. A similar situation is occurring with copper, although copper basins are not expected to be operational until 2030. We still need to reconcile these biases, starting with domestic policy, by communicating clearly and reliably what we seek and how we can achieve it, addressing how we want and can attain a fruitful bi-regional partnership. It is essential that foreign direct investment (FDI) reaches MERCOSUR with a technological spillover effect that benefits the local population.

It is also crucial to continue working to establish a stable economic framework that minimizes macroeconomic volatility and incentivizes long-term investment. The stabilization of macroeconomic variables—such as low inflation, twin surpluses, a predictable exchange rate regime, and reserve accumulation—must be accompanied by a new framework capable of addressing the long-standing demand for more robust legal certainty. For investors, in this case European investors, to decide to invest in capital-intensive projects such as mining and green hydrogen, fears of sudden changes to the rules of the game should be minimized. In addition to tax and financial incentives and streamlined administrative processes, such as the RIGI (Integrated Regime for Investments), Argentina could continue working to establish and implement robust laws that protect patents, trademarks, and copyrights, guaranteeing the independence of the judiciary to resolve business disputes, reducing corruption through transparency and accountability mechanisms, and providing protection against unjustified expropriation. This last point is of particular importance to Europe, given the past dispute over the YPF-Repsol expropriation. Even so, cooperation between Argentina and the EU faces the challenge of transcending the strictly bilateral, but the finalization of the Agreement becomes an essential first step.

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Agostina Salman holds a degree in International Relations and a Master's degree in National Strategic Intelligence. She is a director and researcher at Proyectar Nación, a member of the European Union Studies Group at the National University of Rosario (Argentina), and a fellow of the University of Salamanca (Spain) and the FAES Foundation (Spain). Agostina has worked as an international analyst for the Ministry of Defense of Argentina and teaches at the Argentine University of Business (UADE), as well as at other local and international academic institutions. She has lectured at the Argentine Council for International Relations (CARI), the Argentine Multidisciplinary Debate Center (CEDEMA), and the Argentine Society for Political Analysis (SAAP), among others. Some of her articles have been published in journals such as Al-Ghurabá and Revista Integración y Cooperación Internacional. You can find more of their articles and podcasts produced for the European Union Studies Group of the National University of Rosario (GEUE-UNR) on their website, https://www.proyectarnacion.com.ar/, or on Instagram at https://www.instagram.com/proyectarnacion/.

The opinions expressed in this blog are solely those of the author and do not reflect the opinions of the EULAS Network.