More than a year after the European Union (EU) and Mercosur—the South America trade bloc (Argentina, Brazil, Paraguay, and Uruguay) —completed negotiations of a trade agreement, they were finally able to sign it on January 17, 2026. EU approval was delayed by member state opposition. The states finally gave the “green light” on January 9, albeit with a qualified majority—the first time a trade agreement did not receive approval of all member states. Borderlex reported that five member states (Austria, France, Hungary, Ireland, and Poland) opposed the agreement, while Belgium abstained. This post looks at the government procurement commitments in the agreement. It also highlights a new request for court review that could delay implementation of the pact.

Negotiations of the EU-Mercosur agreement began more than 25 years ago and advanced in stages. In July 2019, the two trade blocs reached an agreement in principle on a new trade arrangement. On government procurement, they agreed to apply the rules in the WTO Government Procurement Agreement (GPA) and to exchange market access in procurement at the central government level.

Two years later, in 2021, they finalized details of their 2019 agreement. It included plans to seek coverage of subcentral government procurement within two years after the pact entered into force. Their broad coverage of central government procurement was subject to the Mercosur countries’ application of high thresholds over lengthy transition periods and an extensive array of offsets, price preferences, and set asides. 

In the final agreement concluded in December 2024, government procurement is covered in Chapter 12 and its annexes. It provides for Brazil’s first-time coverage of subcentral entities along with its removal of an earlier offer to cover procurement related to its Unified Health System. (That reflected one of the major concerns that had led President Lula’s administration to withdraw Brazil’s market access offer near the end of its negotiations to join the GPA in May 2023.) Argentina also incorporated its own health care sector exclusions. In response, the EU matched their health care exceptions and exclusions with its own. As compensation for the withdrawal of its health sector, Brazil agreed to open its subcentral government procurement, offering coverage of 20 states and its federal district. 

Regarding other parties’ subcentral coverage, Paraguay has listed 17 departmental governments while Argentina and Uruguay retained their earlier commitment to consult with their entities within two years after the agreement enters into force. For Argentina, those entities are its provincial governments and the autonomous city of Buenos Aires, and for Uruguay its departmental governments. Their coverage will be deemed satisfactory if it encompasses subcentral governments that generate at least 65% of each country’s national GDP.

If the EU is satisfied with the Mercosur countries’ subcentral coverage, it will reciprocate with a corresponding level of coverage of EU entities. The EU has further indicated that it also looking to Brazil to provide satisfactory access to its central entities.

Of the Mercosur countries, Uruguay offers the broadest coverage of procurement, as unlike the others, it covers other entities as well as all goods, services, and construction services, and takes no transitional threshold for construction services. However, for construction services and public works, it may grant a price preference, which may be conditioned on hiring nationals, in accordance with qualification requirements in its law.

Paraguay will not be obligated to open its government procurement for three years following implementation of the agreement. After it opens its procurement, it will be able to apply a 20% price preference for domestic goods and services for 18 years when local components comprise at least 40% of goods and Paraguayan nationals are more than 70% of the supplier’s staff in services and construction works.

Argentina excludes from its commitments the application of preferences or other advantages accorded to its micro, small, and medium-sized enterprises. It also retains the right to apply offsets up to 50% of the value of the procurement when the agreement is implemented, which will be reduced to 20% after 15 years. The limitations do not apply to Argentina’s defense and security ministries.

Brazil reserves the right to apply price preferences, as well as set-aside policies of up to 25% of the procurement in favor of its micro and small enterprises. It will also be able to apply margins of preference to national manufactured goods and services based on federal legislation, with an obligation to inform the EU when it takes such action.

The government procurement chapter is generally based on the GPA with some modifications. For example, the required content of summary notices, notices inviting suppliers to apply for inclusion on a multi-use list, and notices of intended procurement are included in annexes to the chapter rather than in the chapter itself.

Before the agreement can be implemented, it will have to be approved by the European Parliament (EP) and ratified by the parties. EP ratification became more complicated when on January 21, it voted to request an opinion from the European Court of Justice (ECJ) on whether the EU-Mercosur agreement is compatible with EU law. That resolution was narrowly approved with 334 votes in favor, 324 against, and 11 abstentions. The EP request could delay its ratification of the trade elements of the pact by up to two years. If the ECJ were to find the pact does not conform to EU law, it could not enter into force. However, as Borderlex has pointed out, the European Commission could decide to implement the pact provisionally as soon as one Mercosur country ratifies it. (This issue will be examined more fully in a later post.)

Jean Heilman Grier

January 27, 2026