March 6, 2021

Moody's expects the Mercosur-EU pact to benefit Uruguay and Paraguay mostly

The free trade agreement signed last Friday in Brussels by Mercosur and the European Union (EU) will benefit Uruguay and Paraguay, according to Moody's.

"The free trade agreement between the European Union and Mercosur is a positive event in terms of credit, whose benefits are likely to materialize in the medium term," said Samar Maziad, senior analyst at Moody's, in statements released by the rating agency in Buenos Aires. .

After 19 years of negotiations, Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the EU sealed on Friday a historic strategic partnership agreement that includes a free trade chapter with tariff advantages that will enter into force once it is ratified by the parties. members of both blocks, which could take at least two years.

For Mercosur, a pact with the Twenty-eight represents new commercial opportunities with a market of 500 million consumers and that is already its second commercial partner.

The EU is also the largest foreign investor in the South American bloc, a market of 260 million people.

According to Maziad, greater trade integration will boost exports, support investment and technology transfer and contribute to greater competitiveness of the countries of the South American bloc formed in 1991.

According to the analyst, Uruguay and Paraguay "will benefit most from the agreement given that they are open and small economies".

"In the case of Brazil and Argentina, the largest Mercosur economies, we anticipate that the economic benefits will be important, but proportionately smaller, and that macroeconomic prospects will continue to be dominated by domestic events," the expert said.

According to the agreement signed in Brussels, for the Mercosur countries tariff reduction periods for the entry of European products will be extended, on average, in periods of 10 and up to 15 years, while the EU accepted tariff reduction periods for imports from the Mercosur immediately.

According to data from the European Commission, in 2018 the EU exported goods to Mercosur for 45,000 million euros and imported from the South American block for 42,600 million euros.

(tagsToTranslate) Moodys (t) Mercosur-UE (t) mostly (t) Uruguay (t) Paraguay

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