Who benefits and who loses in the Portuguese economy with the EU-Mercosur agreement

Machinery and equipment, components for transport equipment, pharmaceuticals, metalworking and construction materials are some of the sectors that stand to benefit most from the agreement signed between the European Union (EU) and the Mercosur countries, which will enter into force on a provisional basis. The advantages could also be significant in the agri-food sector, but traditional sectors such as textiles and footwear could face increased difficulties with greater competition, according to a study by Aicep, to which ECO had access.

“Due to tariff reductions, easier market access and regulatory predictability” Portugal could gain “opportunities in the machinery and equipment, transport equipment components, pharmaceutical, metalworking and construction materials sectors”, according to the preliminary analysis and assessment of the potential implications and business opportunities for Portuguese companies arising from the recently signed EU-Mercosur Partnership Agreement (EMPA).

From January to November 2025, manufactured industrial products accounted for 95.5% of Portugal’s total exports of goods to Mercosur, of which 55.8% were classified as low-tech, followed by products with high (21.8%), medium-high (13.0%) and medium-low (9.4%) levels of technological intensity. These figures may rise with the reduction in tariffs.

For transport materials, the reduction will be from 14 to 35% to 0% in phases, and for machinery, the current 20% will be reduced in some cases and eliminated in others, which will bring direct gains in competitiveness through price.

However, this will not be the case for the entire domestic industry. Traditional sectors such as textiles and footwear “may see their competitiveness penalised” due to greater exposure to competition from Mercosur industrial niches. While, on the one hand, the agreement may represent an opportunity for niche and differentiated products, competition from Mercosur through low prices, scale production and the risk of falling prices is a reality, because lower-cost production could flood the European market.

However, “for both the fashion and home sectors, Mercosur countries are not typically the main destination markets, where Portuguese companies encounter high tariffs and non-tariff barriers, among other factors that hinder exports”. Therefore, “the implementation of the trade agreement could help Portuguese companies in these sectors to diversify their export markets”, the study argues.

For Portugal, the EU-Mercosur agreement represents “a tangible opportunity to strengthen external competitiveness, both in terms of trade in goods and services”, the study emphasises. “Portugal and Mercosur already have a close trade relationship, with total trade equivalent to €8.5 billion (goods in 2024 and services in 2023). By eliminating tariffs on 91% of all products, virtually all Portuguese exports will benefit. For example, the current 20% tariffs applied to electrical machinery and equipment will be phased out for most products, and therefore the €104 million exported in 2024 by this sector has room to grow.”

One of the national sectors considered to be among those most favoured by the agreement is agri-food, according to the Aicep study, “with Portugal likely to gain opportunities in products such as wine, olive oil, cheese, fresh fruit and tomato preparations”. This is because the “agreement eliminates or reduces tariffs of around 18 to 35% on wines; around 13% on tomato preparations; around 10% on olive oil and fruit, expands the market (with strong affinity in Brazil) and protects more than thirty Portuguese products with Geographical Indication, such as Queijo da Serra cheese, Presunto de Barrancos ham, Azeite de Moura olive oil and Pera Rocha pears, among others”.

However, Aicep points out that in the case of olive oil exports to Brazil, “the additional impact may be limited since the market has already abolished tariffs on Portuguese olive oil, with growth expected to be driven more by market dynamics than by the agreement alone”. Olive oil was the most exported Portuguese product to Mercosur (31.7% of the total with the bloc), with Brazil being the world’s largest buyer of this national product (37.8% of Portugal’s total exports).

Conversely, products such as meat (beef, pork, poultry), rice and honey “will face greater risks of price pressure and additional import quotas from Mercosur”, leading producers to express high levels of concern. In the cases of rice and honey, there is even “fear of substitution by imports at potentially lower prices and of variable quality”, which has led national associations to call for safeguards and increased monitoring.

In the agri-food sector, Portugal, but also the European Union, “as a bloc that is part of this agreement, [must] follow the implementation and practical execution of the agreement and activate the mechanisms that will certainly exist to protect European industries”, emphasised Francisco Catalão, administrator of Aicep, in an interview with ECO. “Otherwise, the European Union will not be doing a good job of monitoring the agreement”, he argued.

According to data from the National Statistics Institute (INE), 1,860 national companies (8.8% of all exporting companies in Portugal) exported to Mercosur in 2024, an increase of 134 companies compared to 2020. Brazil was the market to which most companies exported (1,663), followed at a distance by Argentina (228), Uruguay (194) and Paraguay (104). In terms of the dependence of national companies on that economic group, “an average exposure of 59.5% to the aggregate was observed, with varying levels of exposure between countries: Argentina (4.3%), Brazil (62.8%), Paraguay (22.1%) and Uruguay (10.3%)”, recalls the Aicep study.

And while China is Mercosur’s main supplier, with a 23% share, Portugal ranks 42nd, with a 0.391% share of the bloc’s total imports, a gain of 0.043 percentage points (p.p.) compared to 2023, after an increase of 0.028 p.p. in the previous year. Agricultural products and vehicles and other transport equipment gained the most market share. The biggest loss of market share was in wood and cork (-0.004 p.p.).

Mercosur, as a bloc, was the sole customer of 315 Portuguese companies (16.9% of the number of operators) generating 3.7% of the value exported. “Portugal has room to grow, but it needs to better segment sectors where there is a stronger match”, concludes the Aicep study.