On 01 November 2024, the 3rd round of negotiations between the Southern Common Market (Mercosur) and the United Arab Emirates (UAE) ended in Montevideo (Uruguay) following talks conducted on the sidelines of the G20 meeting in Rio de Janeiro. This round, which began on 28 October, brought together representatives from delegations from Argentina, Brazil, Paraguay, Uruguay, and the UAE. Technical groups focused on Market Access for Goods, Rules of Origin, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Services and Legal Issues. A final Free Trade Agreement (FTA) is expected to be signed by the end of this year (2025). According to the UAE Minister of State, Ahmed Al Sayegh — cited by the Brazil-Arab News Agency — who was present in Rio during the G20, the UAE has seen, over the past five years, considerable growth in bilateral cooperation with an assortment of countries including: Australia, Colombia, South Korea, India, Jordan, Morocco, and New Zealand. In Latin America, Brazil has seen the lion’s share of investments from the UAE, receiving companies such as Emirates Airlines, the defence sector Edge Group and the sovereign wealth fund, Mubadala.

Although Mercosur acts as a single entity when signing international free trade treaties, since it has acquired legal personality under international law, it is important to note that in terms of its integration process, it is still at the stage of being an imperfect customs union, with specific common external tariffs varying from country to country as part of what is called a list of exception, where each member can decide on a number of products that are not part of the bloc’s external tariffs agreement. So, as negotiations between the bloc and the UAE ensue, the bloc itself is still undergoing a process of harmonising its policies, which may add extra complexity to closing the FTA. For instance, on 06 December 2023, the Mercosur Common Market Council (CMC [the bloc’s decision-making body]) suspended a rule that limits the semestral alteration of the number of products in the bloc’s tariff exception list. 

To be sure, Decision CMC 12/23, adopted at the bloc’s Summit in Rio de Janeiro in 2023 and running through December 2025 concerns the List of Exceptions to the Common External Tariff (LETEC, in Portuguese), which includes up to 100 items broken down by their Common Nomenclature of Mercosur (NCM) for different products. In its normal operation, countries could change only 20% of list items each semester, but following a proposal made by the Brazilian government, changes now can be up to 100% of items throughout the year. LETEC is a compendium with validity scheduled until 31 December 2028 in which Member States are authorised to include up to 100 NCMs that can have their import tax reduced or increased by the government, creating exceptions to the bloc’s customs measures. It is a mechanism for adjusting national tariffs that Member States have as a prerogative. The changes to the list can bring positive impacts by altering the competitiveness of each product or input, following the tariff limits provided  by the World Trade Organization (WTO).

All in all, the winds for a FTA between Mercosur and the UAE appear favourable as talks continue moving forward at a reasonable pace. Nonetheless, it is important to remember the complexities that such agreements entail and how Mercosur itself is still in the process of completing the integration of its customs union. How this may affect the bloc’s export and import of products to and from the UAE is yet to be seen in practice.