Mercosur’s relations with China and the EU: Strategic Complementarity, Asymmetries and Dependencies and International Projection.

Introduction 

The Southern Common Market (Mercosur) plays an important role as a partner of both the European Union and China, especially in the current geopolitical context marked by instability. For instance, while the recent closure of the Strait of Hormuz disrupted the global supply of oil, the provision of it to Europe and Asia by Mercosur members such as Brazil and Argentina has emerged as a viable supply alternative. 

Mercosur countries also play an important role as strategic partners to global powers due to their critical mineral reserves that are crucial for the energy transition. However, the growing international relevance of the bloc due to its natural resources requires the members to continuously safeguard their autonomy in order to protect their commercial interests. Additionally, recent measures put in place by the Trump administration – such as the reinstatement of the Monroe Doctrine that legitimises U.S. interventionism on the region – are of serious concern for the individual countries’ sovereignty in the region. Therefore, a firm international stance and the diversification of worldwide partnerships are crucial for the bloc’s protection of autonomy on the global stage. 

On the one hand, though EU–Mercosur relations were formally established in 1999, it was only in December 2024 that both parties agreed on a comprehensive partnership agreement. At present, the Interim Trade Agreement is arranged for provisional application on May 1st of 2026, and once in operation, will create the world’s largest free-trade area with a market of over 700 million people, increasing export productivity of both sides involved. China’s ties to Mercosur, on the other hand, strengthened when the country joined the World Trade Organisation in 2001. The trade exchanges between the two increased from 20 billion USD in 2005 to 220 billion USD in 2024. By comparison, trade between Mercosur and the EU exchange only totaled over 129 billion USD in the same year. 

Data on imports and exports 

Data indicates that the Chinese trade of goods with Mercosur grew 13% between the years 2005 and 2024, while Chinese trade with the rest of the world only grew by 8% in the same period. Despite both sides diversifying traditional trading partners over the years, the Chinese influence in the region grew so much that even the rise of right-wing conservative political leaders such as Javier Milei in Argentina and Jair Bolsonaro in Brazil – who use the rhetoric of ‘anti-communism’ and portray China as a threat – did not stop them from  pursuing trade and financial partnerships with the country.

Currently, China is Mercosur’s top trading partner, importing goods estimated at 184 billion USD from its members, which is more than double of the bloc’s trading volume with the European Union. Yet, despite a continuous deepening of the Chinese and Mercosur ties, the relationship between the parties lacks an established free trade agreement and formal dialogue platforms. The sheer size of the Chinese economy leads to an asymmetrical relation which evokes reluctance to open up the economy by Mercosur’s industrial players; there is fear of the Chinese partner competitiveness and doubts on whether the national economies would be able to bear it. 

The Chinese imports from Mercosur are mainly primary products, agricultural and agroindustrial goods. For some goods such as sugar, soy, animal or vegetable oils and meat, the South American bloc serves as a main supplier for China. These products provided by Mercosur account for more than 60% of the total of what China buys from the rest of the world. By contrast, Chinese exports to Mercosur are largely technological products such as vehicles, smartphones, semiconductors, as well as insecticides/pesticides. There is a similar trend in EU imports, in which a significant reliance on the bloc for primary goods such as soy, coffee, corn, meat, minerals, oils, and other energy resources can be observed. Similarly to China, the main imports coming from the EU into Mercosur are manufactured goods such as machinery, equipment, vehicles and chemical products. 

In this sense, a clear and consistent pattern of trade concentrated on a few specific products is observed when analysing the categories of goods exchanged both by China and the EU with Mercosur. Whilst Mercosur exports are mostly agroindustrial and primary goods, its imports from China and the EU are manufactured goods, indicating a pattern of trade asymmetry. While Mercosur countries are also strategically crucial for China and the EU to diversify and maintain a stable supply of food, rare earths, oil and other resources, the terms of trade are unfavourable to the Mercosur economies. The new EU–Mercosur agreement is expected to intensify this trend even more, since it aims to reduce or gradually eliminate tariff barriers that favour exports of machinery and appliances, transport equipment, chemicals and pharmaceuticals, among others, to Mercosur. This high volume of exports of agricultural/agroindustrial products increases the sensibility of Mercosur markets to the fluctuation of prices and can constrain Mercosur’s autonomy in the relationship. This way, the asymmetrical trade and dependency contribute to a cycle of deindustrialisation, preventing economic development.

Mercosur countries also possess vast reserves of critical raw materials such as lithium and copper, which position the bloc as a strategic partner for global powers with an existing presence in the region. Argentina, for example, holds the world’s third largest lithium reserves, indispensable for the global shift to green energy in which both China and the EU are leading players. Lithium is needed in batteries for electric vehicles and other electronics such as smartphones and laptops. Brazil holds significant quantities of rare element reserves and 94% of the world’s niobium production (a mineral that is essential for the development of electronics), medical technology, aerospace technology, transportation infrastructure and others. For China, it is merely beneficial to  diversify the supply of these minerals, whereas for the EU, the new agreement with Mercosur represents a vital step in safeguarding the flow of critical raw materials and strengthening its strategic autonomy by reducing its existing reliance on China as a main supplier. 

Infrastructure development in the Mercosur region 

Three Mercosur member states – Argentina, Uruguay and Bolivia – are participants in China's Belt and Road Initiative (BRI). Their participation has facilitated Chinese investment in several strategic sectors of these countries, from the extraction of important metals to the development of energy and transport infrastructure. Some examples are the Santa Cruz River Hydroelectric Project that aims to significantly increase Argentina’s hydroelectric power capacity, Huawei's development of 5G digital infrastructure in Brazil, and the investment by the Chinese state-owned Cofco in the largest international export terminal within the port of Santos. Moreover, there are plans to develop the Central Bi-Oceanic Railway Corridor (CBRC), a railway that would connect Brazil, Bolivia, and Peru, facilitating access to the Chinese market.

The European Union has also been financing projects through its Global Gateway Initiative, such as the pilot initiatives related to green hydrogen production in Brazil, Argentina and Paraguay. In this process, hydrogen is produced with sources of renewable energy like sun, water or wind, becoming a carbon-neutral energy carrier that is able to store clean energy for a long period of time. The introduction of the trade agreement is expected to open up space for further projects related to critical raw materials and energy. 

Nature of the relations

Regarding the multi-faceted nature of the relationships, Mercosur and China developed a relationship within the scope of South–South Cooperation. Both are considered Global South actors and coordinate in meaningful exchanges aiming at social and economic development. On the international stage, Brazil and China are leading members of the BRICS organisation, and are strong voices in favour of safeguarding the needs and interests of the Global South, leading the BRICS as relevant actors in the global scene. However, within the dynamics of trade and economic cooperation, there is evidence of the reproduction of asymmetrical dependency patterns. The China–Brazil example demonstrates how despite better alignment to national developmental needs, South–South dynamics can still reproduce power imbalances, or create new forms of economic dependency often found in North–South dynamics. In the case of the Mercosur–EU relations, critics point out that the Mercosur-EU trade agreement preserves the classic international division of labour, which assigns the responsibility of exporting industrial goods to the developed nations (i.e., the EU), whereas the periphery states (i.e., Mercosur) are left to export primary goods abroad, thereby perpetuating a cycle of underdevelopment and dependency in the global system. 

  In addition to asymmetrical trade relations and the risk of dependency, Chinese infrastructure projects have been accused of being debt-traps, where budgets significantly overrun and constrain fiscal sustainability, as well as the ability of these countries to repay the debt to China. This pattern can be found in investments in the South American region such as Brazil, Ecuador and Venezuela, but also in African and Asian countries. In these cases, the lending conditions of the investments involve the assurance of Chinese access to the countries’ natural resources such as oil, which ultimately replicates power imbalances and favours dependency and austerity measures. Moreover, Chinese pragmatism in negotiations is often perceived as one that does not fully consider environmental and labour standards as priorities. 

Environmental concerns are present in both dynamics. Despite the pragmatic and flexible character of Chinese cooperation, Sino partnerships are more frequently portrayed as ecologically damaging. By contrast, the European Union has imposed legally binding sustainability requirements aligned with the goals stated in the Paris Agreement. Regardless, the destruction of land and ecosystems will continue to occur at an even larger scale due to the increase in demand for agricultural export goods. On this matter, civil society has demonstrated dissatisfaction towards the Mercosur–EU trade agreement, including activists under the Articulation of the Indigenous Peoples of Brazil (APIB), who have declared their opposition due to its negative impacts on the environment. They argue that, because of the lack of government protection of their lands, the agreement constitutes a violation of the rights of the indigenous people who will suffer from the devastation. 

In terms of values and normative power, there is a clear difference: while the Mercosur–China ties are marked by pragmatism and common values of the Global South, Mercosur–EU relations are very closely aligned with principles of multilateralism, democracy and sustainability. China exerts power by developing flexible infrastructure partnerships in exchange for the protection of its own commercial interests in the recipient countries. This flexibility, however, opens up space for the mismanagement of resources, previously described as debt traps. The EU, on the other hand, protects its commercial interests by focusing on its normative power to shape individual and global standards of norms and values – such as the respect for democracy, human rights and sustainability. The problem here lies in the EU positioning itself as a superior moral entity, imposing norms in an almost paternalistic way. As proof of this, Brazilian president Lula da Silva criticised environmental rules present in the Mercosur–EU trade agreement arguing that it could be setting asymmetrical conditions for the agreement, putting Mercosur at a disadvantage.

For Mercosur, in its relations with both China and the EU, it must project itself on the international stage through the development of trade partnerships. Moreover, the asymmetrical terms of trade pose an urgent demand for improved capacity of internal organisation and coordination of Mercosur as a bloc of emerging economies. Doing so will safeguard Mercosur’s interests and autonomy when dealing with these two potent actors, while enabling it to strategically position itself in the global scene as a prospective partner at eye level. 

Strategic partnerships for the future 

Despite Brazilian officials using its veto in formal negotiations out of concern for the resilience of its domestic manufacturing sector, they have begun considering a partial trade agreement between Mercosur and China for the first time. The diplomatic ties that Paraguay has with Taiwan can complicate but not completely prevent the establishment of an agreement. And in the case of Argentina – which has been deepening its relationship with the U.S. and receiving significant financial support – some reluctance in accepting an agreement can be observed in case it interferes with Argentinian interests with the U.S. There continues to be a lack of common strategy of the bloc towards China and the more individual countries advance with bilateral agreements serving their own national interests, the more difficult it will be to come to terms with an agreement with China together. 

China is a very important figure for the Global South when it comes to national development and innovation. Being part of the top 10 nations present in the global innovation index, China can support Mercosur countries that have a very elementary export of high technological products in relying less on foreign technology and boosting national industries. This could be achieved through the continuous exchange of scientific knowledge and R&D (scientific research and practical development), such as the projects mentioned in the infrastructure development section, the implementation of more artificial intelligence initiatives, clean energy projects, training and qualification programmes, and academic exchanges that would encourage economic development.

For both the European Union and China, there is potential for the development of technological partnerships in the industry of bioenergy. As the need for alternative energy sources increases, Mercosur countries play an important role in the production of biomass and biofuels such as ethanol and biodiesel. For this to go ahead, the institutionalisation of the ties between the actors is needed, with top-level strategic dialogues being the way in which to facilitate cooperation in realms other than trade and FDI. As a result of these changes, a foundation for a more symmetrical relationship could be established, aligning better with international challenges and the South–South cooperation framework in the case of China, thereby respecting the autonomy of the region.

Moreover, with the current U.S. cuts on development funding, an opportunity opens up for the EU to explore new ways of promoting development in the region through technology transfers, scientific advancements, R&D, and funding of collaborative projects. Cooperation in other areas can also be fomented such as sustainable agriculture or green industries, in which the EU has made significant progress. In addition and as previously mentioned, investment on green hydrogen production projects should be continued by the European Union. 

Conclusion

To conclude, the Mercosur–China and Mercosur–EU dynamics are complex and are marked by strong cooperation in key sectors, but also by dependencies in trade and an overall imbalance of power and influence. Therefore, there is a clear need for continuous analysis and re-evaluation of the foundation of these relationships for a more equitable development of ties. For instance, further formalising China–Mercosur relations and establishing a balanced free trade agreement could better satisfy the needs of both sides, diminishing the asymmetric power structure that currently exists. This could facilitate a more diversified level of trade, fostering self-sufficiency for the manufacturing industry of Mercosur countries. In the case of the Mercosur–EU relations, the potential consequences of the trade agreement will be revealed soon. After 25 years of negotiations, both sides are expected to gain from the trade, although the positive and negative implications of the deal are yet to be seen as well as how they will affect the current relationship. 

The views expressed in this article belong to the author(s) alone and do not necessarily reflect those of European Guanxi.

ABOUT THE AUTHOR

Luiza Faorlin is a graduate student in European Studies with a Minor in Journalism and Communication from the University of Coimbra. Her main fields of interest are Development and International Cooperation. 

This article was edited by Daria Bogolyubova.

Featured Image: LXIII Reunião Ordinária do Conselho do Mercado Comum e Cúpula de Chefes de Estado do Mercosul e Estados Associados / Creative Commons Attribution 2.0 Generic / Free for use