(Bloomberg) -- The breakthrough in free-trade talks between the European Union and Mercosur after 20 years of frustrated efforts comes as a huge boost to the presidents of the two largest South American nations, both of whom are struggling with dismal economic outlooks.
The negotiations between the EU and the bloc formed by Argentina, Brazil, Paraguay and Uruguay pave the way for an agreement to expand goods shipments worth almost $102 billion a year. Argentina’s President Mauricio Macri shared audio of his foreign minister weeping with joy as he broke the news of the breakthrough. President Jair Bolsonaro posted a series of tweets celebrating the “historic” deal. “Great day!” he tweeted, alongside a thumbs-up emoji.
While for European leaders the agreement represents a huge boost for a global free-trade agenda amid rising protectionism championed by President Donald Trump, for the South American presidents the triumph is more visceral. Macri faces a tough re-election campaign amid a second recession in four years, while Bolsonaro’s poll ratings are on the slide just six months into his mandate as growth forecasts fall and unemployment remains sky-high.
Read More: EU, South America Achieve Breakthrough in Free-Trade Talks
“It’s a game-changer for Argentina,” Horacio Reyser, Argentine Foreign Ministry Secretary for International Economic Relations and the country’s top negotiator in this deal, said in an interview. “We only have commercial deals with 10% of global GDP. This takes us to 30% of world GDP. Our economy will grow faster.”
A press statement released by the Brazilian economy ministry said that the deal would result in an increase in the country’s GDP of $87.5 billion over the next 15 years, a number that could rise to $125 billion.
The deal also couldn’t come at a better time for Uruguay’s President Tabare Vazquez, whose ruling left-wing Broad Front party faces its toughest electoral test in October general elections since sweeping to power in 2005
Mercosur-EU negotiations enjoyed the full support of the Paraguayan governments of President Mario Abdo Benitez and his predecessor, also of the ruling Colorado Party, Horacio Cartes.
Next Steps
While the South Americans believe there will be an immediate boost to investment after the breakthrough, the actual deal won’t come into effect until it’s ratified in the congresses of the participating countries.
Reyser estimates it may take between two to three years for the whole agreement to pass in all levels of the Argentine parliament. In Brazil, the deal requires a simple majority to pass both the lower house and the senate. Lawmakers are not permitted to change a single line. Once voted through, the last tariff will expire after 15 years.
Business groups were quick to cheer the deal. Argentine crop export chamber Ciara-Cec head Gustavo Idigoras said it has a "very significant" impact for Argentina and Mercosur. Exports of edible, bottled soybean and sunflower oil are expected to soar.
Brazil’s National Industry Confederation said that the agreement was the most important ever signed by Latin America’s largest economy. “This deal could represent Brazil’s passport to entry into the league of great economies in international trade,” said Robson Braga de Andrade, the CNI’s president.