Transatlantic dealmaking from the European Union (EU) to Brazil and other countries in South America could receive a significant boost if a major trade deal continues to show momentum in the months ahead.

The EU Commission last week endorsed a long-awaited free trade deal with Mercosur, a bloc that includes Argentina, Paraguay and Uruguay, alongside regional giant Brazil.

If the Commission gets its way, EU member states and the European Parliament would rubber-stamp the deal by the end of 2025. If this timetable proves reasonable, the world’s largest free-trade bloc could be a reality by mid-2026.

The EU is already the largest foreign investor in Mercosur, with nearly USD 400bn in foreign direct investment, according to Juan Cerruti, global chief economist at Santander.

“This historic agreement stands out not only for its magnitude but also for its potential to transform the region’s trade and investment landscape,” Cerruti said. It will also help European companies that are already active in Latin America streamline their operations, he said.

The two blocs announced their aspirations for a deal in June 2019. Deals with buyers from the EU and targets in Mercosur spiked in 2019, Mergermarket data shows.

However, activity fell with COVID-19, and the pandemic coincided with a realisation that the talks would move at a glacial pace. It remained muted even in the otherwise blockbuster deal year of 2021. Since then, deal count has made a faltering recovery, but no year has matched 2019 for aggregate M&A value.

Still, there were 106 deals worth EUR 10bn in the full year (FY) for 2024, marking both the high watermark in the post-pandemic world and the second-highest result in the last decade, after FY19.

So far in 2025, the pace has fallen slightly. There have been 65 deals worth a combined EUR 3.6bn year-to-date (YTD), compared to 66 transactions worth EUR 3.8bn in the same period last year.

Of course, other trade news further north in the Americas has dampened investor sentiment on Latin American exporters.

The largest deal so far this year is Carrefour’s EUR 943m take-private of Atacadao, a Brazilian grocery wholesaler chain, which was announced in February. The French bidder – already Atacadao’s controlling shareholder – increased the offer price in April.

It is significant that the largest deal this year is both in Brazil and the retail sector. Nearly nine out of 10 deals so far this year involve Brazilian targets, while the retail sector is the most popular by value.

Finishing line

The finishing line might be in sight after last week’s breakthrough, but the final stretch of the race could prove treacherous.

“The deal has already seen opposition from key political stakeholders such as farmers and environmental groups, suggesting that ratification will be a significant challenge,” according to Payne Griffin, senior director and trade expert at FTI Consulting.

Populist movements are rising in Europe, which means it might become more difficult to approve multinational trade agreements, Griffin said.

Farmers and environmentalists have taken to the streets of Europe to protest against the deal, particularly in France, where the centrist government is likely to lose a confidence vote later today (8 September).

Despite anger in the French countryside, one member state alone cannot reject the deal. At least four countries representing 35% of the EU’s population are needed to form a blocking minority.

While not a foregone conclusion, getting the deal over the finishing line would have far-reaching implications for both Latin America and Europe.

A new strategic alliance “could serve as a powerful instrument to boost the global role of both regions, which will have a very favourable impact on their economies and markets,” Cerutti said. It could also foster greater regional integration within Latin America by imposing harmonised rules of origin, simplified procedures, and common standards, he said.

Jogo bonito

With an economy nearly 3x the size of Argentina, Paraguay and Uruguay combined, Brazil is Mercosur’s engine.

BIP, an Italian business consultancy, is one European company that is thinking about deals in the giant Latin American country. It has already been active in Brazil and has plans to continue.

In June, BIP’s managing partner for M&A, Andrea Airaghi, told Mergermarket that the firm was actively interested in receiving pitches related to Brazilian consultancies specialising in cybersecurity, cloud services, and financial services. It has the proceeds of an EUR 60m bond as firepower.

The company is itself in the midst of a change of control. Intermediate Capital Group (ICG) is the frontrunner to buy CVC’s 70% stake in BIP, the Italian press has reported.

Meanwhile, LLYC is another consultancy that has been active in Brazil. The Spanish communications and public affairs firm announced one deal in June and is in talks with a second target in the country, its CEO for the region, Juan Carlos Gozzer, said.

Finally, Fluidra, a listed Spanish provider of swimming-pool components and accessories, is interested in buying in Brazil, as well as in Mexico further north and in other markets. It has EUR 450m in unused revolving credit, CFO Xavier Tintoré said in June.

If the treaty is fully ratified, dealmakers can expect to see many other European companies following in the footsteps of those that have already invested in Brazil.