The European Union and Mercosur concluded a free trade agreement on January 17 in Asunción, bringing to an end 25 years of on-and-off negotiations between the two blocs.

Senior officials from both sides gathered in the Paraguayan capital for the signing ceremony, with European Commission President Ursula von der Leyen and European Council President António Costa representing the EU alongside foreign ministers from the four Mercosur nations.

The accord must now navigate approval processes in the European Parliament and the national legislatures of Argentina, Brazil, Paraguay and Uruguay before entering into force.

Paraguayan President Santiago Peña, whose government currently chairs Mercosur, hailed the occasion as historic and expressed gratitude to negotiators from both regions.

"This agreement sends a very strong message to the world. It reflects a clear and deliberate choice. We choose fair trade over tariffs. We choose a productive, long-term partnership over isolation," said Von der Leyen.

She pointed out the deal will significantly expand the access of European goods and companies to the South American market and resources, including rare earths.

Costa framed the agreement as a rejection of protectionist approaches, stating it demonstrated a "firm commitment to openness, exchange and cooperation, as opposed to isolationism, unilateralism and the use of trade as a geopolitical weapon."

The pact encompasses more than 700mn people across both regions. Brussels estimates it will save European exporters over €4bn annually in duty payments.

The agreement is designed to dismantle up to 91% of tariffs on European goods entering Mercosur markets and 92% of levies on South American exports to the EU. For European industries, particularly automotive and machinery manufacturers, the deal promises phased elimination of current duties ranging from 14% to 35%.

French agricultural producers have mounted sustained opposition to the accord, staging demonstrations over concerns that South American competitors will undercut their prices. However, the EU's approval on January 9 required only a simple majority, allowing Brussels to override objections from France and other sceptical member states.

Trade flows between the blocs are dominated by European sales of machinery, chemicals and transport equipment moving westward, whilst South American shipments concentrate on farm produce, raw materials and forest products.

The protracted negotiations have repeatedly foundered over disagreements concerning environmental protection in the Amazon region and resistance from European agricultural interests who fear increased competition from South American producers.