We are devoting a series of posts on this blog to give you some down-to-earth thoughts on the recently-signed Mercosur/EU agreement. Our first post gave you some initial thoughts. But what’s Mercosur all about and why should UK companies* be paying attention?
Mercosur is a South American trading bloc comprising Brazil, Argentina, Paraguay and Uruguay. Confidence in this bloc hasn’t been the greatest over the last ten years, and we’ve often seen it here (I am based in Uruguay) as too slow, bureaucratic and political. However, under presidents Macri and Bolsonaro (Argentina and Brazil, respectively), the bloc has been given a much-needed confidence vote. The bloc has been traditionally very protectionist and still has very high tariffs and complex regulations, something that I know has put off many UK companies from doing business here. This new agreement gives EU exporters huge advantages compared to competitors in other markets.
Mercosur in numbers (source):
- 260 million consumers
- 5th largest economy outside the EU (GDP EUR 2.2 trillion)
- EU exported EUR 45bn in goods to Mercosur in 2018 and EUR 23bn in 2017
Apart from the sheer size of the bloc, in my opinion, what’s also relevant:
- Cultural proximity to Europe, especially in Argentina, Uruguay and South of Brazil. Very few cultural differences and definitely not cultural shocks. It is relatively easy, on a personal basis, to do business in these countries, compared to countries like China, India or Russia.
- Two languages: you can access 260m people with just two languages (Spanish and Portuguese).
- Four tax/legal systems: you can access 260m people tackling only 4 countries (yes, there are tax and legal differences internally, mind you – particularly in Brazil and Argentina)
- Time differences are minimal: 2-4 hours behind the UK
- A region that values European origin in general and that has a close affinity with the UK, which is still seen as reliable, honest and competent
- Need for UK/EU products and services: we will discuss this on our next post
Some numbers (source) on the UK and Mercosur:
- 4,796 UK companies currently export to Mercosur
- Exports to Mercosur help support 113,000 jobs in the UK
- The value of UK exports to Mercosur is EUR 4.6bn and the value of its import from the bloc is EUR 4.7bn
- Mercosur is the UK’s 20th largest market outside the EU
In my opinion, the room for improvement and therefore growth is massive. Compare the figures above to those for Germany:
- 12,561 German companies currently export to Mercosur
- Exports to Mercosur help support 244,000 jobs in Germany
- The value of German exports to Mercosur is EUR 15.4bn and the value of its import from the bloc is EUR 6.3bn
- Mercosur is the Germany’s 10th largest market outside the EU
British and EU exporters are not new to Mercosur markets. Over the last 10 years, we have supported UK companies in Brazil, Argentina, Paraguay and Uruguay in sectors as diverse as agritech, industrial machinery, food service, electrical engineering, education and more. The infographics “EU-Mercosur trade in your town”, even if probably not 100% accurate, give you a flavour of what’s already been exported:
(do compare the UK to the rest of the EU, mind you…)
So that’s Mercosur for you, in one short post.
* we discussed this agreement in the light of Brexit briefly in our last post.