“One of the most important trade deals of all time.” 
Jair Bolsonaro, President of Brazil

In 1999, the European Union and Mercosur started negotiations on a trade deal.  Twenty years after negotiations began, both sides have now reached a historic free-trade agreement. The agreement aims to cut or remove trade tariffs, making imported products cheaper for consumers while also boosting exports for companies on both sides. It is set to create a market for goods and services covering nearly 800 million consumers, making it the largest in the world in terms of population. 

Mercosur is made up of Argentina, Brazil, Uruguay, and Paraguay. For many years Brazil, one of the world’s largest economies, remained closed to European economic sectors. This deal will undoubtedly open the market for South American producers, especially farmers, who have had trouble accessing foreign markets in the past.  

The EU is the biggest foreign investor in Mercosur with a stock valued at €381 billion, while Mercosur’s investment stock in the EU amounted to €52 billion in 2017. Despite this substantial relationship, high tariffs have historically kept European competitors at a disadvantage against national industries. The deal, however, could significantly change the way Europeans do business in countries like Brazil.

The goal of the new EU-Mercosur trade deal is to:

• Remove barriers and help EU firms – especially smaller ones – to increase exports to Mercosur countries.  
• Strengthen worker’s rights and ensure environmental protection, encourage companies to act responsibly, and uphold high food safety standards. 
• Protect quality EU food and drink products labeled as geographical indications from imitations.

The agreement represents a win-win for both the EU and Mercosur, creating opportunities for growth and jobs for both sides.  

Brazil’s President, Jair Bolsonaro, described the deal as “one of the most important trade deals of all time.” For Brazil, as one of the largest agricultural producers in the world, it certainly is. The country not only boasts the world’s eighth-largest GDP, but it is also the largest economy in Latin America. 

Expected to become the world’s most substantial food exporter by 2020, the agriculture and agribusiness sectors have been the most significant contributor to the economic recovery of Brazil, now representing 23.5% of GDP, the highest level in 17 years. The most recent harvest report in Brazil (16/17) is projected to be 238 million metric tons, more than double the harvest from just ten years ago.  

Amongst Brazil’s most in-demand crops are coconuts, which have seen their demand skyrocket in recent years, due to the increased exposure of this product in the health and wellness industry. Brazil is the world’s fourth largest producer of coconuts. In 2016 Brazil produced over 2 million tonnes of coconut, and coconut production in Brazil is expected to increase as the demand for coconut products grows.  

Europe, in particular, is a region that has seen a significant increase in the demand for coconut water and coconut oil, especially those certified as organic. The Center for the Promotion of Imports from Developing Countries (CBI) says that in Europe, coconut imports have increased by more than 30% from 2011-2017. 

The main coconut producing countries are in Asia: the Philippines, Indonesia, and India currently account for 71 percent of global production of coconuts. However, they are affected by low prices and lack of financing, discouraging them from replanting trees. At the same time, they face a serious problem: the aging of plants, which have a productive life of between 30 and 40 years. As a result, their production will decrease by more than 80 percent in the next decade, and the growing demand will increasingly have to be met by other regions.  

The EU-Mercosur trade deal provides a significant advance to organic coconut producers. The trade agreement sets high standards and establishes a reliable framework to jointly address issues like environment and labor rights, while reinforcing sustainable development commitments already made, for example, under the Paris Agreement.  

The deal will also provide a new forum to work closely together on a more sustainable approach to agriculture and, as part of the political dialogue under the Association Agreement, address the rights of indigenous communities. This stipulation is an indicator that the EU will set standards for imports and crops produced and grown sustainably. Primal operates the largest commercial neem plantation in the world, alongside a dwarf and hybrid coconut plantation in Northeastern Brazil. We grow our trees through the sole use of sustainable and organic inputs which pose no threat to humans and the environment. With a vertically integrated business model, we will be able to harvest and process coconuts into water and oil, with organic certification. This model will allow us to sell at a premium and garner more attention from the biggest markets in the world, such as the United States and Europe. 

At Primal, we decided on Northeast Brazil for our world-leading commercial neem plantation, because of our firm belief in the country’s economic potential. With favorable international trade intentions, a projected economic boom, and a rapidly expanding agriculture industry, Brazil is well positioned to play a vital role in sustainably feeding a rising global population and reap the financial rewards for doing so. 

Placing ourselves at the intersection of innovation and sustainability is what sets us apart as not only a business but as a movement. Trade agreements, such as the one between Mercosur and the EU only strengthen our position as a global leader in sustainable agriculture and green investments.