The Basque Country and the EU-Mercosur Agreement: impact on the business sector

On May 1^st 2026, the European Union’s external trade policy entered a new phase with the provisional implementation of the agreement with Mercosur, which comprises Brazil, Argentina, Uruguay and Paraguay, with Bolivia currently undergoing full adhesion. After more than 25 years of negotiations, this milestone represents more than just a reduction in tariffs; it is a strategic move that will enable the European economy (and consequently the Basque economy) to expand its trade capacity with a region that is gaining strategic importance in an increasingly uncertain global context.

A change in the rules in key markets

The agreement contemplates the gradual elimination of tariffs on more than 90% of bilateral trade. For an industrial economy such as the Basque one, the impact is direct: the average tariff applied by Mercosur to the EU will fall from 11% to 1%.

Sectors critical to the Basque Country, such as the machinery and capital goods industries, the automotive sector, and the chemicals industry, which have historically faced high barriers, could benefit from more favourable access. Furthermore, the simplification of customs procedures and the protection of geographical indications provide vital regulatory predictability for companies seeking long-term stability.

The Basque presence in the Southern Cone

The Basque Country is not starting from scratch. It already has strong ties with the region:

• Trade destination: In 2024, Mercosur was the 17^th largest destination for Basque exports.
• Brazil is the driving force: It accounts for 67% of Basque exports and 97% of imports to the bloc.
• Physical presence: A total of 120 Basque companies have 183 operations in the region (89 of which are production facilities), making Mercosur the Basque Country's fifth-largest destination globally in terms of the number of operations.

The business perspective

This analysis is not based solely on the formal content of the agreement. It also draws on the findings of a workshop organised by the BBK Banking Foundation and Orkestra, which was attended by companies from the 'Hidden Champions' community. The workshop took place in Bilbao and examined the barriers, opportunities and practical conditions for establishing a presence in Mercosur. This document on the EU-Mercosur agreement and the smart internationalisation of the Basque Country provides a more detailed analysis of the event.

Basque 'Hidden Champions' are companies that are leaders in international niche markets, and they're already leading the way. Supporting more than 1,000 direct jobs linked to Mercosur, these companies value the agreement not only for its potential to increase sales, but also for its ability to reduce operational friction and technical barriers, which currently constrain their activity. They also argue that, while the agreement facilitates the shipment of products from the Basque Country, it also reinforces the case for establishing a physical presence in the region. Shifting from selling from abroad to operating locally could therefore be an even more significant step in establishing a solid business in Mercosur. Ultimately, the agreement could improve conditions for setting up operations and enhance operational predictability by reducing regulatory, customs, and operational friction in the region.

Selective opportunities and 'smart internationalisation'

Although the agreement is a cause for optimism, Orkestra stresses that it is not a ‘magic formula’ that will work for everyone automatically. Rather, it is a gateway to smart internationalisation. This involves targeting specific markets, carefully selecting entry strategies, and controlling the pace of expansion. Furthermore, the agreement addresses one of the challenges identified in the policy brief on 'Hidden Champions'. In an era of growing geopolitical fragmentation, internationalisation increasingly requires a combination of exports, a local presence, and access strategies that are tailored to each market.

There are at least three key issues to consider here:

• Heterogeneity: Mercosur is not a uniform bloc. Each country requires a specific strategy. Brazil remains the major benchmark market and the one with the highest operational demands.
• Persistent barriers: The agreement does not entirely eliminate financing schemes that prioritise local production, which reinforces the need for a local presence in order to compete on equal terms. For many tenders, local content rules will continue to carry weight in practice.
• Security of supply: Beyond sales, the agreement is crucial for ensuring access to the critical raw materials required for the digital and green transitions of the Basque industry.

Conclusion: turning opportunity into action

For the Basque Country, the value of the agreement lies in improving access and operational predictability in a region where trade, business presence and sectoral specialisation are already well established. The greatest commercial opportunities will arise where these strengths align with the needs and opportunities of the Mercosur countries. Therefore, the EU-Mercosur agreement provides the Basque Country with a platform to diversify its supply chains and achieve strategic autonomy. The challenge for Basque institutions and companies is now to translate this framework into actionable priorities, strengthen regulatory support, and leverage the expertise of established companies to foster the growth of industrial projects in the region with greater certainty.

These and other issues will be addressed by the Basque Hidden Champions community at the first Hidden Champions Forum, which will be held on June 15^th in Bilbao alongside our project partner, the BBK Banking Foundation.