The trade alliance between the EU and South America’s Mercosur, comprising Brazil, Argentina, Paraguay and Uruguay, will substantially boost trade ties in a region that saw commerce with China soar in recent decades while U.S. influence plummeted.

But even as U.S. President Donald Trump’s administration seeks wider regional fealty, South American governments from Brazil to Peru are unlikely to relinquish strengthening ties to China or Europe at a time when they have eclipsed the U.S. in trade in most of the region.

Venezuela raid may have sealed the deal

If anything, several analysts said, Trump’s efforts to flex American power in the region may have helped push past the finish line a trade agreement that suffered numerous delays over two decades of negotiations.

“If credit for this deal goes to anyone, it is to the international context,” said Ignacio Bartesaghi, a foreign policy adviser who has worked with numerous Uruguayan governments over the years. “It goes to Trump’s tariff war, the conflict in Ukraine, to what happened in Venezuela recently.”

Trump’s commando raid to seize Venezuelan President Nicolas Maduro, which set the stage for a more amenable successor government, was the latest of several moves by the U.S. president to sway regional governments.

Last year, Trump threatened to cut off U.S. financial support to Honduras if a conservative candidate did not win the presidential election and conditioned billions of dollars in loans to Argentina on conservatives triumphing in the country’s midterms.

He also used steep tariffs on Brazilian goods to try forcing the country to stop the prosecution of former President Jair Bolsonaro, a staunch Trump ally.

Voters backed Trump’s choice in both elections. But Bolsonaro was later convicted, and the U.S. government dropped most of the new tariffs against Brazilian products soon after.

“The return of America’s pre-eminence in the Western Hemisphere, led by President Trump, is undisputed,” Anna Kelly, a White House spokeswoman, said in a statement. “All of the President’s foreign policy actions have restored American strength after four years of weakness under Joe Biden.”

More deals to come

Trump has repeatedly bashed multilateralism and refused to abide by international rules, withdrawing the U.S. from several global pacts and even telling The New York Times last week that he did not need “international law.”

Few countries in Latin America seem to agree.

While Argentine President Javier Milei, one of Trump’s closest allies in the region, praised the U.S.-backed capture of Maduro, his Foreign Minister Pablo Quirno also celebrated the deal with the EU as a victory for “clear rules and freedom.”

Venezuela was a full Mercosur member until its suspension in 2016 for failing to meet trade and human rights commitments.

One Brazilian official close to the presidency, who asked not to be named to discuss private deliberations, called the EU deal a “breath of fresh air” in “the most shameful and negatively critical week for multilateralism in decades.”

The agreement signed this month may also push Mercosur to conclude other trade agreements with Canada and the United Arab Emirates, said Welber Barral, a former Brazilian trade secretary.

“Countries are seeking to create regional rules that can be obeyed, so they won’t depend on the World Trade Organization, which is being discredited by Trump,” Barral said.

The EU-Mercosur deal is just one more example of several being negotiated and signed by countries that were hit with steep tariffs by the Trump administration, such as Indonesia’s trade accord with the European bloc and a pledge between Japan, South Korea and China to increase regional trade.

The deal between Europe and South America shows that many countries want to reinforce global norms, said Margaret Myers, director of the Asia & Latin America Program at the Inter-American Dialogue.

“At a time when the U.S. is breaking from the status quo, parts of Latin America appear to be upholding it,” she said. “It’s a wake-up call for the U.S.”

— Additional reporting By Luciana Magalhaes in Sao Paulo and Ricardo Brito in Brasilia

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The soy moratorium agreement bars signatories from buying soybeans grown on Amazonian farms deforested after July 2008.

In an announcement on Monday, Mato Grosso Governor Mauro Mendes said lobby group Abiove informed the state government officially that the association and major traders were leaving the pact. A tax law change on January 1 is a key factor.

Abiove, which includes ADM, Bunge, Cargill, Cofco and Louis Dreyfus among members, confirmed in a subsequent statement it had “initiated talks” to exit the pact, which is backed by the federal government and conservation groups.

The group and about two-thirds of the companies that formerly participated no longer appeared on Monday on the moratorium agreement’s website.

Conservation groups condemn the move

WWF said in a statement that the decision was an environmental setback.

Departure of the firms from the pact “weakens one of the most effective instruments for combating deforestation in the country,” and it exposes farmers to increasing climate risks, WWF said.

Greenpeace also criticized the move, saying it would violate promises made to investors and international markets.

The moratorium is credited with slowing the destruction of the world’s largest rainforest. However, as Reuters reported last week, some of the world’s largest soybean traders were preparing to withdraw from the deal to preserve tax benefits in Mato Grosso, where a new law eliminating the benefits for moratorium participants took force at the start of 2026.

Aprosoja-MT, an association representing farmers in Mato Grosso that had pressured companies for years to end the pact, welcomed the Abiove announcement.

The farmer group called the decision a victory, claiming the moratorium agreement is illegal and unfair to those who comply with the Brazilian Forest Code.

Abiove said companies will be individually responsible for fulfilling their own conservation commitments. “The legacy of monitoring and the expertise acquired over nearly 20 years will not be lost,” it said.

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The firms exiting the so-called Amazon Soy Moratorium, which has saved millions of acres of tropical forest over nearly two decades, are looking to shield themselves from a new state law in Mato Grosso, the sources said on condition of anonymity.

Starting in January, the state will strip tax incentives from companies taking part in the conservation program. Mato Grosso grew some 51 million metric tons of soybeans in 2025, more than Argentina.

A preliminary report from state auditors in April found that grains traders had benefited from tax incentives worth about 4.7 billion reais (C$1.15 billion) between 2019 and 2024.

ADM and Bunge were the top beneficiaries of tax incentives, receiving about 1.5 billion reais (C$368.6 million) each, said Sergio Ricardo, head of the Mato Grosso state audit court.

U.S.-based ADM, Bunge and Cargill, as well as China’s Cofco and Brazil’s Amaggi, are signatories of the pact with facilities in Mato Grosso that have benefited from state tax incentives. It was not clear which of the firms would break immediately from the moratorium.

Cargill referred questions to industry group Abiove, which did not respond to requests for comment. ADM, Bunge, Cofco, Amaggi and grain exporter group Anec did not respond to questions.

“Most companies will choose not to lose the tax incentives and will withdraw from the agreement,” said one of the sources, adding that the departures would effectively end a pact signed in 2006 with the federal government and conservation groups.

‘Dangerous precedent’

The moratorium is considered one of the most important forces slowing deforestation rates in the Brazilian Amazon over the past two decades as it bars signatories from buying soybeans from farmers who plant on land deforested after July 2008.

Researchers estimate that an area of the rainforest the size of Ireland would have been lost to soy farms in Brazil without the moratorium and related conservation efforts, compared to the pace of expansion in neighboring countries such as Bolivia.

The Mato Grosso law, which lawmakers passed in 2023, is the latest example of a global retreat from pacts and policies to curb climate change, even as temperatures break records, driven by rising fossil fuel use and deforestation.

Critics of the soy moratorium say that the pact restricts the market and hurts farmers. Farming groups in Mato Grosso say the protocol reduces the income and economic development of the state.

“Companies could choose to keep their zero-deforestation commitments,” said Cristiane Mazzetti, who oversees the moratorium for Greenpeace. “It’s a dangerous precedent, and it’s not what we need in a moment of climate emergency,” she added.

Brazil’s federal government has argued in court against the new Mato Grosso law stripping tax breaks from traders due to their environmental commitments.

“If the Mato Grosso government really removes those incentives, we have heard that some, or many, companies will in fact abandon the moratorium for economic reasons,” said Andre Lima, a senior Environment Ministry official tasked with combating deforestation. He added that firms had not officially informed the ministry of their plans.

Far-reaching consequences

President Luiz Inacio Lula da Silva has vowed an “ecological transformation” of the Brazilian economy, capped off with the United Nations climate summit hosted in the Amazon last month.

But in domestic politics, his leftist government is often fighting a rearguard battle to protect the world’s largest rainforest from a farm lobby with the upper hand in Congress.

The unraveling of the Amazon Soy Moratorium is likely to embolden those rural powerbrokers and their allies. This year the farm lobby has successfully gutted environmental permitting laws and stripped some protections from Indigenous lands.

The trend has caught the attention of farmer groups in Europe arguing to block a free trade agreement between the European Union and South America’s Mercosur due to the impact of Brazilian agribusiness on vital ecosystems.

Brazil’s Supreme Court has barred some but not all of the farm lobby’s agenda in Congress, based on constitutional protections for the environment and Indigenous peoples.

Environmentalists warn that the end of the soy moratorium could pave the way to dismantle other environmental protections in the world’s largest soybean producer, including part of Brazil’s forestry code restricting farmers from felling trees on 80 per cent of their properties in the Amazon.

Lawsuits

In recent years, soybean farmers pushed state lawmakers in Mato Grosso, Rondonia and Maranhao to strip tax benefits from companies taking part in environmental pacts more restrictive than Brazilian law.

It remains unclear which environmental commitments outside the soy moratorium will trigger those new state laws, which could threaten a range of other companies, including cellulose producers and meatpackers.

Brazilian antitrust agency CADE has separately opened an investigation of the soy moratorium for a potential breach of competition rules. For nearly two decades, trading firms have shared the cost of monitoring soy farms in the Amazon to avoid buying from those planting on newly deforested land.

Starting in January, CADE has ordered traders “to refrain from collecting, storing, sharing, or disseminating commercial information related to the sale, production, or acquisition of soybeans.”

Soy farmers in Mato Grosso have also sued grain traders for roughly $180 million over their role in the pact.

In temporary rulings, Supreme Court Justice Flavio Dino stopped the antitrust investigation, but let the Mato Grosso law take effect. Environmental groups are still trying to block the state law ahead of a final court ruling on the issue.

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