After nearly twenty years of negotiations, the EU and Mercosur trading blocs have finally reached a preliminary agreement on a trade deal. The agreement, known as the EU-Mercosur Trade Agreement, would create a 780 million person market by bringing the EU and South American markets into closer economic and political contact—a rare demonstration of defiance to the protectionist trend sweeping global trade.

Although the EU-Mercosur Trade Agreement is far from complete (EU and Mercosur countries still have to ratify the agreement), this agreement could present a significant opportunity for Latin American cannabis companies looking to penetrate EU cannabis markets.

EU-Mercosur Trade Agreement Could Open Doors For Latin American Cannabis Companies

One of the key benefits of the EU-Mercosur Trade Agreement is the elimination of high customs duties and red tape plaguing trade between EU and Mercosur countries. This suggests that cannabis companies operating in Mercosur countries (i.e. Argentina, Brazil, Paraguay and Uruguay) could realize improved profit margins when exporting products to emerging EU markets—all while maintaining competitive prices.

The ability for these companies to offer competitively priced products is especially important considering the cost-sensitivity associated with cannabis products; if legal cannabis products are not priced competitively, the black market cannot be eliminated.

What’s more, some scholars believe that benefits from the EU-Mercosur Trade Agreement could spill over into other countries.

Via Peterson Institute for International Economics,

“The benefits of the EU-Mercosur agreement could spread to the rest of Latin America . . .”

While it remains to be seen how exactly these benefits spread throughout Latin America, it could be reasoned that companies in Mercosur associate countries—such as Ecuador and Colombia—stand to benefit the most.

Via Council on Foreign Relations,

“Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname are associate members [of the Mercosur trade bloc]. They receive tariff reductions when trading with the full members but do not enjoy full voting rights or free access to their markets.

In sum, it appears that the EU-Mercosur Trade Agreement could present opportunities for not just Uruguayan cannabis companies, but Colombian cannabis companies as well…

The EU-Mercosur Trade Agreement May Shape Global Cannabis Industry

The EU-Mercosur Trade Agreement is more than just the EU’s largest-ever trade agreement. It represents a major stepping stone for free trade—and potentially, the global cannabis industry as well.