Producers and Exporters Eagerly Await Ratification of EU-Mercosur Deal

Once rat­i­fied and fully imple­mented, the recently signed free trade agree­ment between the Mercosur and the European Union will cre­ate a com­mon mar­ket of 780 mil­lion peo­ple.

Olive oil pro­duc­ers and exporters on both sides of the Atlantic are eagerly await­ing the ces­sa­tion of tar­iffs.

“The EU-Mercosur trade deal rep­re­sents good news for the olive oil sec­tor,” Anna Cane, pres­i­dent of the Italian Association of the Olive Oil Industry (Assitol), told Olive Oil Times. ​“In 15 years our exports to Mercosur coun­tries will be com­pletely lib­er­al­ized.”

There is cur­rently a 10 per­cent tar­iff levied against most E.U. olive oils imported to the Mercosur, which is com­posed of Argentina, Brazil, Paraguay and Uruguay.

“Gradually tar­iffs on olive oil will reduce, until their defin­i­tive removal,” she said. ​“This mea­sure helps to make trade between Europe, Brazil, Argentina, Paraguay and Uruguay more con­ve­nient.”

“There are great mar­kets, with many con­sumers inter­ested in Italian food prod­ucts,” she added.

While olive oil con­sump­tion remains largely stag­nant in coun­tries such as Italy and Spain, the appetite for olive oil is grow­ing steadily in the Mercosur, which is a deficit mar­ket for the prod­uct, accord­ing to Juan Vilar Hernández, an indus­try ana­lyst, strate­gic con­sul­tant and per­ma­nent pro­fes­sor at the University of Jaén.

“This is a deficit mar­ket for both olive oil and table olives, which have com­pletely abol­ished tar­iffs in the case of sta­ble olive oil,” Vilar Hernández told Olive Oil Times. ​“Therefore, the [European] olive oil pro­cess­ing sec­tor sig­nif­i­cantly improves its mar­gin.”

Nowhere is this deficit more evi­dent than in Brazil. Since the end of a dev­as­tat­ing finan­cial cri­sis in 2015, con­sump­tion and imports have risen steadily. According to data from the International Olive Council, Brazilians con­sumed 50,000 tons of olive oil in the 2015/16 crop year. By 2018/19, this fig­ure had risen to 78,000 tons, a record high.

Brazil cur­rently has a very spe­cific trade deal with Portugal, which pro­vided nearly 60 per­cent of the country’s olive oil imports in 2018. Vilar Hernández reck­ons that as tar­iffs come down, Spanish pro­duc­ers will be able to enter the mar­ket more eas­ily.

“In this case, the abo­li­tion of the old tar­iffs… will help oil, espe­cially from Spain,” he said.

For Brazilian con­sumers, the deal comes as good news. The even­tual elim­i­na­tion of tar­iffs means that more high qual­ity extra vir­gin olive oil will enter the mar­ket and con­tinue to drive down prices.

However, Sandro Marques, author of the Guide to Brazilian Olive Oil and edi­tor of Um Litro de Azeite, pre­dicts that the land­mark trade deal will hurt the country’s fledg­ling olive oil pro­duc­tion sec­tor.

“Our pro­duc­ers are wor­ried about the deal but noth­ing con­crete can be said yet,” Marques told Olive Oil Times. ​“One of the biggest fears is that good qual­ity oil arrives at lower prices and Brazilian oil loses com­pet­i­tive­ness.”

Ibraoliva, an orga­ni­za­tion that sup­ports olive grow­ers and oil pro­duc­ers in Brazil, is already scram­bling to fig­ure out how the free trade deal will impact pro­duc­ers. Officials from the orga­ni­za­tion have sched­uled meet­ings with the Ministry of Agriculture to dis­cuss what may hap­pen.

“Our pro­duc­tion is small but it’s still a hard task for pro­duc­ers to sell it, so good qual­ity imported oils could be a real prob­lem,” Marques said. ​“And it’s impor­tant to keep in mind that as more groves reach their matu­rity, our pro­duc­tion tends to increase.

However, the sense of fore­bod­ing among Brazilian pro­duc­ers is not shared by their neigh­bor to the south­west. Argentina is poised to be one of the biggest bene­fac­tors of the free trade deal.

Tariffs on its exports to the European Union as well as quo­tas imposed on those exports will be dropped upon rat­i­fi­ca­tion. European olive oil imports are also unlikely to impact Argentina’s trade with its neigh­bors.

According to data from the International Trade Center, nearly 40 per­cent of Argentina’s olive oil exports went to Spain in 2018. The year before, on the back of a record-break­ing har­vest, more than 35 per­cent of exports were des­tined to E.U. coun­tries.

“Any agree­ment ben­e­fits both par­ties,” Frankie Gobbee to co-founder and direc­tor of the Argentina Olive Group, told Olive Oil Times. ​“This agree­ment, espe­cially because vir­gin olive oil, which is the one we pro­duce most in Argentina, can be exported to the European Community from year one.”

Previously, Argentina had an agree­ment with Spain that allowed them to export some olive oil to the coun­try duty-free in order to be blended and re-exported by Spain. Now Argentine exporters will have far eas­ier access to other coun­tries. Of par­tic­u­lar inter­est are some north­ern European coun­tries, where con­sump­tion is increas­ing more quickly than in the Mediterranean basin.

“I believe that the agree­ment will facil­i­tate and improve the image of our coun­try as a pro­ducer of extra vir­gin in the counter-sea­son, to improve the qual­ity of the Mediterranean oils at a time of the year when they do not have fresh extra vir­gin olive oil,” Gobbee said.

As Argentine pro­duc­ers eye the Spanish mar­ket, the same is hap­pen­ing on the other side of the Atlantic. Argentina has tra­di­tion­ally been a very pro­tec­tion­ist mar­ket, which will be newly opened up by the trade deal.

Rafael Pico Lapuente, the direc­tor of the Spanish Association of the Olive Oil Exporting Industry and Commerce (Asoliva), told Olive Oil Times that he does not expect much to change with the imple­men­ta­tion of the deal, except in the case of Argentina.

“Obviously any com­mer­cial agree­ment is for the ben­e­fit of all and there­fore of the inter­na­tional mar­ket,” he said. ​“Exports will increase but not notice­ably. They could increase some­what more in Argentina.”

Before the deal comes fully into force, it needs to be rat­i­fied in the European Parliament, 28 European cap­i­tals and four Mercosur cap­i­tals.

While there is oppo­si­tion to the deal in some E.U. coun­tries, it is still widely expected to pass muster, cre­at­ing a free mar­ket in which 54 per­cent of the world’s olive oil is con­sumed and 71 per­cent of it is pro­duced.