India Eyes Expansion of Preferential Trade Agreement with Mercosur Bloc
- MGMMTeam
- Jul 3, 2025
- 4 min read
As Prime Minister Narendra Modi embarks on a diplomatic tour of Latin America, India is preparing to push for a major expansion of its Preferential Trade Agreement (PTA) with the Mercosur bloc. The visit, which includes key stops in Argentina and Brazil, offers an opportunity to reshape India’s trade footprint in the South American region. With Mercosur seeking stronger ties with Asian economies, India’s outreach comes at a time of renewed global trade alignments.
Revitalizing a Strategic Partnership
The India–Mercosur PTA, signed in 2004 and implemented in 2009, currently allows for tariff concessions on around 450 Indian and 452 Mercosur product lines. These cover a range of goods, including Indian exports such as organic chemicals, pharmaceuticals, plastics, and machinery, and Mercosur's contributions like agricultural products, food preparations, and essential oils. Over the years, trade between India and the Mercosur nations—Argentina, Brazil, Paraguay, and Uruguay—has steadily grown, with Brazil emerging as India’s largest partner in the region.
However, the existing agreement is now seen as limited in scope. Indian officials have expressed interest in expanding the PTA to cover over 1,500 to 2,000 tariff lines, a move that would allow broader access for Indian exports and open up new import channels from the South American bloc. Such an upgrade would represent a significant deepening of economic ties and help both sides diversify trade dependencies.
Modiji’s Latin American Tour: A Diplomatic Catalyst
Prime Minister Modi’s tour from July 2 to 9 includes visits to Ghana, Trinidad and Tobago, Argentina, Brazil, and Namibia. His stops in Argentina and Brazil carry particular significance. In Argentina, Modiji will meet President Javier Milei—marking the first Indian prime ministerial visit to the country in over five decades. In Brazil, he will participate in the BRICS Summit and hold bilateral discussions with President Luiz Inácio Lula da Silva.
These meetings will serve as key platforms for India to advocate for a more comprehensive PTA with the Mercosur bloc. According to Indian government sources, the proposal for expansion will be high on the agenda. While India is prepared to move forward, a consensus among Mercosur members remains elusive. India hopes that its diplomatic efforts will help accelerate the internal alignment needed within the bloc to proceed with negotiations.
Mercosur’s Asian Pivot and India’s Strategic Moment
The timing of India’s proposal aligns well with Mercosur’s shifting trade strategy. Under the leadership of President Lula, Brazil has been advocating for deeper trade ties with Asia. Lula recently described Asia as the most dynamic region for trade and emphasized Mercosur’s intention to foster stronger connections with countries like India, China, South Korea, and others. The bloc has also recently finalized a free trade agreement with the European Free Trade Association (EFTA), signaling its broader appetite for multilateral engagement.
This pivot offers India a window of opportunity. As China faces increasing geopolitical friction and supply chain vulnerabilities become more apparent, Latin American countries are looking to diversify their trade partnerships. India, with its large market and strategic positioning, is being viewed as a viable alternative or complementary partner.
Trade Goals and Economic Implications
India’s broader ambition in Latin America is to push bilateral trade with the region beyond the $100 billion mark. Strengthening its PTA with Mercosur is central to that objective. In 2024–25, India’s trade with the bloc stood at over $17 billion, with exports accounting for $8.12 billion and imports at $9.36 billion. Expanding the PTA could significantly enhance this figure, especially by facilitating entry of Indian pharmaceuticals, engineering goods, and IT services into Mercosur markets.
On the other hand, Mercosur nations—particularly Argentina and Brazil—could benefit from increased exports of agricultural commodities, edible oil, and minerals to India. The agreement may also set the stage for cooperation in energy, defense, and digital sectors. With lithium reserves in Argentina and Brazil's leadership in biofuels, the partnership could evolve beyond trade into strategic technology and resource alliances.
Challenges on the Road Ahead
Despite mutual enthusiasm, the road to an expanded PTA is not without hurdles. Mercosur operates on the basis of consensus, meaning all member countries must agree before the bloc can move forward with any modifications to existing agreements. Additionally, some members are cautious about further liberalization without clear safeguards for their domestic industries.
There are also concerns related to environmental and sustainability standards, which have been major sticking points in Mercosur’s trade talks with the European Union. India may need to address similar sensitivities, especially in agriculture and climate-linked regulations, as negotiations progress.
Conclusion: A Trade Deal for a New Era
India’s effort to deepen its trade ties with the Mercosur bloc through the expansion of the Preferential Trade Agreement marks a pivotal step in its Latin American strategy. It reflects not only New Delhi’s ambition to diversify trade partnerships but also its recognition of Latin America’s growing geopolitical relevance. As Mercosur turns its gaze toward Asia, India’s proactive diplomacy could help secure a stronger foothold in a region rich with opportunities.
Should Modiji’s visit yield tangible commitments or even the initiation of formal negotiations, it may well signal the beginning of a new chapter in South–South economic cooperation—one that links the growing aspirations of two dynamic regions across the globe.
(Sources: Business Standard, Business Line, Indian Express)
Comments