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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.