EU-Mercosur Agreement on Public Procurement
This briefing is the fourth in a series on the EU-Mercosur agreement, where BLOMSTEIN addresses key provisions with respect to Trade in Goods, Trade in Services, Public Procurement, Competition and Sustainability, and outlines implications and opportunities for businesses.
Today’s briefing focuses on the Government Procurement chapter of the Agreement, which sets out a comprehensive framework for open and reciprocal access to public procurement markets between the two parties. Tendering processes are expected to become more streamlined, transparent, and competitive.
General Principles
The chapter establishes a framework to open government procurement markets between the EU and Mercosur, highlighting the importance of transparent, competitive, and open tendering in fostering economic development for both regions.
Both parties commit to granting market access for covered procurements, which can involve goods, services, mixed contracts, and all types of procurement contract (e.g., purchase, lease, or rental). As a general principle, EU and Mercosur suppliers will be able to compete for public contracts on equal terms with domestic providers, subject to specific carve-outs.
The agreement includes general exceptions for procurement related to national security or defence. It also preserves the right to adopt non-discriminatory measures relating to goods or services of persons with disabilities, philanthropic institutions, or prison labour, as well as measures necessary to protect intellectual property, public order, safety, human health, and the environment.
Coverage
Each Party is entitled to specify the goods, services, and government entities (both central and sub-central) covered by the agreement, as well as the minimum contract value thresholds above which the rules apply. Such commitments reflect each party’s economic context and sectoral sensitivities.
For instance, Brazil has specifically excluded purchases made by the public health system or goods and services purchased under food and nutritional security and school feeding programmes that support family farming.
Contract value thresholds
The contract value thresholds above which the rules apply will align after seven complete years from entry into force at approximately EUR 160,000 (in current currency) for goods and services, and around EUR 6 million for construction contracts. However, Mercosur countries benefit from a grace period during which higher thresholds apply. For example, Brazil initially sets its thresholds at approximately EUR 265,000 for goods and services, and EUR 10 million for construction contracts from the date of entry into force.
To prevent circumvention of these value threshold thresholds, Parties shall not divide a procurement into multiple lots or use particular valuation methods solely to avoid the agreement's application. For recurring contracts involving the same goods or services, the total value must be assessed by aggregating contracts over a 12-month period, whether looking backward or forward.
For contracts involving the lease, rental, or hire of goods and services, valuation shall be based on:
Fixed-term contracts: the total value over 12 months;
Indefinite-duration contracts: the estimated value over 48 months.
In all cases, the contract value must include all forms of remuneration, such as premiums, fees, interest, options, and any other compensation.
Government entities
With respect to covered entities, the agreement generally includes central government administrative bodies, while also aiming to extend coverage to sub-central governments. For instance, Argentina is required to work toward including provincial procurement that accounts for at least 65% of national GDP within two years of the agreement’s entry into force. In Brazil, the executive branches of most federative states—representing the majority of the country's GDP—are already covered under the agreement. On the EU side, the list of covered entities typically includes only central government bodies. However, the agreement contains a provision under which the EU expresses its willingness to extend coverage to sub-central government entities on a reciprocal basis.
Non-Discrimination
For covered procurements, the Agreement obliges each party to accord the goods, services, and suppliers of the other party treatment no less favourable than that given to its own domestic counterparts. This includes a prohibition on the use of offsets—such as requirements for local content, technology transfer, or other forms of investment—as conditions for awarding contracts. However, this non-discrimination obligation does not apply to customs duties, import regulations, or similar measures affecting international trade.
Mercosur negotiators sought to introduce greater flexibility into these provisions, and the final text reflects certain accommodations. For example, Brazil secured the following carve-outs:
The prohibition of offsets shall not apply if the conditions and their assessment are non-discriminatory among potential tenderers (applies to EU and non-EU tenderers), clearly defined in the procurement documents and indicated in the notice of intended procurement.
Reserves the right to apply margins of preference to national manufactured goods and services as established in the federal Brazilian legislation.
Reserves the right to apply margins of preference in prices, as well as set-aside policies of up to 25 % of the procurement object, in favour of domestic micro and small enterprises.
Procedural Standards and Transparency
The chapter lays out detailed procedural rules to ensure transparent and fair tender processes. Open tendering is the default method, meaning all interested suppliers may submit bids. Selective tenders (qualified suppliers are invited by the procuring entity to submit offer) and limited tendering (procuring entity contacts a supplier or suppliers of its choice) are permitted only in defined circumstances and must still respect the principles of transparency and impartiality.
Transparency obligations are comprehensive. Procuring entities must publish timely and electronically accessible notices of intended procurement, containing sufficient detail—such as the subject of the contract, technical specifications, and deadlines—to allow suppliers to prepare appropriate bids. Parties are also encouraged to conduct procurement procedures electronically on a best-efforts basis. Further, the notice summaries should be made available in one of the WTO languages i.e., English, French and Spanish.
Conditions for participation should be limited to what is necessary to ensure that suppliers possess the required legal, financial, technical, and commercial capacity. For example, prior experience may be required, but not previous engagement with the procuring entity or activity in a specific geographic area. Technical requirements should emphasize performance and functionality over design, and should preferably be based on international standards, or national standards where appropriate. References to specific trademarks, producers, or suppliers are not permitted, unless there is no other sufficiently precise or intelligible way of describing the procurement requirements and provided that, in such cases, the entity includes words such as "or equivalent" in the tender documentation.
Key takeaways
The Agreement establishes a comprehensive framework to enhance market access for government contracts between the EU and Mercosur. While it allows each party to maintain clearly defined limitations to safeguard regulatory autonomy and public policy objectives, it provides a solid legal foundation for deepening cooperation between the two blocs and fostering more predictable, transparent and competitive public tenders. The implementation of this framework will be groundbreaking, transforming a market that has traditionally remained largely local.
BLOMSTEIN will closely monitor further developments and keep you informed. If you have any questions on the topic, Roland Stein, Bruno Galvão, Carolina Vidal, Marcelo de Sousa and the entire team is ready to assist you.