EU–MERCOSUR: Public Procurement and State-Owned Enterprises

The Association Agreement and the Interim Trade Agreement between the European Union and the States Parties of the MERCOSUR, signed on January 17, 2026, incorporate specific chapters on public procurement and state-owned enterprises. These chapters introduce standards of transparency, non-discrimination, and competition that, if fully implemented, could generate significant improvements at the domestic level, with a direct impact on suppliers, contractors, and contracting authorities.

The signing of the agreements marks a milestone in the relationship between both regions and seeks to deepen economic and trade ties. In addition to provisions on trade, industry, and investment, the texts include specific rules on public procurement and state-owned enterprises.

Public procurement

The agreements promote the reciprocal opening of public procurement markets for goods and services among EU and MERCOSUR member countries. Within this framework, public entities must ensure fair treatment for domestic and foreign suppliers with substantial operations in the territory of one of the parties and must avoid any form of discrimination based on the origin of the goods or services offered, as well as on the nationality or ownership structure of bidders.

However, exceptions are incorporated to protect important public interests (e.g., national security, the environment, intellectual property, public health, public order, and public morals), provided that applying them does not result in arbitrary or unjustifiable discrimination.

The regime applies to procurement carried out for governmental (non-commercial) purposes that exceeds certain thresholds and covers goods and services expressly negotiated. Excluded, among others, are procurements related to rights over real estate, public employment, defence, international assistance agreements, and certain financial operations.

In Argentina, the regime applies to entities of the centralized and decentralized federal public administration and to expressly listed social security institutions. Provinces, the City of Buenos Aires, national universities, and companies with federal state participation remain outside its scope, unless they voluntarily adhere.

The most relevant provisions include:

• Competitive procedures as a rule: Open and competitive mechanisms are favoured, with rules on technical specifications, time limits, participation requirements, and evaluation criteria. Restricted procedures (private or selective tenders) are permitted only in duly justified exceptional circumstances.
• Transparency and publication: This includes obligations to publish applicable laws and procedures, calls for tender, tender documents, contract awards, and statistical information. Using electronic procurement is encouraged, along with standards to prevent conflicts of interest and sanction corrupt practices.
• Review and challenges: administrative and judicial review mechanisms must be timely and effective, with minimum timeframes to file challenges and the possibility of adopting interim measures, as well as corrective or compensatory remedies, as appropriate.

State-owned enterprises

The parties undertake to ensure that their state-owned enterprises and entities enjoying exclusive or special privileges—when exceeding certain revenue thresholds—purchase and sell goods or services based on strictly commercial considerations, except to the extent necessary to fulfil their public mandate or function, in accordance with applicable law.

The regime does not apply to non-commercial operations, services supplied in the exercise of governmental authority, certain defence-related entities, or enterprises expressly excluded under the Agreement (for instance, to Integracion Energetica Argentina SA, Nucleoelectrica Argentina SA, Soluciones Satelitales SA).

Entry into force of the agreement

The Association Agreement and the Interim Trade Agreement will become enforceable between the European Union and MERCOSUR and its signatory states on the first day of the month following the date on which the parties notify each other they completed their respective internal procedures necessary for ratification.

For the European Union, the Interim Trade Agreement requires the European Parliament’s approval and a Council decision concluding the agreement. Once these steps are completed, it may enter into force (or be provisionally applied, if that route is activated). By contrast, the broader Association Agreement requires ratification by all EU Member States in accordance with their internal procedures.

Within MERCOSUR, each state party must complete its internal approval and ratification procedures and carry out the required deposits. In Argentina, this entails congressional approval, ratification by the Executive Branch, and notification to the depositaries of the Agreement. In this context, on February 12, 2026, the Chamber of Deputies granted initial approval to the Interim Trade Agreement, and the bill is now pending the Senate’s consideration.

The Interim Trade Agreement provides for provisional application: it may begin on the first day of the second month following the date on which the European Union and the corresponding MERCOSUR signatory state notify each other they completed their internal procedures and confirm their decision to apply it provisionally. The Interim Trade Agreement will remain in force until the Association Agreement enters into force.

The framework also contemplates applying the Association Agreement (or parts of it) provisionally, through a mechanism of successive notifications:
 

1. the European Union identifies the parts to be provisionally applied and notifies it completed its procedures;
2. MERCOSUR and/or its signatory states notify they completed their internal procedures or ratification of the Agreement and consent to the proposed provisional application.
    

Finally, in January 2026, the European Parliament referred the Interim Trade Agreement to the Court of Justice of the European Union, to determine whether the agreement is consistent with the founding treaties of the European Union, a step that could delay the approval and ratification timeline within the European framework.