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Procurement Covered by the Agreement

As a general rule, the agreement applies to contracts for goods and services awarded by certain public entities of each party, provided that the value of the contract exceeds the thresholds set out in the annexes to the agreement.

Contracting Authorities

The agreement clearly identifies the central government entities whose procurement activities fall within its scope. It therefore includes detailed lists of the relevant public entities for each EU Member State and each Mercosur country.

For Mercosur countries, the treaty also distinguishes between central government entities and sub-central authorities. This distinction is particularly important in the case of Brazil, as it brings within the scope of the agreement public entities belonging to the country’s federated states.

Contract Value Thresholds

The agreement distinguishes between two categories of procurement:

• goods and services other than construction services; and
• construction services and works concessions.

The applicable thresholds are expressed in Special Drawing Rights (SDRs).

Different thresholds apply depending on whether the contracting authority belongs to the European Union or to a Mercosur country, and also depending on the type of entity involved (central or sub-central government authority).

For EU contracting authorities, the thresholds are set at:

• 130,000 SDRs for goods and services other than construction services;
• 5,000,000 SDRs for construction services and works concessions.

For Mercosur countries, the agreement generally provides for a gradual reduction of the minimum thresholds over time, according to a schedule linked to the number of years following the entry into force of the agreement.

Exclusions

The agreement expressly excludes several categories of procurement from its scope. This includes, in particular, contracts relating to the acquisition or lease of real estate, as well as procurement carried out for the purpose of providing international assistance.

In addition, both the EU and Mercosur parties have excluded certain goods and services from the scope of the agreement. Determining whether a particular contract falls within the treaty therefore requires a careful review of the annexes, which contain numerous sectoral and national exceptions.

The agreement also preserves the parties’ right to adopt measures necessary to protect their essential security interests. This applies notably to procurement involving arms, ammunition, defense products, or military equipment. More broadly, such measures may also concern procurement considered essential to national security, national defense, or the protection of intellectual property rights.

Principle of Non-Discrimination

For procurement covered by the agreement, each party undertakes to grant goods, services, and suppliers from the other party treatment no less favorable than that granted to its own domestic operators. This principle applies both at state level and at the level of individual contracting authorities, with the aim of ensuring reciprocal, immediate, and unconditional access to covered procurement markets.

The agreement also prohibits discrimination based on the foreign origin of capital, goods, or services. As a result, a locally established supplier cannot be treated less favorably simply because it is controlled by, or includes participation from, operators of the other party. Similarly, contracting authorities may not discriminate against products or services on the basis that they originate from the other contracting party.

These provisions represent one of the agreement’s most significant developments. Several Mercosur countries currently maintain rules favoring domestic suppliers and products, which place foreign operators at a clear disadvantage. The new framework therefore creates major opportunities for European businesses, particularly considering that Brazilian federal public procurement alone represents a market worth approximately €8 billion.

Prohibition of “Offsets”

In public procurement, offsets typically take the form of obligations to subcontract part of a contract to local companies or to source a certain percentage of goods from domestic suppliers.

The agreement generally prohibits the parties from imposing such requirements. However, important exceptions remain. Argentina, for example, may require offsets of up to 50% of the contract value, while Brazil retains the ability to impose offsets without specific limitation.

Common Procedural Rules

The agreement also introduces a degree of harmonization in procurement procedures.

First, it establishes common principles regarding participation requirements. In particular, any conditions imposed by a contracting authority must be limited to what is strictly necessary to ensure that a supplier has the legal, financial, commercial, and technical capacity to perform the contract in question.

With regard to tendering procedures, the agreement sets out the circumstances in which limited tendering may be used. It also specifies the information that must be included in tender documents and the conditions under which contracting authorities must communicate amendments to those documents.

Finally, the agreement contains transparency obligations relating to procurement information. Once a contract has been awarded, the contracting authority must promptly inform participating suppliers of the outcome and, upon request, provide the reasons for rejection together with details of the successful tender. It must also publish a contract award notice containing key information such as the subject matter of the contract, the successful bidder, the contract value, the date of award, and the procurement procedure used.

Conclusion

By progressively opening public procurement markets on both sides to reciprocal competition, the EU–Mercosur agreement creates significant opportunities for European companies. At the same time, however, it introduces a complex legal framework requiring careful analysis. Businesses will therefore need to examine closely whether a given procurement procedure falls within the scope of the agreement and assess the practical implications that follow.

Philippe de Richoufftz, Partner

Charles Umbach-Bascone, Associate