The 68th Mercosur summit in Asunción on 30 June produced a formal launch of trade negotiations with Japan and a pledge by Brazilian President Luiz Inácio Lula da Silva to pursue a similar accord with China, even as the meeting exposed sharp internal friction over the implementation of the bloc’s recently activated free-trade agreement with the European Union. The summit also saw Uruguay assume the six-month rotating presidency from Paraguay, with President Yamandú Orsi pledging to advance the integration agenda.

Paraguayan President Santiago Peña, the outgoing chair, used his opening address to deliver a pointed critique of the EU deal’s quota distribution, stating that “the playing field is not level for everyone” and that the arrangement had left a “bitter taste” in his country. He demanded that export quotas with preferential tariffs be shared equitably among members before the European Union completes its ratification process, warning that “if Mercosur wants to be credible outwardly, it first has to be fair inwardly.” The dispute centres on how the bloc allocates limited EU import quotas for agricultural goods, with Asunción arguing that larger economies have captured disproportionate shares in the initial phase.

Viewed from Brasília, the summit advanced a strategic reorientation toward Asian markets. Lula confirmed that the bloc “will soon want to do the same with China” and described the Japan talks as a step toward “the most dynamic markets on the planet.” Brazilian officials also announced a near 43 percent increase in the country’s contribution to the Mercosur Structural Convergence Fund (Focem), raising it from $70 million to $100 million annually over a decade, and secured agreements on mutual recognition of digital identity systems and a regional pact to combat femicide. The Brazilian foreign ministry, however, voiced unease over what it called “initiatives that threaten the maintenance of the common external tariff,” a reference to Argentina’s recent bilateral trade agreement with the United States.

Argentina’s absence from the presidential table underscored the bloc’s internal strains. President Javier Milei cancelled his attendance hours before the summit, citing the political fallout from the resignation of his cabinet chief over an illicit enrichment scandal. His government has pressed for greater flexibility in Mercosur’s common external tariff, a stance that has drawn criticism from other members. The summit also expressed solidarity with Venezuela following the double earthquake that killed over 1,700 people, with leaders observing a minute of silence and coordinating emergency aid.

With the EU accord partially in force since May and negotiations underway with Canada, India, the United Arab Emirates and Vietnam, Mercosur is simultaneously managing an expanding external agenda and unresolved internal distributional questions. The next formal step is the first round of tariff-preference talks with Japan, while the bloc must inform Brussels of its quota-sharing scheme by September. Under Uruguay’s presidency, the focus is expected to remain on concluding pending trade deals and containing centrifugal pressures on the common external tariff.