Lithuanian dairy processors see both opportunities and risks from Mercosur

With four South American countries and the European Union (EU) signing a landmark and controversial trade deal on Saturday after 25 years of negotiations, Lithuanian dairy processors say lower tariffs could have a positive impact on exports to South America, while others fear Europe will be flooded with cheaper products.

Dalius Trumpa, head of one of the largest dairy processors, „Rokiškio suris“, says he sees both opportunities and risks. 

„South America is an exporting country, as far as I know, they used to export more to the United States, and if you take Lithuanian companies, several companies, including us, export to South America, and I couldn't say for sure because of the MERCOSUR countries, but I think for the Lithuanian dairy industry there is a plus rather than a minus“, – Mr. D. Trumpa told the BNS. 

„We've been going into those markets a little bit before, but if there is a reduction in tariffs under the treaty, of course, that's always a plus, it makes our goods more competitive“, – he added.

D. Trumpa said that South America currently accounts for a small share of „Rokiškio surio“ exports, mainly cheese. 

At the same time, Gintaras Bertašius, head of another Lithuanian dairy processing company that exports to the continent, „Vilvi Group“, says the agreement raises the risk of cheap South American products flooding into the European market.  

„We are present in South America – both in Chile and Brazil. We have sufficient volumes in those markets (...), significant volumes for us, I would not like to name them, but the volumes are significant. This is on the opportunity side. On the risk side, I can still see it. We have Argentina as a particular dairy country, Uruguay also as a dairy country – there is a lot of milk production and a lot of product production. I don't know all the rules of the game yet really, there is talk that it will be protected for some time and gradually allowed into Europe. (...) Here I see risks that cheap enough products may come to Europe," Bertašius told BNS.

According to him, the additional competition poses risks for processors and dairy producers.

„Of course, for consumers the opportunities will probably be greater the more competition there is. But for the sector itself, if you look at it politically, globally, I can see that there are risks“, – said Mr Bertašius.

As BNS wrote, the head of the European Commission's (EC) Representation in Lithuania, Marius Vaščega, says the agreement will open up new opportunities for Lithuanian businesses, especially the dairy sector, to export to South America, and safeguards are in place to protect farmers from its cheap production.

Arūnas Svitojus, President of the Chamber of Agriculture, has previously said that the Mercosur agreement is leading to difficult days for European agriculture. He said that the agreement would hurt cattle, poultry, dairy and sugar industries, as South American countries produce a lot of cheap products.

The agreement between the 27-member EU and the Mercosur bloc of Brazil, Argentina, Uruguay and Paraguay creates one of the world's largest free trade areas, eliminating tariffs on more than 90% of bilateral trade. The document still needs to be approved by the EU Parliament and ratified by each MERCOSUR country, and is expected to enter into force by the end of 2026.