AfCFTA-Mercosur Trade: South Africa Eyes Latin America

Rio Times · Analysis

Africa’s trade architecture is shifting from a patchwork of colonial-era corridors into a continent-wide single market, and the MERCOSUR preferential trade agreement that has existed quietly since 2016 suddenly looks like a strategic asset that Brasília, Buenos Aires, and their neighbours have barely begun to use.

AfCFTA Is Not a Slogan Anymore

The African Continental Free Trade Area has moved from diplomatic signing ceremonies into the grinding, unglamorous work of tariff schedules, rules of origin, and customs harmonisation. Its full implementation will take years, but the direction is irreversible: a single market of 1.4 billion people with progressively fewer internal trade barriers.

South Africa has made AfCFTA a central plank of its growth strategy. As African Business reported in late 2025, the country seeks greater traction through its positioning in the African single market, aiming to expand manufactured exports and leverage its role as the continent’s largest outward investor.

The logic is straightforward. South Africa is Africa’s most advanced, diversified, and productive economy, and it is already the biggest exporter of manufactured products to other African countries.

Lower internal tariffs magnify that advantage, giving South African vehicles, machinery, processed foods, and electrical equipment easier access to markets from Nairobi to Dakar.

For Latin American exporters, this creates both a threat and an opportunity. The threat is that South African manufacturers, protected by AfCFTA preferences, will out-compete Latin American imports in sectors where the two regions overlap. The opportunity lies in using South Africa as a manufacturing and distribution hub to access the wider African market under AfCFTA terms.

The unspoken truth is that Latin American governments have paid remarkably little policy attention to AfCFTA’s implications. Trade ministries that track every twist of EU-MERCOSUR negotiations have barely analysed the tariff schedules that will govern a market roughly equal in population size to China.

That neglect is beginning to look strategically costly. As AfCFTA’s implementation accelerates, the rules of market access are being written now — and Latin America is not in the room.

The MERCOSUR–South Africa Bridge: Real but Under‑Traded

The MERCOSUR-SACU preferential trade agreement that entered into force in 2016 is the only formal, operational trade architecture directly connecting South America’s largest economic bloc to Africa’s most advanced economy. It extends reduced tariffs and preferential access on selected lines, creating a legal framework for two-way trade in industrial and agricultural goods.

The agreement links South Africa — and through it, the Southern African Customs Union members Botswana, Namibia, Eswatini, and Lesotho — to Brazil, Argentina, Paraguay, and Uruguay. In trade-policy terms, it is modest; it covers selected tariff lines rather than across-the-board liberalisation.

But in strategic terms, it is a foot in the door that almost no one is walking through.

Brazilian and Argentine exporters have not built the logistics, distribution networks, or trade finance mechanisms to convert tariff preferences into actual cargo on ships. The agreement exists on paper but has not generated the commodity flows or investment patterns that its architects anticipated.

The gap between the agreement’s potential and its utilisation reflects a deeper Latin American problem: Africa remains a residual market in the strategic planning of most major firms, an afterthought rather than a core geography. Asian and European competitors, by contrast, have spent two decades building procurement relationships and brand presence across the continent.

South Africa’s own trade data makes the point starkly. Its top trading partners in 2024 were China, the United States, Germany, Japan, India, and the United Kingdom.

Within Africa, its main partners are Namibia, Botswana, Nigeria, and Mozambique. Latin America barely registers — which means there is headroom, but also that the hill to climb is steep.

The strategic conversation in Brasília, Buenos Aires, and Montevideo should be about whether to deepen the MERCOSUR PTA into something more ambitious — perhaps a full free trade agreement with SACU or even a framework that extends to other willing African economies — or to complement it with bilateral deals. Either path requires political capital that has not yet been allocated.

What South Africa Actually Trades

South Africa’s trade profile with the African continent is notable for one feature that is often missed in broad-brush commentary: its exports to African partners are predominantly value-added goods, not raw materials. This makes South Africa a fundamentally different kind of African economy — and a more interesting partner and competitor for Latin America.

Vehicles and automotive components are among the largest categories. South African auto plants feed markets across the continent, and AfCFTA will only strengthen their competitive position.

For Brazil and Mexico, both major auto producers, this raises the question of whether to compete head-to-head or to seek complementary niches.

Machinery and electrical equipment form a second major export category. South Africa’s industrial base, while under pressure from energy shortages and logistics bottlenecks, remains the continent’s most sophisticated.

Latin American machinery exporters — particularly from Brazil’s robust capital-goods sector — could find partnership opportunities rather than pure competition.

Processed foods are a third key area. South African food and beverage companies have deep penetration in neighbouring markets, and their brands are recognised across the continent.

Latin America’s own food multinationals have analogous experience in branding and distribution for emerging-market consumers, creating potential for joint ventures or co-branding.

The detailed intra-African trade profile compiled by Tralac, a trade law centre, shows that Namibia accounts for roughly 13% of South Africa’s African trade, with Botswana and Nigeria at 12% each, and Mozambique also at 12%. This diversification means South African exporters are not dependent on any single African market, giving them resilience that Latin American firms can learn from.

The manufacturing intensity of South Africa’s exports also means that as AfCFTA reduces internal tariffs, the country’s competitive position will strengthen further — and the window for Latin American firms to establish their own Africa market positions will narrow.

East Africa’s Import Hunger

East Africa’s growth trajectory, projected at 5.8% in 2026 and anchored by Kenya, Ethiopia, and Tanzania, is generating rising demand for precisely the goods Latin America exports competitively. Vehicles and commercial transport, machinery for construction and agriculture, electrical equipment, and processed foods are all categories with rapidly expanding East African markets.

The subregion’s combined GDP of roughly US$511 billion and population of over 300 million form a demand pool that is under-served by Latin American suppliers relative to Asian and European competitors. The market is not empty — Chinese, Indian, and Turkish firms are deeply embedded — but it is large enough and fast-growing enough to accommodate new entrants.

Kenya’s projected growth of 5.3% in 2025 is driven by domestic demand and a recovery in business activity, which translates into rising imports of capital goods and consumer products. Ethiopia’s 7–8% growth trajectory, if sustained, will require massive inputs of construction materials, agricultural machinery, and transport equipment — sectors where Brazilian and Mexican firms have world-class capabilities.

Tanzania’s 6% growth, supported by services, industry, and construction, similarly points to expanding demand for imported goods and services. The country’s port at Dar es Salaam is a natural entry point for goods destined for the wider East African hinterland, including landlocked Uganda, Rwanda, and Burundi.

The logistics challenge remains severe. Moving goods from Latin American ports to East African markets involves long ocean transit times, limited direct shipping services, and port-handling costs that can erode price advantages.

But these challenges are not insurmountable — Asian exporters have solved them, and Latin American logistics operators can learn from their experience.

A focused Latin American strategy for East Africa would concentrate on a few high-potential sectors, establish regional distribution hubs — perhaps in Nairobi or Dar es Salaam — and invest in the trade finance and after-sales service networks that differentiate serious long-term players from opportunistic exporters.

West Africa’s Energy and Infrastructure Play

West Africa’s growth outlook of 4.1–4.2% annually is lower than East Africa’s, but the composition of that growth — heavily weighted toward infrastructure and energy — makes it particularly relevant for Latin American engineering, construction, and capital-goods firms. Senegal and Niger are becoming notable energy plays, and the entire subregion is investing in roads, ports, and power generation.

UNECA and AfDB analyses stress that West African growth is driven by domestic absorption and external demand, particularly from emerging economies such as China. This means the subregion is already accustomed to sourcing from non-traditional suppliers, which lowers the psychological barrier for Latin American firms.

Nigeria, despite its well-documented economic difficulties, remains the continent’s largest population centre and one of its biggest economies. Its infrastructure deficit is vast, and its government, however inconsistently, continues to invest in transport and energy projects.

For Brazilian construction firms with experience in complex emerging-market environments, Nigeria is a high-risk, high-reward market.

Ghana and Côte d’Ivoire offer more stable entry points. Both have functional ports, relatively predictable regulatory environments, and growing demand for processed food, building materials, and consumer goods.

Latin American agribusiness and food-processing firms could find receptive markets for products that are already familiar from trade with Europe.

The West African Economic and Monetary Union’s sustained growth — 5.9% on average from 2021 to 2024 across its eight members — indicates that the francophone part of the subregion is a distinct and attractive sub-market. Its common currency and shared legal framework reduce some of the transaction costs that complicate pan-African trade strategies.

Latin American firms contemplating West Africa should not underestimate the importance of Francophone Africa’s business culture, which rewards relationship-building, patience, and a willingness to work in French. Brazil’s limited French-language capacity is a genuine competitive disadvantage in this part of the continent.

The North African Logistics Gateway

North Africa’s ambition to serve as a connector of continents — the phrase used by the IMF’s 2026 analytical paper — is not merely aspirational. Morocco’s Tangier Med port is already one of the largest container ports in the Mediterranean and Africa, and the country’s high-speed rail expansion signals long-term infrastructure commitment.

Morocco’s free trade agreements with both the European Union and the United States, combined with its political stability relative to much of North Africa, make it arguably the most attractive single entry point for Latin American firms seeking an African manufacturing and logistics base.

Egypt’s Suez Canal remains the world’s most important maritime chokepoint, and its government is investing heavily in canal-adjacent industrial zones designed to attract manufacturing and logistics investment. For Latin American exporters targeting both European and Middle Eastern markets, an Egyptian production base could make strategic sense.

Algeria and Libya are hydrocarbon-heavy economies whose import demand fluctuates with energy prices. But even they represent substantial markets for food products, construction materials, and engineering services when oil revenues are flowing — and Latin American firms with experience in similarly structured economies in the Middle East could find the terrain familiar.

The North African consumer market of roughly 277 million people is overwhelmingly young, urbanising rapidly, and increasingly connected digitally. Latin America’s fintech and digital-service exporters, particularly from Brazil and Colombia, could find a receptive audience for mobile-first financial products.

The strategic value of North Africa for Latin America is not only as a market in its own right but as a logistics and manufacturing bridge to Europe, the Middle East, and sub-Saharan Africa. A well-structured North African presence multiplies a firm’s options across three continents.

Competing With Asia in Africa’s Commercial Space

Any honest assessment of Latin America’s prospects in African markets must begin with the recognition that the field is already occupied. Chinese firms have spent two decades building infrastructure, securing procurement relationships, and embedding themselves in African supply chains.

Indian, Turkish, and Emirati competitors are also deeply entrenched.

China’s Belt and Road Initiative has financed ports, railways, and power plants across the continent, and Chinese construction and manufacturing firms have followed the financing. For Latin American firms, competing head-to-head with Chinese state-backed offers on price is rarely viable.

The competitive edge for Latin America lies in areas where price is not the only variable. Quality, brand, after-sales service, and cultural affinity all matter in African markets, particularly in consumer-facing sectors.

Brazilian food brands, Mexican construction materials, and Argentine agricultural technology can compete on these terms even when they cannot match Chinese prices.

There is also an under-explored avenue of partnership with Asian firms. Brazilian or Mexican companies could supply specialised components or services to Chinese-led infrastructure projects, or form joint ventures that combine Latin American technology with Asian financing and African market access.

The diplomatic dimension should not be overlooked. African governments are increasingly wary of overdependence on any single external partner, and many are actively seeking to diversify their trade and investment relationships.

A visible Latin American presence — at trade fairs, in business delegations, in diplomatic engagement — would be welcomed as a counterweight to Chinese dominance.

The window for this kind of competitive entry is not infinite. As Chinese and other Asian firms deepen their positions, brand recognition and supply-chain relationships are hardening.

Latin American firms that wait another five years to enter may find the cost of customer acquisition prohibitively high.

A MERCOSUR–Africa Agenda for the Next Decade

The pieces of a serious MERCOSUR–Africa economic agenda are all on the table: a preferential trade agreement with South Africa that could be deepened, AfCFTA’s unfolding single market, East Africa’s growth engine, West Africa’s infrastructure surge, and North Africa’s logistics gateway.

What is missing is the political will to convert these assets into actual trade and investment flows. That requires presidential attention — Lula’s Africa trips need to be followed by trade missions, export financing, and investment promotion — and it requires the private sector to treat Africa as a core market rather than a philanthropic footnote.

The institutional infrastructure exists. The African Union engages regularly with Latin American regional bodies, the multilateral development banks are increasingly focused on South-South cooperation, and the MERCOSUR-SACU PTA provides a legal framework to build on.

The problem is implementation, not architecture.

A realistic medium-term agenda would include deepening the MERCOSUR-SACU PTA into a broader free trade agreement, negotiating bilateral investment treaties with Kenya, Nigeria, and Morocco, establishing trade promotion offices in Nairobi and Accra, and creating dedicated Africa desks at Latin America’s development banks.

The first Latin American pension fund to make a major Africa allocation, the first Brazilian or Mexican multinational to treat Lagos or Nairobi as a regional headquarters, the first major agribusiness joint venture between Brazilian and African firms — these breakthroughs will create demonstration effects that others will follow.

The Rio Times will continue to track and advocate for this agenda because the convergence of Africa’s economic rise, Latin America’s industrial and agricultural capabilities, and the global re-ordering of trade and investment flows is a story that deserves sustained, serious attention from policymakers, investors, and the public in both regions.

Frequently Asked Questions

What is the MERCOSUR–SACU preferential trade agreement?

It is a trade agreement in force since 2016 between South America’s MERCOSUR bloc (Brazil, Argentina, Paraguay, Uruguay) and the Southern African Customs Union (South Africa, Botswana, Namibia, Eswatini, Lesotho). It reduces tariffs on selected industrial and agricultural goods, but remains under-utilised by Latin American exporters.

Why is AfCFTA important for Latin America?

The African Continental Free Trade Area is creating a single market of 1.4 billion people with progressively lower internal trade barriers. South African manufacturers are well-positioned to benefit, which will intensify competition for Latin American exports; but partnering with South African firms or using South Africa as a distribution hub could also create new market access.

Which sectors offer the best opportunities for Latin American firms in Africa?

Vehicles and auto parts, processed foods and beverages, agricultural technology and inputs, construction materials and engineering services, and digital services and fintech are the sectors where Latin America’s competitive strengths most closely match African market demand.

Sources: un.org, pwc.com, knowledgehub-sro-na.uneca.org

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