Deforestation is one of the main drivers of climate change and biodiversity loss. Much of it is linked to clearing land for producing commodities such as soy, beef, and palm oil. In this context, unilateral trade measures that restrict the consumption of goods produced on deforested land are emerging as global tools to tackle this problem. But how prepared are major exporting countries to adapt to these new regulations, and what does this mean for both sustainability and trade? In this blog, we draw on recent research estimating the economic and environmental impacts of the EU Deforestation Regulation on Argentina, offering insights into how policy, business, and governance intersect to shape sustainable supply chains.
Understanding the EU Deforestation Regulation
The European Union Deforestation Regulation (EUDR) is one of the most ambitious examples. It will prohibit the export to the European Union of certain raw materials and derived products that are not “deforestation-free”, meaning they were produced on land deforested after December 31, 2020. The regulation covers cattle, cocoa, coffee, oil palm, rubber, soy, and timber and derived products such as meat, chocolate, leather, and paper. The law was initially set to apply in January 2025, but it was postponed by one year following complaints from EU members, operators, and trade partners. Its implementation remains uncertain due to both technical challenges in measuring deforestation risk and political claims from exporting countries. Indeed, for countries that rely heavily on export revenues from these commodities, the EUDR could have wide-ranging economic and environmental implications.
Argentina’s exposure to EUDR
Argentina, a middle-income country in Latin America, is among the top eight countries most exposed to the EUDR—alongside Brazil, Indonesia, and Malaysia. The stakes are high: Argentina is a major exporter of soy and beef, and deforestation has been significant: between 2018 and 2022, the country lost over 1 million hectares of forest cover. Argentina thus illustrates the challenges faced by major exporters in adapting to the EUDR: balancing the need to maintain key export revenues, comply with new traceability and sustainability requirements, and reduce forest loss, all while navigating the economic and environmental trade-offs inherent in these regulations.
Economic and environmental impacts of the EUDR
What are the economic and environmental consequences of implementing the EUDR in a country like Argentina? By using land-use data from the MapBiomas Initiative, in a research paper, we estimated that the EUDR would cover around 6 billion US dollars in exported value, but 97% is already compliant with the EUDR. The most affected non-compliant production chains are soybeans and cattle. Then, we calibrated an economy-wide model to simulate the economic and environmental implications of the EUDR in Argentina. According to our model simulations, while the macroeconomic impacts are limited—GDP might fall by only 0.14%—the environmental benefits are more significant: deforestation could decline by 2.5%, with respect to the business-as-usual (BAU) scenario. This represents almost 47 thousand fewer deforested hectares in the shock scenario during the period 2025-2030.
However, sectoral impacts may be larger. Non-compliant primary activities producing soy, cattle, and timber products might face significant production losses of more than 1% relative to the BAU scenario. Although these are economic sectors that do not employ many workers, the EUDR can have far-reaching repercussions, as the economy suffers a loss of export revenues and a depreciation of the real exchange rate, which reduce the country’s total income.
Moreover, in the real world, things may not be that simple. Due diligence costs may still prevent even compliant production from entering EU markets, increasing the overall impact. Small producers, who often lack the financial or technical capacity to adapt, for example, would not be able to meet the new due diligence requirements, even if their production is compliant, and thus could be the most adversely affected. Our model does not fully capture these distributional effects, underlining the need for more data and research.
How prepared is Argentina to deal with the EUDR?
The country is not starting from scratch. The public sector has already developed information systems for both the soy and cattle value chains that are being used as a basis for the traceability systems required by the EUDR. The private sector has also stepped in, developing monitoring, reporting, and verification systems to ensure compliance, and the first deforestation-free export has already been completed. In addition, Argentina’s National Forest Law is a key milestone that provides a framework for sustainable forest management. It requires subnational governments to carry out land-use planning for native forests and establishes tools to support conservation practices.
These policies and initiatives give Argentina a head start. But they will need to be scaled up and better coordinated to ensure the country can adapt and respond effectively to the EUDR and similar regulations being discussed in other countries, such as the proposal for the Fostering Overseas Rule of Law and Environmentally Sound Trade (“FOREST”) Act in the US. These regulations pose clear challenges for Argentine exports, but they also create strong incentives to improve sustainability practices.
From insights to action: what can you do?
By engaging proactively with the EUDR, different stakeholders can transform compliance challenges into meaningful improvements and long-term benefits across the supply chain:
- Policymakers will need to ensure that traceability systems are inclusive and support small producers.
- Businesses should invest in compliance mechanisms to safeguard and increase their access to key markets. Integration of public and private information systems is not only desirable but also essential to ensure effective monitoring.
- Researchers and civil society organizations can play a crucial role by filling data gaps and monitoring the impacts. Better land use and land tenure data are key to assessing the economic and distributional consequences of these new regulations.
The EUDR may challenge Argentina in the short term, but can also help the country consolidate its position in international markets and advance its climate transition, moving forward along a development path that aligns competitiveness with sustainability—turning challenges into opportunities. More broadly, the EUDR example demonstrates how global trade rules are increasingly becoming tools for advancing sustainability, and that commodity-exporting countries that face similar tensions could extract lessons from Argentina’s case to align environmental action with productivity growth and development.
