A controversial free-trade agreement between the European Union, Colombia and Peru takes effect today (1 August).

The deal could potentially save exporters €500 million every year in tariffs alone. It is expected to boost European sales of cars, luxury goods and chemical products as well as Peru’s and Colombia’s food and mineral exports to Europe.

The deal has been controversial because of working conditions and labour rights, especially in Colombia, where right-wing death squads have assassinated scores of trade unionists.

The European Commission said that the deal includes “far-reaching provisions on the respect of human rights, the rule of law and effective implementation of international conventions on labour rights and environmental protection”.

An inclusive supervisory committee will be set up to monitor implementation of the deal, with the participation of trade unions and human rights groups.

The EU has made it clear that it would like Ecuador and Bolivia to join the new trade zone.

The deal pulls Peru and Colombia even further away from their more protectionist neighbours such as Argentina – with which trade relations have been testy in recent months – and Brazil.

Weak global demand slowed exports from Colombia and Peru last year, but both economies appear to be resilient after years of growth.

The International Monetary Fund earlier this year described Peru, with its 30m people, as one of the fastest-growing and most stable economies in Latin America, with real GDP growth averaging 6.5% in 2002-12. (It slowed to 6.2% last year.)

Colombia, with close to 50m people, has seen persistent inequalities including high unemployment and a large grey economy. The Fund also warned against the country’s increasing dependence on volatile mineral exports.

The trade deal with the two Andean nations was signed in June 2012 and was approved by the European Parliament last December. Its provisions apply provisionally until all EU member states have ratified the deal.

Separate agreements with the smaller economies of Honduras, Nicaragua and Panama also take effect today.