In 2010, after several years of being stalled, negotiations between MERCOSUR and the European Union to conform a Free Trade Agreement (FTA) were resumed. This FTA is expected to have an important impact on MERCOSUR economies, especially if both blocs reach an agreement regarding the agriculture sector. For a small country as Uruguay, one of the small economies of MERCOSUR, the conclusion of this agreement may have an important impact on the economy, and also on income distribution and poverty, as the FTA will have differentiated impact on the different sectors of the economy. This paper analyzes the impact of a FTA between MERCOSUR and EU making special focus on distributional impacts on Uruguay. For doing so, we apply an improved version of MIRAGE with household heterogeneity.