Brazil sees ripple effect after Mercosur-EU deal; Canada next in line
Valor | 19 January 2026
Brazil sees ripple effect after Mercosur-EU deal; Canada next in line
By Renan Truffi and Sofia Aguiar
Brazil’s government expects that the signing of the free trade agreement between Mercosur and the European Union on Saturday (17) will trigger a ripple effect for similar negotiations between the South American bloc and other countries. Brazil has been approached to speed up talks on comparable trade deals since late 2025. The most promising of these is a Mercosur-Canada agreement. Valor learned that discussions are well advanced and the expectation at Brazil’s foreign ministry is to sign a free trade area with the Canadian government as early as 2026.
“The agreement with Canada carries strong political weight, as the country is part of the USMCA [United States-Mexico-Canada Agreement]. Because this is a free trade agreement, rather than a customs union or common market, member countries can negotiate individually,” said Gustavo Monferrari Viana, a tax and foreign trade partner at Simões Pires Consultoria. “The natural expectation from a deal with Canada is access to another market and, in some agricultural and primary sectors, the substitution of a share of Canada-U.S.-Mexico trade with products from Mercosur.”
The prospect of dismantling tariff barriers with Canada has energized Brazilian negotiators, who see symbolic value in striking a deal with a neighbor of the United States. U.S. President Donald Trump spearheaded a broad tariff offensive against Brazil, Canada, and several other countries last year, in an escalation against multilateralism championed by President Lula.
In recent months, according to officials, Lula has developed a strong rapport with Canadian Prime Minister Mark Carney, helping to clear the way for negotiations to advance.
Carney invited Lula last year to attend a G7 meeting, the forum that brings together seven of the world’s largest advanced economies. Brazil is not a member and therefore does not usually participate in such gatherings.
In 2025, Canada was among 40 markets that recorded the highest purchases of Brazilian products, alongside countries such as India, Turkey, Paraguay, Uruguay, Switzerland, Pakistan, and Norway. In absolute terms, Brazil exported $7.2 billion to Canada last year and imported $3.1 billion, leaving Brazil with a trade surplus in bilateral flows.
Brazilian exports to Canada are currently concentrated mainly in minerals, such as raw gold, and calcined alumina, also known as aluminum oxide. These products are shipped primarily from the states of Minas Gerais, followed by Bahia, Maranhão, and Pará.
According to officials in the government’s international affairs team, Canadian negotiators are expected to visit Brasília next month for a new round of talks with Mercosur. Brazil will invite representatives from Paraguay, Argentina, and Uruguay—countries that must also endorse the agreement’s terms—to take part in the meeting.
A second positive spillover from the Mercosur-EU deal is the possibility of unlocking negotiations with the United Kingdom, comprising England, Scotland, Wales, and Northern Ireland. Valor has learned that Brazilian diplomats have received signals that the UK fears being left behind due to its geographic and economic proximity to the EU. As a result, according to officials, London has begun to accelerate talks with South American countries.
Another potential offshoot of the agreement with Europe involves Japan, Brazil’s third-largest trading partner in Asia after China and India. A source with access to the talks said Japanese diplomacy—long resistant to this type of agreement with Mercosur—has recently sent signals that it may be more flexible at the negotiating table. It remains unclear, however, whether there is room to discuss a full free trade area with Japan or whether Tokyo would prefer a preferential trade agreement.
Together, these developments suggest that after years of relative isolation, Mercosur may be entering a new phase in its geopolitical trajectory. “Mercosur was isolated. The last agreement had been in 2011, with Palestine, and in 2010, with Egypt. More than 12 years passed until we signed with Singapore in 2023, then with EFTA [Iceland, Liechtenstein, Norway, and Switzerland], and now with the European Union. We are advancing agreements with the United Arab Emirates and expanding preferential tariff lines,” Vice President and Minister of Development, Industry, Trade, and Services Geraldo Alckmin told Valor.
For Marsílea Gombata, a senior researcher at the International Relations Research Center at the University of São Paulo (Nupri-USP) and a professor of international relations at FAAP, “ironically, the protectionism of the Trump administration appears to be pushing Brazil into a new phase of trade policy.”
“Brazil, long known for its protectionism, is now seeking free trade agreements to secure its exports,” she said.
Even as it opens a new chapter, however, the South American bloc has historically been marked by ideological rifts that undermine joint progress. In the bloc’s current configuration, for instance, Lula has openly clashed with Argentine President Javier Milei. The question, according to experts, is whether such tensions could hinder the conclusion of new agreements, including with Canada.
“Getting this far in the Mercosur-EU negotiations was not easy and required persuading parts of the manufacturing sector. It remains to be seen whether there will be convergence among all Mercosur countries for other agreements, like the Mercosur-EU deal, to move forward. Political and ideological disputes have historically hampered Mercosur’s uneven path. The idea of a free trade area with Canada does not appear to be a simple topic,” one expert said.
Since last year, Mercosur has been negotiating free trade agreements with Indonesia, Mexico, Vietnam, South Korea, the United Arab Emirates, and Lebanon, and more recently India, including a Brazilian government mission scheduled for February in New Delhi. However, the signing of the agreement with the European Union, combined with Trump’s campaign against multilateralism, has given fresh momentum to talks with countries that Brazilian diplomats say could take Mercosur to a new and more competitive level of trade integration.
