Brazilian SMEs struggle to capitalize on Mercosur-EU trade deal

Small and medium-sized Brazilian companies are still trying to determine how they can benefit from the trade agreement between Mercosur and the European Union.

While large exporters are already reviewing contracts, internal systems and export strategies to take advantage of lower tariffs, smaller businesses are struggling to identify which products qualify, what requirements they must meet and which procedures they must follow to access the new benefits.

The challenge goes well beyond understanding the new tariff rates. To qualify for preferential treatment, companies must determine whether tariffs on their products will be eliminated immediately or phased out gradually, whether their exports will be subject to quotas, and how to prove that their goods comply with the agreement’s rules of origin.

They may also need to adapt internal control systems and meet the EU’s regulatory, sanitary and environmental requirements. In some cases, companies that adjust more quickly may be better positioned to benefit from limited annual export quotas before they are filled.

The push comes just over two months after the agreement began to be provisionally applied on May 1. Although its definitive implementation still depends on the completion of institutional procedures in the European Union—including a decision by the European Parliament following a review by the Court of Justice of the European Union—the two blocs are already applying its trade preferences.

As previously reported by Folha de S.Paulo, Brazilian exports to the EU increased by $2 billion during the first two months of provisional application, according to an ApexBrasil study comparing figures for May and June 2026 with the same months in 2025.

Lawyers advising exporters say the main bottleneck is now operational rather than legal. The Brazilian government is preparing a broad effort to accelerate companies’ adaptation, particularly among small and medium-sized businesses, while trade associations and specialized law firms are stepping up their guidance.

Even under provisional application, the agreement immediately eliminates tariffs on approximately 5,000 Brazilian products exported to the EU. It also establishes gradual tariff-reduction schedules for thousands of other goods and creates opportunities to expand exports, attract investment and reorganize supply chains between the two blocs.

“The implementation caught companies off guard. There is a risk that businesses will take too long to benefit from the opportunities created by the agreement,” said Francisco Negrão, a partner in the international trade practice at law firm Trench Rossi Watanabe.

According to Negrão, many companies have yet to map out which of their products qualify for immediate duty-free access, which will follow gradual tariff-reduction schedules and which will depend on quotas.

“We have gained a very clear sense of companies’ level of awareness, how prepared they are and the extent to which they have begun implementing the necessary measures,” he said.

Annual quotas create pressure to move quickly

For some products, the agreement establishes export quotas. In these cases, the lower or zero tariff applies only up to a maximum annual shipment volume. Once the quota has been filled, further exports remain permitted but are once again subject to the standard import tariff.

That makes the pace of companies’ preparations particularly important, since some of the agreement’s benefits depend on the availability of annual quotas.

“Those that move first will be able to take advantage of these reductions, which are limited each year,” Negrão said. As an example, he noted that “Argentina had already filled the quota for one product in the first month.”

Companies must also review their tariff classifications, adapt internal systems to document product origin, and establish traceability and regulatory compliance mechanisms, he added.

“Proof of origin is absolutely fundamental. The agreement expands market access, but it also increases the risk for companies that fail to comply with the rules of origin.”

Exporting a product from Brazil is not, by itself, enough to qualify for the agreement’s benefits. Companies must demonstrate that their goods meet the origin criteria established by the treaty, proving that they were produced or sufficiently transformed within Mercosur.

Without that documentation, an export may lose its eligibility for reduced tariffs.

Large exporters in industries such as animal protein, food, machinery and metals have already begun making the necessary adjustments, Negrão said, but progress has been slower among smaller businesses.

“Smaller companies and SMEs are still getting their bearings and risk missing the first-mover window.”

Government steps up outreach to businesses

The same assessment has emerged from the government’s discussions with the private sector.

Tatiana Prazeres, foreign trade secretary at Brazil’s Ministry of Development, Industry, Trade and Services, said the agreement took effect “very quickly,” requiring a concentrated effort to provide companies with the information they need.

“We are implementing the largest trade agreement in Mercosur’s history,” Prazeres told Folha. “The government is working with several partners to ensure that information reaches those who need it, to help private companies understand how they fit into the agreement and to enable Brazilian exporters to take full advantage of it.”

The ministry has already developed training materials, including guides on rules of origin, tariff phaseout manuals, platforms allowing companies to check tariffs by product, and dashboards highlighting opportunities in each Brazilian state.

The strategy also includes partnerships with Sebrae, Brazil’s small-business support agency; the Brazilian Trade and Investment Promotion Agency, ApexBrasil; and the Brazilian Agency for Industrial Development, ABDI.

“Tariff reductions open the door, but regulation will determine how easy it is to walk through it,” Prazeres said.

ApexBrasil has reached a similar conclusion. Agency President Laudemir André Müller said many companies remain unaware of even the basic details of the agreement.

“We have found that many companies do not know the agreement exists or that it is already in effect. Even among those that are aware of it, many do not understand how it applies to their specific situation.”

One of the main challenges is helping business owners understand how the new rules affect their own products, Müller said.

“Did the tariff on my product fall to zero? Did it fall to 8%? When does the reduction take effect? We have to translate that information, explain it and get it to companies.”

ApexBrasil has developed dashboards that allow businesses to review tariff-reduction schedules and trade opportunities by product and by Brazilian state.

Source: Folha de S.Paulo

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