Mercosur may reach provisional deal with Canada

Even though it is considered at an advanced stage and close to completion, the agreement between Mercosur and Canada still has sensitive issues to be aligned, such as access for beef, dairy products, poultry and eggs, as well as disagreements over geographical indication rules. The strategy is to reach a viable short-term understanding, taking advantage of the current international context, and leave potential deeper provisions for future reviews—without abandoning ambition in the negotiations, according to one source.

Negotiations for a free trade agreement advanced in the latest round held in February. Although sensitive issues remain unresolved, negotiators believe these differences should not prevent the treaty from being concluded, which is expected to happen this year. The expectation is that two or three more technical rounds will be needed to finalize the deal.

Among the main issues under discussion is market access in sectors considered delicate for both sides—such as beef, dairy products, poultry, and eggs—as well as disagreements over geographical indication rules. In the case of beef, Canada tends to show greater sensitivity, since Mercosur countries, especially Brazil, Argentina, and Uruguay, are highly competitive in this segment.

The following breakdown identifies the primary commodities within Brazil’s export profile to Canada for January 2026, measured in Wet Metric Tons (WTMT). These figures are sourced from Datamar’s market intelligence:

Top Exports to Canada | Jan 2026 | WTMT

Source: DataLiner (click here to request a demo)

On the Canadian side, an additional difficulty emerged after legislative changes approved in June last year that prevent the government from offering tariff-rate quotas or tariff reductions for products such as poultry, dairy products, and eggs. These items are highly relevant for Mercosur countries, raising a hurdle that requires negotiated solutions between the parties.

Another sensitive issue concerns the treatment of geographical indications, a type of certification for products and services characteristic of their place of origin. The model adopted by Canada in trade agreements follows the logic of the North American Free Trade Agreement (NAFTA). Mercosur, however, has begun incorporating this mechanism into more recent agreements, such as the one signed with the European Union, which will require some degree of convergence.

In the industrial sector, Canada is likely to target areas such as machinery, equipment, auto parts and automobiles in the Brazilian market. In these cases, Mercosur’s focus is to ensure longer adjustment periods for local industry, allowing for gradual market opening or the establishment of quotas.

All these issues are part of the broader market-access negotiations and are expected to be calibrated in the final stages of the agreement. According to government sources, divergences of this kind are common in trade deals and are usually addressed in the final rounds, when the most sensitive issues are “encapsulated” for resolution at the closing stage of negotiations. For this reason, Brazil remains optimistic about concluding the treaty.

Sources within the Lula administration believe the current international context favors the conclusion of new trade agreements. Amid a scenario of increasing economic fragmentation and a search for diversified partners—including in response to the United States’ tariff offensive—several countries have shown greater willingness to advance negotiations.

In addition, the recent agreement between Mercosur and the European Union has begun to serve as a reference for other negotiations. According to sources involved in the talks, the fact that the South American bloc has already reached an understanding with a major partner helps calibrate expectations and facilitates the negotiation dynamic. As Valor previously reported, the government already expected to unlock talks with new partners after the treaty with the Europeans.

In this context, beyond Canada, negotiations with the United Arab Emirates have progressed well, while discussions with India and Vietnam remain at an early stage. The bloc also maintains exploratory dialogue—an earlier phase before defining the terms of reference for negotiations—with Japan.

There is also an assessment that highly competitive sectors with narrower margins, such as the automotive industry and machinery and equipment, tend to push their governments toward trade agreements as new treaties begin to enter into force. This dynamic could stimulate new approaches between Mercosur and relevant partners such as the United Kingdom and South Korea.

The Brazilian government’s view is that it is necessary to take advantage of this “window of opportunity” to advance agreements that go beyond tariff reductions. These treaties also involve regulatory changes, harmonization of standards and reductions in bureaucracy, which in some sectors may have an economic impact even greater than tariff cuts themselves. Recent negotiations, for example, have already encouraged adjustments in Mercosur legislation, according to sources, such as progress in self-certification mechanisms and rules on government procurement.

Source: Valor International

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