The European Union resolved 25 years of negotiations on Jan. 9, 2026, approving a free trade agreement with Latin America’s Mercosur region, including Brazil, Argentina, Paraguay and Uruguay, affecting some $128 billion in annual two-way trade. The deal could be signed as early as mid-January during an EU-Mercosur meeting in Paraguay.

“Our message to the world is this: Partnership creates prosperity and openness drives progress,” European Commission 0resident Ursula von der Leyen said in a statement.

Brazilian president Luis “Lula” da Silva was more ebullient: “Historic day for multilateralism. After 25 years of negotiation, the Mercosur-European Union Agreement was approved, one of the largest free trade agreements in the world. The decision approved by the European side unites two blocs that, together, add up to 718 million people and a GDP of $22.4 trillion,” he wrote on X.

The agreement includes a combined population of nearly 718 million, within which Brazil is the largest market in the Mercosur bloc with a population of some 215 million, followed by Argentina with 47 million, Paraguay with 7 million and Uruguay with more than 3 million.

Other trade blocs could arise from the Mercosur opening. Lula has invited Canadian prime minister Mark Carney to accelerate the Mercosur-Canada trade agreement. Carney has accepted an invitation to visit Brazil in April to deepen these economic ties, according to MercoPress.

Bolivia has been a full member of Mercosur since July 2024, but has a four-year window to integrate Mercosur’s trade regulations into its national laws. Venezuela was a full member until it was suspended in December 2016. Chile, Colombia, Ecuador, Guyana, Panama, Peru, and Suriname are associate Mercosur countries.

Driving Down Protectionist Tariffs

The key advantage to the EU-Mercosur deal will be the flattening of import tariffs in Latin America, which typically range from 10% to 35%. Brazil, in particular, has long utilized high tariffs to protect its industries, including a 20% increase on plastic resin import taxes levied in 2024. That increase affected over 80 chemical products, including some relevant to the paint and coatings industry, like butanone (MEK) and ethyl acetate.

Brazil imported $1.53 billion worth of paints, dyes and varnishes (global Harmonized System 2-32) in 2024, representing the 21st most imported product out of the top 100 items, according to the Observatory of Economic Complexity. That figure is triple the $497 million worth of exports of the same products, OEC reports. The OEC was spun out of developer MIT as an open source project in 2012.

The primary sources of Brazil’s paints, dyes and varnishes imports in 2024 were China — supplying $490 million, the United States — supplying $163 million, India — supplying $145 million, Germany — supplying $112 million, and Spain — supplying $69 million, OEC calculates.

Brazil is also a key source of paints, coatings and feedstocks for the other members of Mercosur and the Latin America region. In November 2025, Brazil exported paints, dyes and varnishes in Mercosur mostly to Argentina — worth $13.4 million, to Paraguay — worth $4.87 million, and to Uruguay — worth $1.44 million, OEC counts. 

Mercosur Market GDP Worth $3 Trillion

For Europe, gaining easier access to the Mercosur market means lower-cost access to an estimated $3 trillion sub-regional economy. The EU is Mercosur’s second largest partner in trade in goods, accounting for almost 17% of Mercosur’s total trade in 2024, according to the Council of the European Union.

While EU exports to Mercosur could rise on the new tariff agreement, EU companies also are investing more in the region to augment production capability to serve the four countries. Total EU investment in Mercosur is estimated at more than $450 billion.

EU-Mercosur trade will not be limited to hard goods. The new agreement has “provisions for investment facilitation and the removal of barriers to cross-border trade in services, particularly in digital and financial services. Provisions on government procurement will allow EU companies to access public tendering processes in Mercosur countries,” the European Commission  reports.

Regional infrastructure also may improve. “Additional elements of Mercosur are its Parliament and the Structural Convergence Fund of Mercosur (FOCEM). As of 2010, FOCEM seeks to develop regional infrastructure projects to increase integration. Its 2024 budget was $300 million. Paraguay receives the largest amount of funding from FOCEM, followed by Uruguay,” reports the Americas Society. “This is line with the fund’s stated goal of “reducing asymmetries” between the bloc’s smallest and largest economies,” the group states.

Brazil Paints and Coatings Demand Expands

Brazil’s robust demand for paint and coatings materials grew a solid 6% during 2024, essentially doubling the national gross domestic product increase. In years past, the industry has typically outpaced GDP acceleration by one or two percentage points, but last year, the ratio accelerated, according to an early 2025 report by Abrafati, the Associação Brasileira dos Fabricantes de Tintas (see CW 3/25).

Brazil’s per capita paint and coatings consumption generally falls in the range of 10 to 12 liters per person per year, based on 2024 data, making it a leader in Latin America, driven by strong decorative paint demand and construction activity, suggests an AI search. While high for the Mercosur region, the figure is well below the estimated 16 liter per person level in the United States, pointing to the opportunity the market presents.

According to the most recent Abrafati analysis of the paint and coatings industry, production reached $3.9 billion in 2022, and has growth a high-single-digit rates since then. The largest players in the paint, coatings and adhesives market (NAICS CODES: 3255) include these five, according to a January 2026 Dunn & Bradstreet listing:

• Oswaldo Crus Quimica Industria e Comercio, based in Guarulhos, Sao Paulo state, with annual sales of $292 million.

• Killing S/A Tintas e Adesivos, based in Novo Hamburgo, Rio Grande Do Sul state, with $111 million in sales.

• Henkel, based in Itapevi, Sao Paulo state, with $111 million in sales.

• Renner Sayerlack, based in Sao Paulo, with $107 million in sales.

• Sherwin-Williams do Brasil Industria e Comercio, based in Taboao Da Serra, Sao Paulo state, with $93 million in sales.

In terms of overall chemical production, Brazil represents the sixth-largest manufacturer globally, according to The Associação Brasileira da Indústria Química (Abiquim). The association counts 984 chemical manufacturing facilities across the country.

Globalization of Norms

Another key benefit of the EU-Mercosur pact will be the increasing globalization of norms in the paint and coatings industry. Abiquim supports implementing EU REACH-like regulations in Brazil to enhance chemical safety and competitiveness, aligning with global standards, reports ICIS.

Brazil’s Senate in October 2025 approved the creation of a National Inventory of Chemical Substances aimed at “reducing negative impacts” of toxic chemicals on human and environmental health, ICIS reported. “The inventory and the associated public bodies to ensure compliance will put Latin America’s largest economy close to the EU’s Reach regulatory system regarding chemicals,” the agency added.