In this first edition of the Latinsight Strategic Briefing, you will find:
Strategic Outlook: a deep dive into the EU-Mercosur pact and its "first-mover" advantages for European businesses.
Deep Dive: an analysis of Brazil’s historic opportunity for sustainable growth and its resilience in a shifting world order.
Market Intelligence: key sectoral updates, including Chile’s record $104 billion mining investment pipeline and Peru’s milestone in agricultural exports.
Policy & Macro Watch: essential updates on Argentina’s first Milei-era budget and Honduras’ new political landscape.
Thank you for your continued support and I hope you enjoy the content in this first edition.
❐ STRATEGIC OUTLOOK
EU - Mercosur: towards a new era for global trade ?
Following over 25 years of negotiations, the European Union and the Mercosur bloc (Argentina, Brazil, Paraguay, Uruguay, and Bolivia) offically signed their landmark free trade agreement on January 17, 2026. The signing ceremony took place at the Central Bank of Paraguay in Asunción - the symbolic site where Mercosur was founded in 1991. This event marks the birth of the world’s largest free trade area, covering 750 million people and representing nearly 20% of global GDP.
Mercosur and the EU have signed a free trade agreement following more than 25 years of negotiations. Luis ROBAYO / AFP via Getty Images
In a global context defined by rising protectionism, including potential U.S. tariffs and China’s growing influence in Latin America, this agreement is a vital tool for "strategic sovereignty". It secures a "first-mover" advantage for the EU, as no other major economic bloc has a comparable deal with Mercosur. This partnership is essential for building resilient supply chains and mitigating the risks of economic coercion by diversifying trade partners.
The pact will eliminate duties on 91% of EU exports and 92% of Mercosur exports and European businesses are projected to save over €4 billion ($4.6 billion) annually in customs duties, which is eight times the savings offered by the EU-Canada agreement.
Significant tariff removals (often reaching 35%) will benefit the automotive, chemical, pharmaceutical, machinery, and textile sectors. For instance, Mercosur will liberalize 90% of its industrial imports from the EU. The EU already maintains a €15.7 billion trade surplus in services with Mercosur. The deal grants EU companies unprecedented, non-discriminatory access to public procurement markets, allowing them to bid for contracts with government agencies on equal footing with local firms.
The agreement is also instrumental in securing a sustainable supply of critical raw materials (CRMs), vital for Europe’s digital and green transitions. More specifically, the following materials are expected to be key trade items:
Niobium: Brazil already provides 82% of the EU’s supply, which is essential for high-strength steel used in infrastructure.
Lithium: Argentina is a global leader in lithium processing, a core component for EV batteries.
Graphite and Silicon: access to these materials will be streamlined, reducing costs for EU technology and battery manufacturers.
The latest rounds of negotiations between the two blocs focused on sustainability and how it should be at the core of the upgraded agreement, with commitments that are now legally binding.
The text includes a binding commitment to stop deforestation by 2030, the first time such a clause has been subject to dispute settlement in an EU trade deal. Moreover, respect for the Paris Climate Agreement is an "essential element"; its breach could lead to the suspension of trade preferences. In addition, both parties commit to International Labour Organization (ILO) standards, including the fight against forced and child labor.
Despite its strategic value, the deal faced "fierce resistance" from the agricultural sectors of France, Poland, Ireland, Hungary, and Austria. To protect European farmers from a surge of cheaper imports, the EU has integrated several shields:
Strict Quotas: sensitive products like beef are limited to 99,000 tons at a 7.5% duty, representing only 1.5% of EU production.
Crisis Fund: a €6.3 billion fund has been established to support EU farmers through market transitions.
Rebalancing Mechanism: a new safeguard allows any party to request a ruling if they feel their benefits are being impaired by the other party's measures.
Geographical Indications (GIs): over 350 European products (e.g., Champagne, Feta, Polish Vodka) will be protected from imitations in Mercosur.
“We are creating the largest free trade zone in the world, a market worth almost 20% of global GDP. Delivering untold opportunities for our 700 million citizens. This agreement sends a strong signal to the world. It reflects a clear and deliberate choice. We choose fair trade over tariffs, we choose a productive, long-term partnership, and above all, we intend to deliver real and tangible benefits to our peoples and companies.”
2026 Perspectives: toward a 1.1 billion person market
While the signing in Paraguay is a historic milestone, hurdles remain in the path to full implementation. The agreement now moves to the European Parliament for a vote, likely in the spring of 2026. While some MEPs may seek a referral to the European Court of Justice to verify the deal's legal validity, the momentum for provisional entry into force is high.
In the long term, considering existing trade agreements and associated countries to both blocs, bilateral trade flows could increase by up to 70%, eventually creating an integrated economic space of 1.1 billion people with a combined GDP comparable to that of the United States.
❐ DEEP DIVE
Brazil’s economic stability and opportunities ahead
The Boston Consulting Group (BCG) recently published a study entitled "A Changing World Is a Historic Opportunity for Brazil". The study explores how current shifts in the world order represent an unprecedented opportunity for the country to embark on a new cycle of sustainable growth. This report analyzes Brazil's strategic advantages, such as its abundance of natural resources and renewable energy, while identifying the levers of competitiveness and the reforms necessary for the country to strengthen its position on the global economic stage.
Key takeaways
Positive growth outlook: Brazilian CEOs perceive the shifting global landscape and the increasing global demand for sustainable resources as favorable conditions for a new cycle of sustainable growth.
Strategic advantages: Brazil possesses several core strengths, including a large domestic market of 213 million people, abundant renewable energy (88% of its electricity grid is clean), vast natural resources (biodiversity and critical minerals), and a neutral geopolitical stance that allows it to be a reliable partner for both advanced and emerging economies.
Economic resilience: despite past volatility, the economy has shown resilience against global political shifts and trade policy changes, recently becoming the world’s fifth-largest recipient of foreign direct investment (FDI).
Key growth opportunities: Brazil is poised to:
Strengthen its position as an agribusiness powerhouse.
Become a strategic supplier of critical minerals (like nobium, graphite and rare earths) for high-tech manufacturing.
Establish itself as a hub for low-carbon industrial plants and energy-intensive data centers.
Expand its role in global manufacturing value chains and digital services.
To fully capture these opportunities, the country must address significant challenges.
Structural roadblocks: investment hurdles known as “Custo Brasil” include overly complex taxation and regulatory systems, high interest rates (currently 15%), trade barriers, and underdeveloped transportation infrastructure (only 18% of roads are paved).
Human capital and innovation: while Brazil has a dynamic startup ecosystem and is a leader in digital payments (like Pix), it faces challenges in its education system, ranking low in global scores for math and science, which necessitates a focus on upskilling the workforce.
Call for collaboration: success will require close collaboration between the public and private sectors to advance infrastructure development and regulatory reforms, such as the ongoing taxation overhaul.
❐ MARKET INTELLIGENCE
❍ AGRIBUSINESS & FOOD SYSTEMS
Peru: record-breaking agricultural exports in 2025
Peru reached a new milestone in 2025 as it exported a record amount of 540 different agricultural products in 115 countries. Agricultural exports exceeded 3 million tons, with avocados leading the way at 767,230 tons (23%), followed by grapes (17%), blueberries (10%), mandarins (8%) and mangoes (6%). The main destination were the United States (28% of total volume), followed by the Netherlands (19%). (Andina)
Brazil agribusiness exports set new record
Brazil agricultural exports amounted to 169.2 billion USD in 2025, a 3% increase from 2024. Agribusiness exports accounted for 48% of the country’s total exports. Market diversification since 2023 has played a major role in exports increase although China remains the main market for Brazilian agriculture products, accounting for US$ 55.3 billions. (Global Agriculture)
Argentina: technological revolutions propel agriculture
Argentine agriculture has surpassed 140 million tons in production by focusing on innovation in seeds, phytosanitaries, and fertilizers. A pioneer in GMOs, the sector is now integrating AI and gene editing to ensure high-yield, sustainable production. (Clarin)
❍ MINING & CRITICAL MINERALS
Chile’s mining sector receives record USD 104 millions in investment
The Chilean Copper Commission (Cochilco) announced in December a total of USD 104 millions has been pledged in investments for the 2025-2034 period. This represents a 25,7% increase compared to the previous period, and the highest amount since 2011. (Chilean Mining Ministry)
Argentina: mining activity surges in San Juan province with 36 projects
San Juan is consolidating its position as Argentina’s leading mining province, attracting investments and securing long-term production. The province currently hosts 36 advanced-stage metal exploration projects, alongside two producing mines and other early-stage exploration and prospecting initiatives. (Mineria y Desarrollo)
❍ INFRASTRUCTURE, TRANSPORT & LOGISTICS
Mexico: ALSTOM signs 1.1 billion USD deal
French train manufacturer ALSTOM has signed a deal worth USD 1.1 billion with the Mexican government for the delivery of 47 new generation passenger trains. The contract is part of a 5-year investment plan launched by Mexican President Claudia Sheinbaum to develop railway mobility in the country. (Bloomberg Línea)
Brazil: technology and efficiency transform road transport
By using geolocation and route optimization, Brazilian carriers are increasing efficiency by 50% without expanding their fleets. Meanwhile, the government’s “Combustible del Futuro” program plans $49 billion in investments by 2037 to decarbonize the road sector, which currently handles 65% of the country's cargo. (Infobae)
❍ ENERGY & SUSTAINABILITY
Argentina and Chile reach agreement on energy supply
Argentina’s oil company YPF has agreed to sell to Chile’s ENAP around 70.000 barrils per day up until 2033. Argentina’s oil revenues are expected to rise thanks to the start of production at the Vaca Muerta site. (El Estrategico)
Chile accelerates hydrogen market development
Chilean Chamber of Deputies has passed a new legislation aiming at developing the green hydrogen industry and foster internal demand. (Chilean Economy Ministry)
Mexico to launch second tender in renewables
The Mexican government is expected to launch in January a new tender for clean energy and energy storage projects after a succesful first round in December which attributed 3.3 GW of renewable capacity and 1.2 GW of storage capacity. (Strategic Energy Europe)
Brazil to double production capacity of biomethane
Brazil is expected to double its biomethane capacities in 2026, driven by the performances of the agribusiness industry. Last year the country had 23 projects of biomethane production either in activity or pending authorisation. (Valor International)
Uruguay regional leader consolidates 98% renewable energy in 2025
Uruguay solidified its energy leadership with 98% clean electricity in 2025, dominated by hydro (46%) and wind (34%) power. The country remains a net exporter, selling 8% of its total production to neighbors while evaluating new $9.3 million waste-to-energy projects. (Ambito)
❍ DEFENCE & SECURITY
Peru to boost investments in the defence industry
The Peruvian government has renewed its program to strengthen the Defense industry with the aim of generating value chains, transferring technologies, and recovering the operational capabilities of the Armed Forces. This enhanced strategy is expected to create more than 12,000 jobs by 2040 and involve more than 1,000 local companies as suppliers. (InfoDefensa)
Colombia invests USD 1.7 billion in anti-drone shield
The Colombian government announced an investment of 1.7 billion USD to create the National Anti-Drone Shield, a strategy aimed at securing the airspace against threats from armed groups. This technological defense project will begin its operational phase in 2026 with an initial 1 trillion pesos (270 millions USD) in funding. (El Cronista)
❍ TOURISM & TRAVEL
El Salvador: record-breaking tourism in 2025 and ambitious goals for 2026
El Salvador generated over $3.5 billion USD in tourism revenue in 2025, positioning the industry as a primary economic engine. This boom is attributed to improved national security, the success of the "Surf City" coastal initiative, and a total investment exceeding $163 million in the San Salvador Historic Center. For 2026, the country plans to consolidate its international standing through new hotel developments and recreational projects in coastal and lake areas. (El Comercio)
❐ POLICY & MACRO WATCH
Venezuela: what’s next after Maduro’s downfall ?
On January 3, 2026, U.S. special forces captured President Nicolás Maduro, who was taken to New York to face narcoterrorism charges. While Delcy Rodríguez is recognized as interim president, Washington aims to secure access to oil reserves and asserts regional dominance through a revived Monroe Doctrine. (Latinsight)
Nasry Asfura officially declared president in Honduras
After several weeks of uncertainty, right-wing and Trump-backed candidate Nasry Asfura has been declared the winner in Honduras’ presidential election with a tight margin of 0.8 percentage points against his opponent Salvador Nasralla. (BBC)
Paraguay: S&P grants second investment grade rating
S&P Global Ratings upgraded Paraguay to BBB-, marking its second investment grade after Moody’s. The upgrade reflects the country’s solid growth, low fiscal deficits, and credible monetary policy, which are expected to boost foreign investment and diversify the export base. (Bloomberg Línea)
Argentina: Congress passes first Milei-era budget for 2026
Argentina’s Congress approved its first budget under President Javier Milei, aiming for a zero deficit through $102 billion in spending. The 2026 plan projects 5% economic growth and targets an inflation rate of 10.1%, following years of budget extensions. (DW)
Colombia’s minimum wage gets a record increase
Colombia announced a 23.7% increase in the minimum wage, bringing the total monthly income for formal workers to $2,000,000 pesos (~540 USD). While the hike aims to boost household consumption, experts warn it may trigger inflationary pressures and impact the investment capacity of small and medium-sized businesses. (Portafolio)
Chile: Economy grows 2.2% behind record copper prices
Chile's economy grew 2.2% annually as of October 2025, driven by a rebound in trade and services. Copper prices reached historic levels above $5.12 per pound, boosting public resources and mining incentives. Additionally, the labor market added 590,000 jobs, with 70% of those positions filled by women. (Chilean Government)
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