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BRAZIL ECONOMICS - Report 26 Jan 2026 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

Brazil’s growth has been supported by higher resource utilization, while the contribution from productivity remains limited. Among the various constraints on productivity in the country, low trade opening plays a prominent role. In this context, the agreement between Mercosur and the European Union is a relevant step toward greater economic integration of Brazil with the rest of the world. The complementarity between the two blocs trade patterns suggests the potential for significant gains, especially in Brazil’s case. Our assessment is that, in light of the economic and geopolitical difficulties faced by Europe, the agreement is likely to move forward, although the risk of postponement remains high. On the Brazilian side, swift approval of the text by Congress would be a positive signal and aligned with the need to expand the country’s growth potential.

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