2025 continued to be a very productive year for the forestry sector in Paraguay. By year’s end, exports of forest products surpassed USD 100 million (approximately 195,816 tons).

High international demand, advances in domestic processing capacity, and sustained investment from public and private sources contributed to strengthening the Paraguayan forestry sector as one of the country’s most vibrant and productive industries. The forestry sector has consolidated its place within Paraguay’s productive matrix with increasing strategic relevance for the country’s economic diversification efforts due to its great potential to generate value-added exports.

One of the key records achieved during the year was the export of wood by the Paraguayan forestry sector, reaching over 2,925 tons during May 2025. It was the third month in a row that the Paraguayan forestry sector set export records for plywood, exceeding the five-year average by over 45%. This recent figure is part of a larger uptrend that began toward the end of 2024 and is the result of improved industrial efficiency, market access, and international demand for certified wood products.

Export values for plywood reached over USD 2.4 million FOB in May, continuing to position the Paraguayan forestry sector within markets of the United States, China, Germany, Portugal, and other countries in Europe and Asia. Export diversification continues to benefit sector growth.

Annual Record-Breaking Figures

In total, exports by the Paraguayan forestry sector surpassed USD 100 million, equivalent to approximately 195,816 tons during 2025. This is the first time annual records have surpassed that mark. The export value also reflects growth in terms of value addition, as processed wood represents an increasing percentage of total forestry exports. Items such as plywood, sawn wood, and engineered wood panels are examples of this changing trend, which sees the sector moving away from the export of raw materials.

Processed wood continues to benefit from investments in efficient and modern industrial capacities, increased logistics and traceability, as well as greater compliance with international quality and sustainability standards. Certification and forest monitoring platforms have allowed exporters access to increasingly demanding markets that verify the legality and sustainability of products.

Digital Tools Boost Institutional Processes

This international dynamic was complemented by improvements in forest governance at the institutional level. The National Forestry Institute of Paraguay (INFONA),  the forestry regulatory body responsible for the management of the country’s forests, upgraded its systems with a new digital platform in 2025.

Administrative processes were simplified and made more efficient by reducing paperwork and streamlining citizen service provisions to producers, exporters, and investors.

Platforms available to the public increased transparency, accessibility to institutional information, and traceability. Forestry institutions and organizations within the country have received praise for these efforts, which position the Paraguayan forestry sector favorably in terms of compliance with transparency requirements that are increasingly valued by international markets.

National Forest Policy Advancements

Advancements were also made in the development of the National Forest Policy, which is scheduled to be passed into law in 2026. Throughout 2025, significant progress was made to refine and develop the policy with technical and participatory input from citizens.

The National Forest Policy will serve as a long-term guiding document centered on sustainable management, circular economy, and balanced territorial development. Topics include environmental conservation, economic development, and social inclusion with the intention of balancing productive forestry with ecosystem protection.

Policies concerning sustainable forest management, restoration, climate change mitigation, and contributions toward Paraguay’s international environmental commitments will be regulated under the Forest Law. The Law will also promote forestry as a means of strengthening rural development and job creation.

Forest Fires and Early Warning Systems

Efforts were also made to prevent and manage forest fires, particularly in response to increasing climate volatility. Systems developed for early fire detection and management were prioritized during 2025.

The implementation of the Integrated Fire Management (IFM) Portal, combined with real-time satellite monitoring, greatly enhanced prevention and coordination for forest fires.

Public institutions, emergency response teams, and communities are now better equipped to work together to prevent damage to forests, infrastructure, and property. The strengthening of fire detection and prevention capabilities will prove critical in building climate resilience within forestry sectors nationwide, particularly in regions most affected by drought and climate volatility.

Technical Education Programs Expand

Technical training related to the Paraguayan forestry sector is also being advanced through the development of the country’s first Technical Forestry Baccalaureate. Developmental stages for the inaugural class to be launched in 2026 are currently underway.

It will be a technical-level academic program oriented around the needs presented by the productive sector. Training will focus on topics such as sustainable forestry management, industrial wood processing, and other forestry-related technologies.

By advancing technical training related to forestry and adjacent industries, the country aims to reduce skill gaps and create quality jobs in rural communities. Efforts such as these allow for stronger knowledge transfer between generations and innovative capacity within the sector.

Forest Plantation Expansion Continues

Added value was also generated by the impressive growth rates of forest plantations. Recorded increases in forested planting areas exceeded 66% between 2022 and 2024. Forest planting continues to experience year-over-year growth.

Industry experts attribute this to conducive levels of land availability, low production costs, and strengthening policies from public institutions supporting the Paraguayan forestry sector expansion. Forest plantation availability allows Paraguay to offer thousands of potentially cultivable hectares to national and international investors.

Paraguay contains millions of hectares of arable land appropriate for afforestation. Investors can find assurance in macroeconomic stability, which projects low-risk, long-term investment opportunities for forestry activities.

Industry Events Bring Added Value

Events such as Expo Madera 2025 served as enrichment platforms for commercial, technical, and cultural exchange. Exposure to domestic and international producers, industries, academia, and consumers strengthens value chains across sectors.

Themes such as forest certification, carbon credits, and green finance were introduced to the sector, allowing forestry to diversify avenues for economic enrichment and align with sustainability initiatives tied to climate finance.

Recently, multiple media outlets have highlighted the significant progress on a new interoceanic corridor in Mexico—specifically, the Isthmus of Tehuantepec Interoceanic Corridor (CIIT)—as an alternative to the Panama Canal for international trade. Reports emphasize that this new infrastructure could “change global trade” by connecting the Pacific and the Atlantic through a modern multimodal corridor that integrates railways, ports, highways, and advanced logistics zones. In this context, the emergence of the Mexican Interoceanic Corridor has drawn growing attention from global supply chain analysts.

What Is the Isthmus of Tehuantepec Interoceanic Corridor?

The CIIT is not a traditional maritime canal, but rather a dry, multimodal route that connects the Pacific Ocean (Salina Cruz) with the Gulf of Mexico (Coatzacoalcos) via a reinforced railway and modernized ports, complemented by supporting infrastructure such as highways, energy systems, and logistics facilities. As an Interoceanic Corridor, it seeks to provide a land-based alternative for the movement of transcontinental cargo.

According to additional reports, this project—years in development—has been promoted by the Mexican government, with a core strategic objective of competing with the Panama Canal’s transit capacity by offering shorter transit times and reduced dependence on weather conditions.

Operational Status and Scope

Recent news confirms that the CIIT has begun partial operations. A symbolic milestone was the arrival of an initial shipment of vehicles in 2025, in which automobiles traveled from Asia across Mexico by rail to the Gulf Coast in a significantly shorter time than the journey via Panama.

However, operational challenges have also been reported, including train accidents that have sparked internal debates over resource management and safety. These incidents underscore that the Mexican Interoceanic Corridor is still in a consolidation phase, despite its strategic promise.

Comparative Advantages Versus the Panama Canal

Analyses from a number of media outlets identify several advantages of the Mexican corridor over the Panama Canal:

• Shorter transit times under normal and adverse conditions, with examples of interoceanic crossings completed in days rather than weeks.
• Reduced dependence on water resources, while the Panama Canal continues to face drought-related challenges and daily transit limitations.
• The ability to transport diverse cargo types, including containers, vehicles, and industrial goods, with strong potential to attract high-volume trade flows.

Other international analyses emphasize that the project boosts regional logistics development, improves Mexico’s internal connectivity, and offers a robust alternative—particularly during periods of congestion or adverse climatic conditions affecting Panama. In this sense, the Mexican Interoceanic Corridor is increasingly viewed as a complementary safety valve for global logistics.

Debate: Threat or Complementarity?

There are contrasting perspectives on whether the corridor represents a direct threat to the Panama Canal:

• Optimistic regional viewpoints argue that the CIIT is a genuine competitor, even signaling a “new era” in interoceanic routes capable of attracting global trade flows and reducing the Canal’s historical dominance.
• Panamanian and specialized sources counter that, despite the corridor’s potential, the Panama Canal does not face an immediate competitive disadvantage, as its relevance is sustained by continuous investment and a deeply established traffic base.

This debate is highly relevant, as logistics competitiveness depends not only on infrastructure but also on integrated value chains, operational reliability, trade agreements, and tariff structures.

Geopolitical and Economic Perspective

Beyond traditional comparative advantages, a key geopolitical dimension must be considered. The CIIT could evolve into an alternative corridor that enables:

Diversification of routes from Asia (including China and India) to U.S. and European consumer markets, potentially easing congestion in Panama and mitigating risks linked to regional tensions.

An indirect challenge to the geostrategic dominance of the Panama Canal as a critical node in global trade, should large cargo volumes shift toward land-based alternatives.

The provision of an alternative logistics platform for powers such as China, allowing them to mitigate political pressures or technological restrictions imposed by other global actors.

This geopolitical component is often underrepresented in technical and economic analyses. In an era marked by trade tensions, tariff wars, and technological rivalries, logistics routes increasingly function as instruments of power and influence. Within this framework, the Mexican Interoceanic Corridor should be understood not only as a logistics project but as a factor in the broader reconfiguration of global trade geopolitics.

Conclusion

Reports on the Isthmus of Tehuantepec Interoceanic Corridor in Mexico confirm that the project has moved from concept to an emerging operational reality, with substantial structural progress and legitimate debates regarding its impact. Comparisons with the Panama Canal reveal both clear competitive advantages and notable operational and political challenges.

Nevertheless, the geopolitical dimension—encompassing North America–China–Asia dynamics, China’s manufacturing dependence, and the strategic interests of global powers in diversifying logistics routes—remains essential yet remains insufficiently weighted in many traditional analyses. Understanding this geopolitical layer allows the CIIT to be seen not merely as a logistics competitor, but as a strategic element in the evolving geoeconomics of global trade—one that could, over the medium to long term, influence the role and relevance of the Panama Canal.

Uruguay recently updated its investment promotion regime to support faster growth and increase access to tax benefits for small and medium-sized enterprises (SMEs). President Yamandú Orsi’s administration removed a USD 500,000 investment threshold for smaller companies and provided them with additional tax exemptions while establishing strong incentives for large investment projects valued at over USD 30 million. Through this reform, Uruguay modified its investment promotion regime to ensure that fiscal incentives reach a broader base of investors across the economy.

The reform aims to incentivize private investment as part of the government’s efforts to spur job creation and reduce territorial inequalities in employment and income.

Supporting Growth Remains Priority for Government

Promoting economic growth has been one of the hallmarks of Yamandú Orsi’s economic cabinet since before the elections. Candidate Orsi made growth central to his vision for financing public policies and social spending during the electoral campaign. Then, upon assuming office, President Orsi reiterated his commitment to growth when sending the bill for the five-year national budget to Parliament.

One of the mechanisms chosen by the government to put growth into practice was updating the country’s investment promotion regime to increase access to tax exemptions and benefits for micro, small, and medium-sized investors while preserving incentives for large national and foreign companies. In this context, Uruguay modified its investment promotion regime as a strategic tool to link tax benefits more closely with employment creation, innovation, and regional development.

In this regard, Uruguay modified its investment promotion regime linking fiscal incentives to job creation, innovation, and territorial equality.

Uruguay’s Investment Promotion Regime Treat Update

Uruguayans regard their investment promotion regime as established state policy rather than as dependent on political cycles. The original law establishing this regime was approved back in 1998 during Julio María Sanguinetti’s second presidency.

Subsequent administrations, both from the ruling coalition and the now-opposition Multicolor alliance, have maintained the investment promotion regime unchanged, only updating some indicators and criteria.

Essentially, the investment promotion regime benefits any company that undertakes investments or activities beneficial to job generation, decentralization, exports, clean technology adoption, research, development, and innovation (R&D+I), and those carried out in strategic sectors.

Uruguay’s predictable investment-friendly environment has contributed to the country’s reputation as a safe haven for investment in Latin America.

Reform Aims to Update Incentives and Increase Social Impact

“The purpose of the decree is to modernize the matrix of indicators,” announced Uruguay’s Ministry of Economy and Finance (MEF). Updating indicators means that tax exemptions will focus more on social inclusion and territorial equality.

Tax exemptions are oriented toward benefiting companies willing to hire workers belonging to vulnerable groups with diminished opportunities to join the workforce. These groups include young workers, women, adults, and workers living in departments with high poverty and unemployment rates, among others.

Decentralization of investments is also incentivized since projects executed outside Uruguay’s capital city of Montevideo tend to develop less economic activity than their Montevideo-based counterparts.

Tax Incentives under Uruguay’s Investment Promotion Regime

Once a project is declared “promoted,” the responsible company benefits from several tax exemptions under Uruguay’s tax law, such as:

• Exemption from the Corporate Income Tax (IRAE) equivalent to a percentage of the promoted investment (maximum 100% of IRAE).
• Exemption from Net Worth Tax.
• Exemption from import tariffs and fees on capital goods not subject to local competition.
• Certificates of credit for VAT acquired with the purchase of national inputs, equipment, or services.

Thanks to these exemptions, investors can significantly lower the effective cost of their investments, allowing otherwise marginal projects to become viable. These incentives are particularly impactful in investments with high fixed costs and lower variable costs, such as manufacturing, logistics, renewable energy projects, or tech companies.

Better Treatment for SMEs under Uruguay’s Investment Promotion Regime

President Orsi’s most significant change to the investment promotion regime is how SMEs will be treated under the new law:

• Small and micro companies benefit from an additional IRAE exemption of 15 points and two additional years of use.
• Medium-sized companies with fewer than 50 employees benefit from an additional 10-point IRAE exemption and an additional year of use.

Another important aspect of this incentive change is that there is no longer an investment threshold of 3.5 million inflation-adjusted units (approximately USD 500,000) that SMEs must surpass to benefit from Uruguay’s investment promotion regime. In addition, companies without fully audited accounting books will now be able to access the regime.

Reform Opens Opportunities for Larger Projects

In addition to SMEs, the reform created incentives for companies willing to make significant investments in Uruguay. Investments of USD 30 million or more qualify for a 100% exemption from IRAE if submitted by December 31, 2027, and executed before the end of 2029.

To qualify for this incentive, projects must:

• Score five points in the “creation of new jobs” category.
• Score four points in research, development, and innovation.

Projects valued over USD 50 million qualify for even more extended submission and execution deadlines. Businesses can apply until December 31, 2028, and have until December 31, 2031, to finish execution and qualify for 100% exemption from IRAE.

Streamlining COMAP and Project Assessment

Companies interested in receiving incentives from Uruguay’s investment promotion regime must present their investment project to Uruguay’s Commission for the Application of the Investment Law (COMAP), dependent on MEF, for analysis and approval.

In addition to updating the investment promotion regime, Uruguay also instituted some regulatory changes to COMAP’s internal operating procedures. A significant change is using new technologies to reduce investment approval times.

Investment promotion has long been one of Uruguay’s strengths as a place to do business. As Uruguay modified its investment promotion regime to reward investment projects creating positive social impacts, it affirmed its commitment to investment-friendly policies. The modified investment decree came into force on February 1, 2025, leaving Uruguay well-positioned to attract investment in the years to come.

Latin America in a “Low-growth Trap”

Latin America is headed into 2026 without a clear path to robust growth. The Economic Commission for Latin America and the Caribbean (ECLAC) projects a tepid 2.3% regional expansion for 2026, confirming four straight years of growth around 2%. This outlook is shared by the World Bank and the International Monetary Fund (IMF), with the latter’s latest projections offering a 2.1% estimate for Latin America in 2026 with very slight differences among its country forecasts. This challenging environment sets the stage for a fragmented picture of Latin American economic growth in 2026, where growth will be increasingly concentrated in a handful of strongly performing economies.

Divided Among Winners and Laggards

The simple average masks a growing chasm between laggards and winners. Large economies Brazil and Mexico will likely continue to grow well below their historical rates, but will lead relative expansion among Latin American countries at close to 4%. At the other end, a cluster of medium-sized and smaller economies, many of them in Central America, will outperform their larger neighbors, with Panama, Costa Rica, the Dominican Republic, Paraguay, Guatemala and Honduras near or above 4% growth, alongside the atypical cases of Guyana (a one-off driven by a temporary bonanza in its nascent oil sector) and Argentina (a cyclical recovery). Together, these countries will contribute disproportionately to regional expansion and power a turning point in Latin American economic growth in 2026.

Structural Weaknesses to the Fore

ECLAC warns that, if current projections hold, Latin America will have registered just 1.6% average annual growth between 2017 and 2026. In a recent interview, the body’s executive secretary José Manuel Salazar-Xirinachs also drew attention to the expected weakening of private consumption in 2026 as external demand softens and job creation and business investment lose steam after several years of extraordinary energy and commodity prices. Meanwhile, the World Bank’s regional GDP growth forecast for 2026-2027 is a modest 2.5%, the weakest among the Bank’s emerging regions, while the IMF also projects a deceleration to 2.3% growth in 2026 after a 2.4% increase in 2025. As ECLAC’s Salazar-Xirinachs has noted, “structural factors are showing their limitations, and the region is sinking into a low-growth path characterized by weak investment, low productivity and high inequality”. This will set a decidedly lackluster tone for Latin American economic growth in 2026 overall.

Guyana and Paraguay to Shine

Against this general backdrop, several countries stand out on the upside. Guyana is the obvious case. ECLAC projects an eye-popping GDP increase of 24% in 2026 for Guyana, though this is largely the result of a non-recurring fast-tracking of oil production which will taper off over time, as corroborated by IMF forecasts pointing to average growth of around 14% a year over the medium term, of which non-oil would represent the lion’s share. Guyana is a special case of a very small and oil-dependent economy that is set to benefit from massive but one-off investment in a single export product with minimal direct impact on regional and Latin American economic growth in 2026. A different story is being written in Paraguay, where ECLAC sees growth of around 4% in 2026, with some forecasts nudging that up to 4.5%. The country is experiencing a gradual transformation of its productive matrix, based on a competitive agro-industrial foundation, light manufacturing, logistics, and low-cost energy exports. Fiscal and monetary discipline add predictability and macroeconomic credibility to the mix. Should it sustain this performance, Paraguay is destined to be South America’s fastest-growing economy outside of Guyana and one of the more interesting sources of Latin American economic growth in 2026.

Central America and the Caribbean Gain Relative Ground

Elsewhere, 2026 will see Central America and the Caribbean, with the obvious exception of Guyana, outpacing the regional average. Panama is expected to grow at around 4-4.2% as Canal activity, logistics, and financial services help it weather the effects of the winding down of the giant Cobre Panamá copper mine. The Dominican Republic’s growth in 2026 will be about 4.3%, with ECLAC already pointing to a record year in 2025, mainly in the tourism sector, which will support domestic demand. Other factors such as export-oriented free zones and an investment-friendly fiscal and monetary policy will also contribute to a growth trajectory that will converge again toward its long-term average of about 5%. Guatemala and Honduras should also see growth rates near 4% as their economies continue to benefit from strong remittances and resilient domestic consumption. Costa Rica is set to grow around 3.3-3.6% in 2025-2026, clearly above the regional average and also well above its long-term trend. This acceleration is expected to be concentrated on high-tech exports of knowledge-intensive services, as well as free trade zone-oriented manufacturing and a tourism sector that has fully recovered after the pandemic shock.

Argentina’s Risky Recovery

Arguably, the most interesting case is Argentina. The country is projected to register relatively high growth of 4-4.5% in 2025-2026, but this will mainly reflect a cyclical bounce-back from low base effects following two years of recession and output contraction. Argentina has been singled out by the World Bank as one of the key engines of a regional upturn in 2026. However, the IMF has significantly downgraded its own projections, and the Fund’s analysis still flags elevated, albeit falling, inflation and major political and social uncertainty as key downside risks. In terms of Latin American economic growth in 2026, Argentina remains a very high-risk, high-reward bet for investors.

Brazil and Mexico Set to Drag the Region Down

Brazil and Mexico, on the other hand, look set to underperform. ECLAC projects just about 2% growth for Brazil and a mere 1.3% for Mexico in 2026. Mexico’s subpar performance will partly reflect the impact of new U.S. trade barriers that could further reduce its main export engine and slow a long-delayed modernization of its infrastructure and energy generation and transmission networks. In the case of Brazil, persistently high real interest rates, a restrictive fiscal space, and weaker demand for its commodity exports are likely to remain significant headwinds to higher and more dynamic growth. In short, the epicenter of Latin American economic growth in 2026 will migrate from the region’s traditional engines to smaller and mid-sized economies with more robust macroeconomic fundamentals.

Conclusion: Consolidating the Winners and Laggards Divide

In sum, while the outlook for Latin American economic growth in 2026 remains challenging, it is also set to become less homogeneous. Put simply, 2026 is unlikely to bring a broad-based growth boom to Latin America, but it will see the contours of such a boom become much clearer. Growth will be increasingly concentrated in those economies that have a combination of factors on their side, including macroeconomic stability, sectoral specialization, and institutional credibility, instead of just large economic size. On the one hand, this will call on policymakers to deepen reforms aimed at boosting productivity, investment and competitiveness if they wish to convert near-term momentum into a virtuous circle of sustainable expansion. On the other hand, investors will find that Latin American economic growth in 2026 is likely to become a more selective, idiosyncratic and opportunity-rich landscape, with a greater role for economies that have found or created resilient niches and offer predictable and reliable business climates. In that sense, 2026 may be less of a year of rapid growth acceleration than a watershed for how and where growth is being generated across Latin America.

Tariff reductions would be gradual, beginning with a quota. Argentina’s local automotive industry, unlike Brazil’s, saw declines in production and exports in 2025 and would also need to export vehicles to Europe.

The free trade agreement between Mercosur and the European Union could become the final link in the chain that definitively connects Argentina’s automotive market with the rest of the world.

Although the details have not yet been disclosed, there are two different ideas regarding how the tariff benefit for importing cars from Europe into Argentina would be applied.

Because the origins of the trade agreement between Mercosur and the European Union date back nearly 25 years, some argue that there would be an initial seven-year phase during which a limited quota of units could be imported (50,000 vehicles per year), to be shared between Argentina and Brazil. In the second phase, a progressive reduction of the 35% tariff would begin, eventually bringing it down to zero.

However, updating the original project to reflect modern times and the automotive industry of the 21st century, a gradual tariff-reduction scheme could be implemented. This would start with a reduction of the 35% tariff to 25% exclusively for electrified vehicles (hybrids and fully electric vehicles), while for vehicles with internal combustion engines, a quota of around 15,000 units would be established, importable at a rate of 17.5%.

The current scenario

At present, the Economic Complementation Agreement with Brazil (ACE 14) allows all vehicles manufactured in both countries to be imported and exported between them without any import tariffs. Three other similar agreements also allow vehicles to be traded tariff-free with Uruguay, Colombia, and Mexico.

Since last year, a quota of 50,000 hybrid and electric vehicles per year authorized by the Argentine government has made it possible to import vehicles using this technology that are manufactured outside the region and have a tax-free price of USD 16,000, without applying the Mercosur common external tariff of 35% that is normally charged in Argentina and Brazil. Although it is not specifically aimed at that market, the clear beneficiary of this program is China, which accounts for 80% of these vehicles.

A potential trade agreement with the United States would also enable a still-unconfirmed quota of 10,000 units, under which vehicles could be imported from the U.S. market while also avoiding the same additional 35% tariff.

Thus, with the exception of South Korea and Japan, virtually all of the world’s major automobile-producing countries would have the opportunity to sell new vehicles to Argentina without the current tariff barrier. Even though those two countries have production plants in Europe and the United States, meaning that this limitation could be overcome by importing vehicles from those locations rather than from the brands’ original countries.

A larger and better supply of imported vehicles

These agreements benefit consumers, who would gain access to a broader range of vehicles and technologies of higher quality at lower prices than currently available—at least in low- and mid-priced mass-market models—since the quality standards of higher-end cars and pickup trucks are equivalent to those of other plants worldwide.

However, this benefit could become a drawback for regional production if export competitiveness conditions are not improved, as these remain decisive for the profitability of Argentina’s industrial operations.

In this regard, the latest industrial report released this week by the Argentine Association of Automotive Manufacturers (Adefa) showed that in 2025 Argentina’s industrial vehicle production fell by 3.1%, while exports declined even more sharply, dropping 10.8% compared to 2024.

“Lowering tariffs is always good news, but just as the door is opened for imports, the door for exports must also be opened,” an Argentine automaker recently remarked.

The need to export more domestically produced vehicles

“An agreement like the trade agreement between Mercosur and the European Union will bring benefits to other sectors of the Argentine economy, but not so much to the automotive industry if conditions for exporting are not improved. Today, maintaining export markets is already difficult. If competitiveness is not improved, we will remain expensive, even if we sell without tariffs,” they said.

Importing cars from Europe makes complete sense, but exporting products manufactured in Argentina to EU countries does not seem as easy. Nevertheless, the trade agreement between Mercosur and the European Union could hypothetically allow Argentina’s main automotive product—mid-size pickup trucks—to gain export opportunities, competing with Thailand and South Africa, which are currently major suppliers to the European Union.

There could also be specific cases involving brands that had already decided to shift their production toward electrified vehicles ahead of the 2035 deadline that was set to ban internal combustion engine cars. Although that deadline has now been postponed without a new date in sight, there may be situations in which it is more convenient to source such vehicles from South America while continuing a slower transition toward manufacturing electrified vehicles at European plants.

The same sources who warned about the difficulty of continuing to export without improving competitiveness said they prefer “an agreement of this nature rather than a tariff cut, which could be temporary and short-lived.”  The trade agreement between Mercosur and the European Union, in addition to being long-term and progressively implemented, includes safeguards to protect local industry in the event of harm caused by a massive influx of imports, not only automobiles.