Canada could be on the verge of significantly expanding its economic relationship with South America.

Canada and the Mercosur trade bloc are accelerating negotiations toward a new free-trade agreement, with officials hoping to reach a deal before the end of 2026.

The negotiations involve four South American countries — Argentina, Brazil, Paraguay and Uruguay — and would give Canadian businesses greater access to one of Latin America’s largest economic markets.

According to the Financial Times, Mercosur is currently making an aggressive push to secure new trade agreements around the world as the bloc looks to diversify its economic relationships amid growing geopolitical and trade uncertainty.

For Canada, the timing couldn’t be more interesting.

Canada Is Looking Beyond the United States

The negotiations are taking place as Canada’s relationship with its largest trading partner, the United States, faces renewed uncertainty.

Canada-U.S. trade tensions have escalated dramatically in recent months, making the diversification of Canada’s international trade relationships increasingly important.

A potential agreement with Mercosur could provide Canadian companies with greater access to a major South American market while also giving businesses in Brazil, Argentina, Uruguay and Paraguay new opportunities in Canada.

And we’re talking about a significant amount of trade.

In 2025, merchandise trade between Canada and Mercosur reached approximately $19.4 billion, including $5.1 billion in Canadian exports and $14.3 billion in imports from Mercosur countries.

Talks Are Moving Quickly

Canada and Mercosur have actually been trying to reach a trade agreement for years.

Formal negotiations originally began in 2018 but stalled following a negotiating round in 2019.

The process was revived in 2025, and the pace has accelerated significantly since then.

In March, Reuters reported that Canadian, Brazilian and Argentine officials expected an agreement to be completed during 2026, with one official suggesting negotiations could potentially wrap up before September.

Another Argentine official said at the time that signing could happen around September or October.

The Financial Times is now reporting that Mercosur officials continue to target completion of the Canadian deal by the end of the year.

What Could a Deal Mean for Canada?

A free-trade agreement generally aims to reduce or eliminate tariffs and other barriers that make it more expensive or difficult for businesses to sell products and services between participating countries.

Canada already has individual free-trade agreements with several Latin American countries, including Colombia, Chile and Peru.

Mercosur would be different because of its sheer economic size — particularly Brazil, Latin America’s largest economy.

The South American bloc is a major global producer of agricultural products, energy, minerals and other commodities, while Canada exports products and services ranging from machinery and fertilizers to financial and professional services.

Canada’s own economic analysis has suggested that expanded trade with Mercosur could produce increases in Canadian economic output, employment and real wages, although the estimated overall economic gains remain relatively modest.

South America Is Looking for New Partners Too

Canada isn’t the only side looking to diversify.

Mercosur has been aggressively expanding its international trade relationships.

Its long-awaited agreement with the European Union began provisional application earlier this year, while the bloc has also been pursuing closer trade relationships with countries including Japan, India, Vietnam and the United Arab Emirates.

That shift comes as governments around the world reassess how dependent they want to be on individual markets amid tariffs, wars and geopolitical uncertainty.

For Canada, strengthening economic ties with South America could become one part of the same strategy.

No Canada-Mercosur agreement has been finalized yet, and negotiations still have hurdles to overcome.

But after years of stalled talks, the possibility of Canada signing a major new trade agreement with some of South America’s largest economies before the end of 2026 is suddenly looking much more realistic.