Latin America: Mercosur Opens up Major Opportunities for the Luxury Market

The agreement between the European Union and Mercosur was signed last Saturday. By removing more than 91% of customs duties between the two areas, it becomes a crucial strategic opportunity for the European luxury industry, provided it is properly exploited.

While EU-Mercosur trade flows reached around €111 billion in 2024, it is mainly in the manufacturing industry that the Union is placing its hopes, with exports expected to grow by nearly +39% by 2040 (representing an additional €49 billion) thanks to trade liberalisation.

The global luxury market was worth nearly $400 billion in 2025 and could exceed $670 billion by 2035, based on average growth of more than 6% per year. Europe still dominates production in this sector, thanks to giants such as LVMH, Kering, Hermès and Richemont, which capture a significant share of revenues.

For these groups, the agreement, which eliminates tariffs currently ranging from 8% to 12% on clothing and accessories and up to 35% on certain manufactured goods, represents a significant gain in price competitiveness in the long term, with tariffs on clothing and leather goods exported to Mercosur to be eliminated entirely by 2033.

The gradual elimination of customs duties could generate up to €4 billion in annual savings for European exporters, a significant advantage for luxury goods that are sensitive to tariff fluctuations.

The trade area comprising Brazil, Argentina, Paraguay and Uruguay covers a market of more than 700 million consumers with significant potential for luxury goods, thanks to a gradual improvement in purchasing power in major cities (São Paulo, Buenos Aires, Montevideo). The agreement would enable European brands to strengthen their presence in stores and across all sales channels. Luxury watches and jewellery, which are typically sensitive to tariffs, could see an improvement in price competitiveness of 8% to 12% compared to the pre-agreement situation. However, these tariff reductions do not automatically translate into market share growth: the current weight of European luxury goods exports to Mercosur remains low compared to flows to the United States or Asia, but the potential for acceleration is real, especially if the upper middle class continues to grow in South America.

Another important point at the heart of the free trade agreement concerns the strengthening of rules on intellectual property and geographical indications: measures that protect prestigious names in the perfume, fine wine and champagne sectors. This is essential for companies such as Chanel, Hermès and Moët & Chandon, where the brand name is as important as the product itself.

However, while Mercosur offers a platform for privileged tariff access to a market of hundreds of millions of consumers still under-exploited by European luxury brands, this window of opportunity must be transformed into concrete local strategies (effective communication, strengthening brand identities and their heritage), which is both a commercial and cultural challenge for the major European luxury houses.

France could be the big winner from these opportunities, with luxury goods exports estimated at €22 billion per year.