O Mercosur it is experiencing what is perhaps the worst crisis since its birth, in 1991: Uruguay kicked the table. Its president, Luis Lacalle Pou, defended this Thursday before his peers the decision to sign trade agreements outside the bloc, something that is prohibited by statute. “The world will not wait for us. So, calmly, we want to say that Uruguay is going there. I hope we all go together”, warned Lacalle Pou to his partners via videoconference, on the day that Brazil assumed the temporary presidency of the bloc. The Uruguayan rebellion is targeting Argentina, which defends at all costs the norms agreed upon in Asuncion, and seeks the support of Brazil, which agrees to “flexible” Mercosur, but without fracturing unity. Paraguay, for its part, silently supports Montevideo’s position.
The demands of all members, except Argentina, to be able to negotiate agreements with other countries outside Mercosur are old. Uruguay, and to a lesser extent Paraguay, paved the way for the protest. While Brazil and Argentina are responsible for most of the trade in the bloc and lead negotiations with third countries, the two smaller partners consider that they do not receive the expected benefits. On May 26, at an extraordinary summit on the occasion of Mercosur’s 30th anniversary, Lacalle Pou said the bloc was an obstacle to the economic opening of his country. The Argentine Alberto Fernández then replied that if he considered that Mercosur was “a very heavy load”, he could “change boats” whenever he wanted.
Uruguay seems to have accepted the challenge launched by the Argentine. On the eve of Thursday’s summit, Uruguayan Foreign Minister Francisco Bustillo told his peers that his country “will start talking with third parties to negotiate extrazone trade agreements.” Lacalle Pou said in his speech that this does not imply breaking with Mercosur because the decision “does not mean violating or violating the consensus rule” that governs the bloc’s decisions. “The ultimate goal is belonging to the block,” he said. Without mentioning Lacalle Pou, Fernández recalled that the Treaty of Asunción, which constitutes Mercosur, establishes “on the one hand, that negotiations must be initiated and concluded jointly. Second, any proposal must be based on the consensus rule.”
It is not just “flexibility” that divides partners. Brazil and Uruguay also defend the drastic reduction of the Common External Tariff (TEC) which regulates the entry of extrazone products with an average rate of 14%. President Jair Bolsonaro was present at the presidents’ summit by videoconference and confirmed his position. Brasília’s strategy has always been to promote bilateral trade agreements and reduce the CET, but within the bloc’s norms. It notes that Argentina is its main trading partner, thanks precisely to intrazone trade. There is also pressure from the big industrialists. The powerful National Confederation of Industry (CNI) released a statement in which it said that Uruguay’s rupture strategy did not help the bloc’s advance. “Integration in Mercosur needs adjustments and improvements, but it continues to be the one that provides the most economic and social results for Brazil”, says the statement, highlighting the recent free trade agreement signed with the European Union.
For all that, Bolsonaro has given no indications that he will follow in the footsteps of Lacalle Pou. He even said, jokingly, that the only rivalry with his South American neighbors is with Argentina, over football. “On Sunday we’re going to win 5-0 at Maracanã,” he said, with his hand extended to the camera, about the Copa América final, which will be played on Saturday at the mythical Brazilian stadium. Bolsonaro stressed, however, that the priority should be “reviewing the common external tariff and flexibility for trade negotiations with external partners”. And he regretted that during the last six months, the period in which Argentina held the presidency for the season of the bloc, have not responded “to Mercosur’s expectations and needs for modernization”. But he didn’t kick the table.
“We cannot let Mercosur continue to be seen as synonymous with inefficiency, waste of opportunities and trade restrictions,” he said. The temporary presidency of Brazil, which begins this Thursday and ends at the end of the year, will focus on modernizing the economic agenda.
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