Uruguay says it will cut its own trade deals, throwing Mercosur into disarray
Deep divisions in Mercosur’s trade policy were exposed during a summit of the customs union on Thursday, as Uruguay insisted on a plan to pursue its own trade agreements.
Deep cracks emerged in the Mercosur trade bloc this week, as leaders of its four member countries argued at a summit Thursday over relaxing common rules on tariffs and trade.
Uruguay threw the bloc into disarray by declaring that it intends to seek third-party trade deals without the required approval of the trade bloc’s other members.
The 30-year-old bloc, one of the world’s top five economies prior to the coronavirus pandemic, introduced a rule in 2000 that made it compulsory to jointly negotiate common trade deals with third parties. The bloc also imposes common tariffs on imports from abroad.
The bombshell announcement, delivered on the key of this week’s presidential summit, poses serious questions about the customs union’s future, though Luis Lacalle Pou’s government said it intends to remain a member of the South American trade bloc.
“Uruguay, while claiming its membership of Mercosur, announces that it will begin talks with third parties to negotiate trade agreements outside the zone,” the Foreign Ministry in Montevideo said in a statement on Wednesday.
Montevideo’s move to go it alone comes with Brazil wanting to lower tariffs on imports from abroad to boost competitiveness, a development that would threaten Argentina’s exports in particular.
Peronist leader Alberto Fernandez on Thursday urged respect for Mercosur’s so-called “consensus” principle – a construct Brazil and Uruguay said they considered “archaic” and economically paralysing.
“Consensus is the foundational backbone of Mercosur, its
DNA, its reason for existence,” pleaded the president during a virtual summit on Thursday.
“Consensus has always helped to avoid taking decisions that impact or harm one of the members. Thanks to consensus, we seek to reach a common space of agreement that contributes to harmony and dialogue,” he said.
“It is with more integration, not less, that [Mercosur] will be in better conditions,” said the Peronist
“It is a rule. And let us not forget these rules in a global context of great uncertainty,” he added.
Argentina relies heavily on tariff-free exports to its Mercosur partners, particularly the massive market of Brazil.
But Brazil’s far-right president Jair Bolsonaro responded Thursday that “archaic, defensive approaches” were undermining Mercosur’s true potential for economic growth.
Bolsonaro, now taking the bloc’s rotating pro-tempore presidency from Fernández, promised he will work for “rescuing the original values” of Mercosur.
Uruguay announced on Wednesday it would engage in trade negotiations with third parties on its own steam, outside of the bloc’s framework. Montevideo considers that the 2000 rule has never been officially validated, and does not apply.
On Thursday, President Luis Lacalle Pou stuck to his guns, but sought to assure his colleagues that Uruguay will remain a loyal member of the bloc even when negotiating outside of it.
Paraguay’s President Mario Abdo Benítez called for face-toface talks between the leaders to find common ground.
The presidents’ speeches had all been broadcast to the summit one by one.
“Paraguay sees an integrated Mercosur with four members, not a Mercosur of three or two [members]. I don’t want there to be the perception that there was a setback when this summit is over,” said the Paraguayan leader.
Mercosur represents a market of some 300 million people, with a territory of almost 5.8 million square miles (14.8 million square kilometres). Its fifth member, Venezuela, is suspended.