Mercosur, the Spanish-American trade bloc, opened its 62nd meeting yesterday, July 3rd: a two-day summit in Argentina, Puerto Iguazú, during which it will attempt to come to a trade deal with the EU.
The South American trading bloc consists of Argentina, Brazil, Paraguay, and Uruguay (Venezuela is also a member but is currently suspended), in addition to associated countries.
Representing 67% of South America’s GDP, Mercosur is an extremely significant partner for Europe.
The group reached an agreement with the EU in 2019, however, concerns about the cutting down of the Amazon and other issues have seen the agreement stalled.
Santiago Cafiero, the Minister of Foreign Affairs and International Trade for Argentina, has referred to the need to update this agreement, given the potential asymmetry it allows between the two blocs.
This asymmetry consists mainly in the lowering of tariffs, with Mercosur doing away with tariffs for 95% of the EU’s agricultural exports, while the EU does so for only 82% of those from Mercosur.
This unequal level of liberalization in trade relations between the so-called Global North and Global South is long-standing, a point highlighted by the critique advanced in Latin America by Dependency Theory as far back as the 1960s. This school had both economically liberal and Marxist exponents, with varying proposed solutions.
Of course, symmetry isn’t the only issue. The degree to which trade is beneficial also depends on how a country’s industrial policy is able to capture funds for high value-added sectors, attract investment, and allow the development of a robust social fabric and internal market able to absorb and circulate capital. This is where the Uruguayan government, which is more pro-market, will have a very different perspective from that of its Mercosur partner Argentina, for example (more on this later).
The EU, for its part, wants to introduce something of an addendum to the 2019 agreement, which would introduce new environmental protections.
Brazilian President Lula da Silva has criticized the EU’s position as one not based on mutual trust.
The Left currently prevails in South America, exemplified by Petro in Colombia, Boric in Chile, and Ortega in Nicaragua. In Mercosur, this trajectory is represented by its largest members, with Lula da Silva’s Worker’s Party governing in Brazil and Alberto Fernández’ Justicialist Peronist Party in Argentina.
The other two members of Mecosur, however, are governed by centre-right parties: namely the Colorado Party in Paraguay, under Mario Abdo Benítez and president-elect Santiago Peña Palacios, and the National Party in Uruguay, under Luis Lacalle Pou.
To the degree that they adopt a united position vis EU trade, however, we may observe how commercial and geopolitical interests transcend party-political allegiances. Indeed, Santiago Peña Palacios of Paraguay and Lacalle Pou of Uruguay have expressed agreement with Lula da Silva that the EU’s environmental clauses are excessive.
But while this might seem like a good sign for future multilateral negotiations which the continent may engage in, the divides within Mercosur run deep.
Lacalle Pou, for example, has opened up his country’s market, and has pursued trade agreements with China, Turkey, and the UK, among others. Mercosur, however, represents an impediment to this policy, leading the Uruguayan leader to try to make the group’s regulation more flexible in order to allow its member states to negotiate trade agreements on their own, bilaterally. The idea would be to make Mercosur multilateralism compatible with bilateral trade agreements of its members.
Pou has stated that multilateral negotiations are beneficial, providing access to a larger market for foreign partners, but that this should not get in the way of bilateral agreements. His critique, however, is not only directed against Mercosur partners but also against the EU, whose conditions on a trade agreement with the bloc are numerous.
For now, however, and as far as dealing with the EU is concerned, there seems to be wide agreement in Mercosur.
