Members of Mercosur — the trade alliance between Brazil, Argentina, Paraguay, and Uruguay — are set to meet on July 20 and 21 in the Paraguayan capital Asunción. But Brazil’s President Jair Bolsonaro will be a no-show.
The meeting comes as members grapple with growing inflation — and, in the case of Argentina, an energy crisis. Meanwhile, Uruguay continues to push for the bloc to change its rules, allowing member countries to negotiate trade agreements with third parties on their own — as it tries to hammer out a deal with China.
According to Mercosur rules, all member countries must enforce the same levies on imports and any change must be agreed upon by the entire group. For the past couple of years, debates regarding the common external tariff (TEC) had soured relationships within the bloc, with Argentina standing as the sole opponent to trade liberalization.
In October 2021, Brazil and Argentina reached a deal lowering most tariffs by 10 percent. Around 75 percent of tariff lines were affected by the reduction.
Since before taking office, the current Brazilian administration has been highly dismissive of Mercosur, with Economy Minister Paulo Guedes saying it “was not a priority.” His attitude, diplomats say, constantly ruffled feathers among officials of member countries.
Uruguay and China
On Wednesday, Uruguay’s President Luis Lacalle Pou said his administration and China are ready to start negotiations over a bilateral free-trade agreement without the involvement of Mercosur.
According to Mr. Pou, Uruguay had been reaffirming its “intentions to open up” its market to the world in all the recent summits held alongside Argentina, Brazil, and Paraguay.
Mr. Pou says, however, “this does not mean Uruguay won’t be part of the trade bloc anymore.” Montevideo’s preference to establish a trade deal with Beijing first came to light in 2021. The Lacalle Pou administration also held bilateral talks with the UK.
“We always said we did not want to go it alone. But we also don’t want to stand still,” the Uruguayan president said, adding that any deal with China wouldn’t violate international rules. China was Uruguay’s main trading partner in 2021, gobbling up 28 percent of the nation’s total exports, worth more than USD 3.2 billion.
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