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LATIN AMERICA | 09-07-2021 03:18

Cracks emerge in Mercosur trade bloc as Uruguay looks to go it alone

Deep cracks emerge in Mercosur trade bloc, as Uruguayan President Luis Lacalle Pou says he wants to negotiate trade deals without approval from other member nations.

Deep cracks have emerged in the Mercosur trade bloc, as leaders of its four member countries argued at a summit Thursday over relaxing common rules on tariffs and trade.

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.

But now, Uruguay has said it wants to negotiate its own trade deals, while Brazil wants to lower tariffs on imports from abroad to boost competitiveness, threatening Argentina's exports in particular.

Argentina's 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.

"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 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-to-face 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 kilometers).

Its fifth member, Venezuela, is suspended.

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