LONDON
Uruguay's Foreign Ministry has submitted a formal request to Argentina's government as it seeks to make the Mercosur trading bloc more flexible.
Foreign Minister Francisco Bustillo sent a formal request Monday to his Argentine counterpart, Felipe Sola, to hold a meeting with their Paraguayan and Brazilian peers as well as the economy ministers of the four countries to exclusively address the issue of making the bloc more flexible.
Reports said on Dec. 15 that Bustillo expressed Uruguay's plan to Sola to establish a consultation system with different officials.
Uruguayan representatives are understood to be working on a broader report which will be submitted at a bi-annual meeting on April 22.
On March 26, during a virtual summit to commemorate Mercosur's 30th anniversary, tensions were raised between Uruguay and Argentina.
The presidents of Argentina, Brazil, Paraguay and Uruguay gathered for what was supposed to be a moment of solidarity, marking achievements and outlining the future collaborative direction between the South American nations.
But what ensued was a verbal exchange potentially highlighting different visions for Mercosur.
The issue of Mercosur’s flexibility appeared to create tension between Uruguay’s center-right President Luis Lacalle Pou and his center-left Argentine counterpart Alberto Fernandez.
Reports suggest Argentina sought to maintain the status quo within Mercosur, which is perceived by Brazil, Paraguay and Uruguay as particularly conservative.
The three nations reportedly wish to make the trading bloc more flexible for commerce by negotiating new trade accords to reduce the bloc's tariffs.
Argentina rejects the idea, with Fernandez holding the pro-tempore presidency at Mercosur, and the country plays a powerful role.
Despite calling for unity, Lacalle Pou described some of the rules imposed by Mercosur as weighing heavily around what he perceives as a reluctance for the bloc to evolve, insisting it should not become "a burden.”
Lacalle Pou’s remarks appeared to irk Fernandez, who suggested that "the easiest thing is to get off the boat if that load is heavy. Let's put an end to those ideas that help so little.”
Origins
Mercosur was founded in 1991 by Argentina, Brazil, Paraguay, and Uruguay.
Some observers suggest that its aims have only been partly achieved since its founding, despite granting freedom of movement for citizens and trade.
The initial liberalization of Mercosur is generally regarded as an early success.
In 1994, a common external tariff was agreed upon, establishing a free-trade zone.
However, the transition from a trade accord to a customs union has not been implemented.
Between 1991 and 1998, exports from the trading bloc grew more than 20% annually.
Foreign direct investment increased from around $230 billion to $940 billion between 2003 and 2014.
Consensus
The recent tensions appear to represent a lack of consensus within Mercosur.
Despite the successful creation of a common market to bolster trade and negotiate as a trading bloc, some argue that Mercosur has not established a significant footprint in major consumer markets.
There are ongoing negotiations with the European Union, Canada, Singapore, South Korea and the European Free Trade Association (EFTA).
Influence of China
Mercosur has successfully deepened ties with China.
The trading bloc’s exports to China rose 20% from the early 2000s to 2018.
China has surpassed the EU, previously the region’s most important trading partner.
Reports suggest Uruguay wants to establish an alliance with China, either through Mercosur or bypassing it.
Despite Uruguay’s interest in a potential bilateral deal, Mercosur does not permit members to undertake such deals.
Thus, Mercosur would need to adapt from a customs union to a free-trade zone, which Argentina does not favor.
It remains to be seen what will happen regarding the future of Mercosur following recent events.
Mercosur’s main exports currently are soybeans, crude oil, and various minerals.
China, the US, and the EU are the principal export and import destinations for Mercosur nations.
Representing nearly 300 million inhabitants over an area of more than 15 million square kilometers, Mercosur had a combined GDP of 2.4 trillion euros in 2015.
