MercoPress. South Atlantic News Agency

Mujica will try and convince Brazil to open Mercosur to third countries

Uruguay needs to compensate the loss of trade with Argentina

Uruguayan president Jose Mujica arrives Thursday in neighbouring Brazil to discuss with his peer Dilma Rousseff trade expansion, productive and energy complementation and above all opening Mercosur to third countries in search of new markets.

Mujica considers Latin America’s largest economy an ‘strategic associate’ to which Uruguay must be commercially and economically closely linked particularly since the growing problems in Mercosur because of the impediments and delays implemented by Argentina to intra-trade.

Under Mercosur rules any trade agreement with a third country must be the result of a consensus, and past experience indicates that both Brazil and Argentina have systematically opposed such initiatives.

However Argentina has become decisively protectionist and other world markets are needed to compensate while Brazil and Uruguay are suffering from a similar situation: massive inflow of capital which appreciates the currency, limiting exports’ competitiveness and exposing the countries to cheap imports.

With recession in the EU and Japan, China slowing down and the US undergoing a painfully slow recovery, strong currency countries and regions are virtually flooded with imports.

Besides Brazil’s long term interest in ensuring its position as a strong regional power, Mujica and Rousseff have a good relation, both share former guerrilla pasts and aspire a united, one voice South America in world affairs.

Some of the areas looking for complementation are naval construction, with Uruguayan ship yards contributing or inter-locked with the Brazilian industry that is undergoing a significant boost because Brazil’s oil development industry is almost entirely offshore, and all kind of vessels are needed. Besides the oil giant Petrobras has a policy of giving priority to domestic industry as providers.

Bio-technology, pharmaceutics and wind energy are also areas of common interest. Both countries are developing alternatives as bio-diesel and the abundant wind energy.

Communications technology is of particular interest for Uruguay, since it could help to incorporate local software and audiovisuals for digital television to the Brazilian market.

From the opposition, Senator Sergio Abreu said he expects President Mujica to request support from Brazil so that Mercosur allows Uruguay to reach agreements with third countries.

“We don’t need to leave Mercosur but Brazil must understand that Argentina is locking us out and we need new markets. Brazil should not makes us a favour, Uruguay has to tell the big countries that they are the guarantee for the proper functioning of Mercosur”, said Abreu.

“Whatever the reply we will then know what are the chances of industrial complementation with Brazil and what true degree of access to Brazil our products will have” indicated the opposition Senator and member of the Foreign Affairs committee.

Brazil remains as Uruguay’s main trade partner absorbing 20.6% of all exports with an increase of 11% in the first quarter of this year on an annual basis. Total exports in the first three months of 2012 reached 2.002 billion dollars of which 412 million to Brazil.

Uruguay imports in the first quarter totalled 1.966 billion which means the country managed a minimum 36 million dollars surplus in the overall trade.

In spite of an overall 18% increase in exports during the first quarter, sales to Argentina dropped 3.77% as so did those to Italy, Mexico, Spain, Germany, Holland, Spain, China and Switzerland.