MercoPress. South Atlantic News Agency

“Mortally wounded”

"Mercosur is mortally wounded" following Uruguay's decision to stamp a 3% tariff on all imports, from the region and the rest of the world, according to Brazilian observers."This unilateral decision could mean the beginning of the end for Mercosur since the other members will loose trust in the institution", said José Augusto de Castro, president of the Brazilian Foreign Trade Association. Uruguay that currently holds the pro tempore chair of Mercosur last week announced it was forced to "temporarily" increase import tariffs to protect local production and face the uncertainties created by the Argentine financial situation and the constant depreciation of the Brazilian currency, almost 30% since the beginning of 2001. Mercosur imports are exempt from tariffs while third countries pay an average 14%. Mr. De Castro pointed out that the impact of this decision is more political and psychological than economic since Uruguay's overall trade is not significant, but "it's a straight blow to Mercosur credibility". "This also diminishes Mercosur negotiation capacity with other trade blocks", added Mr. De Castro, recalling that the lack of a previous co-ordination of macro economic policies has constantly diminished the group's existence. Actually Uruguay is not the only culprit. Argentina a few weeks ago granted tariff preferences to telecommunication and computer industries imports from non block members. Paraguay also established a flat additional 10% tariff to all imports to protect local production