MercoPress. South Atlantic News Agency

Uruguay supports “monetary convergence”

Uruguay that is holding the Mercosur chair for the next six months will give priority to the creation of a monetary and exchange rate convergence on the lines described by Argentine Minister of Economy Roberto Lavagna.

The Argentine proposal set out in the latest Mercosur summit in Asunción, Paraguay points towards the creation of a "Monetary Institute" to co-ordinate regional macroeconomic policies.

"We have to learn the lesson of recent experiences. Monetary co-ordination is the weakest side of Mercosur", said Uruguayan former president Julio Sanguinetti after meeting with President Jorge Batlle who invited the country's main political leaders to discuss the way forward for the regional block.

"All the tariff debate becomes senseless when exchange rates and currency values abruptly change because of devaluations. That is Uruguay's and Mercosur priority", stressed Mr. Sanguinetti in direct reference to the Brazilian devaluation of January '99 and a similar action by Argentina in early 2002 that plunged Uruguay into one of the country's worst financial crisis.

Another point that Uruguay will emphasize is the "asymmetries" between the economies of the major members, Brazil and Argentina, and those of the weakest, Paraguay and Uruguay.

"Any minor restriction in any of the major countries economies can cause havoc in our dependent economies, and fortunately this was accepted by the Brazilian Foreign Affairs Minister, Celso Amorim, who talked about greater flexibility, in specific situations, towards the smaller economies", explained Mr. Sanguinetti who acted as spokesperson for the meeting.

Mr. Sanguinetti revealed that Uruguay favours a strengthening and speeding of negotiations with the European Union, the US sponsored Free Trade Association of the Americas and with the Andean Nations Community.

As to the possibility of a common currency, Mr. Sanguinetti said that as with the proposal of a regional Parliament "they are long term arrival targets and not starting discussion points, as happened with the European Union".

Mr. Sanguinetti pointed out that Mercosur has enough unsolved issues on the table, such as monetary coordination, that are more urgent.

"Besides we already have a joint Mercosur Parliamentary Committee and I believe we should proceed with this instrument before we start building on other ideas".

The Uruguayan political system is actually divided on the Mercosur Parliament issue. While the ruling coalition is very suspicious of loosing political initiative to a supra-national body, the left wing opposition feels it could be "a convergence of common political goals".

"We don't feel the core of the issue is a regional Parliament but rather avoiding an ideological convergence (with the current administrations in Brazil and Argentina), that given the facts of history can become extremely vulnerable for the smaller members of Mercosur. We must not forget that political stability and reliability is possibly Uruguay's greatest international asset", highlighted a high ranking source of the Uruguayan cabinet.