MercoPress. South Atlantic News Agency

Chile's record trade deficit with Mercosur

The historic trade deficit of Chile with Mercosur full members, Argentina, Brazil, Uruguay and Paraguay is forecasted to reach a new record this year, possibly above 6 billion US dollars.

Between 1995 and 2004 the deficit catapulted 469% from 902 million US dollars to 5,1 billion US dollars, making Mercosur the trade partner with which Chile has the largest deficit.

In the first six months of 2005, the deficit totaled 2,839 billion US dollars which represents a 19% jump over the same period last year, thus the full year projection of 6 billion US dollars.

According to Chilean experts the "Argentina factor" has been decisive in the significant drop in Chilean exports to the regional customs union, particularly during the Argentine 2000/03 economic and financial crisis, together with a huge rise in imports during the nineties mainly because of Argentine natural gas sales which are stagnant since 2004.

Next year Chile will be celebrating the ten years of the controversial Economic Complementation Agreement, ACE, with Mercosur, which as the time generated a strong debate in Chile. While the government was enthusiastic about the political implications of such an agreement, financial and economic sectors were highly suspicious that ACE could lead Chile back to the more protectionist course of Mercosur.

Actually Chile kept on with its open market and tariff reduction policies and nowadays virtually no one considers integration as full member of Mercosur a reasonable option for the country.

"You have to be pragmatic. It's unquestionable that Chile has benefited from its commercial strategy and has been wise in not integrating to Mercosur", admitted Daniel Oks, World Bank regional economist for Chile and Uruguay.

"If Mercosur ideally had been what we all expected, that same path can be done in parallel to a stronger integration with the block. Chile was not mistaken, it would have been difficult for Chile to change the course of Mercosur", added Mr. Oks.

However Chilean government officials insist in trading with Mercosur in spite of the spiraling misbalance arguing that two factors must be taken into account: Mercosur is the strongest market for Chilean manufactured goods and concentrates the bulk of Chilean overseas investments.