MercoPress. South Atlantic News Agency

“Grumpy” Uruguay fed up with Mercosur

Uruguayan president Tabare Vazquez currently in Washington announced Monday Uruguay has decided to scale down its relation with Mercosur from full member to associate member

Uruguay one of the founding members of Mercosur in 1991 with Argentina, Brazil and Paraguay, has faced over the years growing trade obstacles with the larger members of the bloc and had been pondering with the idea of reviewing its relation for some time.

In January 1999 Uruguay suffered the full impact of the unannounced devaluation of the Brazilian currency and in 2001/02 the melting of the Argentine economy which was followed by a run on the banks that spilt over to Uruguay. Furthermore the Brazilian press likes to call Uruguay the "grumpy midget" of Mercosur.

President Vazquez who this week is scheduled to meet with President George Bush in the White House told Uruguayan reporters the decision will be officially announced on his return to Uruguay for which he will request the support of all parties with congressional representation.

Mr. Vazquez revealed he will be travelling to Vienna, Austria for the EU/Latinamerican leaders' summit where he will inform his colleagues of Uruguay's decision. Similarly he will be present at the coming Mercosur summit in Buenos Aires to personally communicate his decision to the other bloc's presidents.

Besides the normal trade disputes with the larger members of Mercosur, Uruguay now is facing an escalating dispute with Argentina over the construction of pulp mills in the river Uruguay, shared and jointly managed with Argentina.

Argentina objects arguing the issue is "bilateral and environmental", because of the shared waters, while Uruguay recalls that President Nestor Kirchner's administration was given all the necessary information and had no environmental objections when the issue was originally considered a couple of years ago.

The escalating dispute with Argentina has seen binational bridges linking the neighbouring countries blocked by Argentine pickets; Buenos Aires promise to take the issue to the International Court of The Hague and strong lobbying in multinational organizations (i.e. World Bank) and financial institutions to cancel all credits for the pulp mills construction until an environmental impact report is done.

The pulp mills, one from Botnia Finland and another from Ence, Spain have the full support of the European Union and will be built according to the latest technology and EU standards.

The total investment of the pulp mills is estimated in 1.8 billion US dollars, the largest ever private undertaking in Uruguay.

Uruguay has repeatedly requested a Mercosur Council meeting to address the issue but Argentina, with the support from Brazil, contends it's a bilateral matter.

President Vazquez a few months after taking office in March 2005 repeatedly warned that Mercosur "as it is and as it functions" is "of no use to Uruguay".

The same concept was repeated last week during an official visit to Mexico, when he nevertheless emphasized that the bloc was "an integration priority" for Uruguay and invited Mexico to join and help "counterbalance" influences in the bloc.

Analysts believe that if Uruguay finally ceases to be a full member, Paraguay the other junior member will follow.

Paraguay also has similar trade and decision making problems with the larger members Argentina and Brazil.

And more specifically with Brazil, Paraguay is demanding a fairer deal regarding the price of electricity generated from the shared gigantic dam of Itaipu, one of the largest in South America and which is mostly absorbed by the Brazilian market.

Besides full members Mercosur has associate members: Chile, Bolivia and Peru, plus Venezuela in the process of becoming a full member.