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Montevideo, June 7th 2023 - 05:13 UTC



Mercosur members growingly less intra trade dependent

Monday, January 8th 2007 - 20:00 UTC
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Evolution of trade among Mercosur members in the last few years shows unexpected surpluses for Brazil and a lesser dependency on the group's intra trade than in the nineties, according to recent data from ALADI, Latinamerican Integration Association.

There are conflicting opinions on the consequences of this new trend, with some officials believing it is negative while others stating that with the incorporation of Venezuela, and possibly Bolivia, the group's intra trade will again take off vigorously. In Uruguay, Economy Minister Danilo Astori is basically sceptical and of the opinion that the current difficulties in having access to the senior Mercosur members markets will be solved in the medium term, while Foreign Affairs minister Reinaldo Gargano believes that improving the block is the solution and in line with this was one of the great sponsors of Venezuela's integration. Regarding trade numbers, since 1995 and until 2003, Brazil had always experienced a deficit in Mercosur intra trade with the exception of 1999. However between 2004 and 2006, Brazil's surpluses added to 12.2 billion US dollars. Brazilian exports to Mercosur in 1998 represented 17% of the country's total overseas sales. But in 2006 they dropped to 10.1% while imports from Mercosur in 1998 represented 16% and they have now gone down to 9.8%. In Uruguay exports to Mercosur fell drastically from 55% in 1998 to 23.5% in 2006, and last year Uruguay had an accumulated trade deficit with Argentina and Brazil of 900 million US dollars. Argentina's exports to Mercosur in 1998 reached 36% but have since dropped to 19% in 2005, and similarly with imports which dropped from 31% to 15%. Some analysts relieve that a lesser "Mercosur dependency" will help avoid the synchrony of negative economic cycles that have hit the region such as the surprise Brazilian devaluation of January 1999 and the Argentine financial crisis of 2001/02, which had a devastating impact for the group. But Tulio Vigerani, Professor of International Relations from the Sao Paulo University believes it's not necessarily a positive trend since "it shows there's not a productive integration process or influx of investments or businesses' integration". Argentine consultant Juan Soldaono argues that if the intra trade percentages keep dropping as have been so far, Mercosur will be rapidly becoming more of a "political than trade organization". Mercosur junior members Uruguay and Paraguay claim that Mercosur has become a two members club, where Argentina and Brazil act and decide based on their exclusive interests. Uruguay and Paraguay are demanding more participation in the decision making process and wish to establish closer trade and political links with third parties (mainly United States) but have been impeded so far by the carrot and stick policy of senior members. Argentina and Brazil (and presumably Venezuela) have cautioned that the "grumpy" members must abide by Mercosur rules regarding trade associations with third parties (which means they have to be approved by consensus) and at the same time have created a "structural development" fund with 100 million US dollars to help junior members with infrastructure investment projects.

Categories: Economy, Mercosur.

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